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India: Computing section 10A deduction; intra-group services; “deemed profit” rate

India: Computing section 10A deduction

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).


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  • When to compute the section 10A deduction: The Supreme Court of India concluded that the deduction under section 10A of the Income-tax Act, 1961, is to be determined at the point when computing the gross total income of the eligible undertaking—and not in the computation of total income. The case is: Yokogawa India Ltd. Read a December 2016 report [PDF 381 KB]
  • Intra-group services: The Punjab and Haryana High Court held that services rendered between the taxpayer and its associated enterprise are not necessarily required be recorded in writing, but F can be communicated orally. The case is: Max India Limited. Read a December 2016 report [PDF 371 KB]
  • Reduced “deemed profit” rate for noncash transactions: The Central Board of Direct Taxes announced that to achieve the government’s mission of moving towards a “cashless economy” and to encourage small businesses to accept payments by digital means, the rate of “deemed profit” of 8% is reduced to 6% with respect to the amount of total turnover or gross receipts received through banking channel or digital means for the financial year 2016-17. However, the existing rate of deemed profit at 8% will continue to apply in respect of total turnover or gross receipts when received in cash. It is expected that a legislative amendment to reflect this policy will be included in Finance Bill, 2017. Read a December 2016 report [PDF 314 KB]
  • Plans to curb “black money” in tax law: Too curb “black money,” bank notes of existing series in denominations of INR500 and INR1000 have been withdrawn by the Reserve Bank of India. Concerns have been raised that certain tax law provisions could possibly be used for concealing “black money”. Accordingly, the government has introduced the Taxation Laws (Second Amendment) Bill, 2016 in the parliament to amend the provisions of the Income-tax Act, 1961 and the Finance Act to provide that defaulting taxpayers are subjected to tax at a higher rate and at increased penalties. Read a December 2016 report [PDF 323 KB]

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