Policy Update-Corporate Taxes : Income Tax laws

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Corporate Taxes

October 2024

  1. CBDT issues Instructions regarding SOP for handling receipt audit objections: Click here to read the full CBDT Instruction.
  2. CBDT specifies the effective date of Vivad se Vishwas Scheme, 2024 :  Click here to read the full CBDT Instruction.
  3. The Central Board of Direct Taxes (CBDT) has launched the e-Dispute Resolution Scheme (e-DRS) for taxpayers to resolve matters related to Income Tax assessments. For details access here.

Comprehensive Review of the Income Tax Laws

  1. TDS / TCS rationalization
    • Harmonization of rates in the TDS / TCS framework
    • Dispensation of request of quarterly certificates
    • Simplify compliance of foreign remittance
    • Withdrawal of TDS on sale of goods u/s 194Q, considering overlap with TCS u/s 206C(1H)
    • Absolve commerce operators from TDS compliance
    • Lower deduction on benefits and perquisites
  2. Dispute Resolution
    • Framework for negotiation for large settlement
    • Statutory time limit for disposal of appeals before CIT(A) should be provided
    • Standard Operating Procedures (SOPs) to mitigate challenges under faceless assessments
    • Timelines for disposal of rectification and appeal effect applications
    • DRP orders to be appealable by tax department
    • Tax consolidation scheme – combined group reporting and assessments
  3. Transfer Pricing
    • Scope of safe harbour rules to be expanded, mark-ups to be rationalized
    • Fast track APA and MAP procedures; Stay of demand during the period APA / MAP process is ongoing
    • Relaxation of secondary adjustment (SA) provisions for non-residents (branch, PE); raise threshold
    • Streamlining of transfer pricing (TP) assessment procedure – review case selection mechanism under CASS, conduct block audits (3-5 years) for TP cases
    • Limitation of Interest Deduction – Restrictions on interest deductions for overseas borrowings to be done away with or deferred for at-least 5-10 years
  4. Policy measures to incentivize specific sectors
    • Reintroduction of concessional tax regime for manufacturing companies commencing production post 31 March 2024*
    • Incentives / tax benefits for companies setting up Global Capability Centres in India
    • Tax incentive on Research & Development expenditure
    • Incentives for companies undertaking huge capex investments (setting up data centers, IT Parks, etc.)
    • Parity on tax treatment of Renewable Energy Certificates in line with tax treatment for carbon credits
  5. Financial Services
    • GIFT City related issues (clarification w.r.t. taxability of interest income, clarification on validity of Nil withholding tax certificate issued to IFSC unit claiming tax holiday, etc.)
    • Reduction in tax rate for foreign companies including banks, to bring at par with domestic companies
    • Extend ‘tax neutrality’ under Section 47 to reorganization by non-corporate investment funds outside India, akin to Indian mutual funds
    • Tax regime for India based fund managers and exemptions to fund managers located in IFSC
    • Relief from deemed dividend provisions for corporate treasury centres in IFSC on receiving loan or advances from their group companies
  6. Others
    • Reduction in domestic tax rates for royalty and fees for technical services
    • Notifications for enforcement of Most Favored Nation (MFN) clause under India’s tax treaties with France, Belgium, Netherlands etc. in respect of restricted scope
    • Clarity on definition of Significant Economic Presence (SEP) and increase in threshold
    • Formal guidelines for attributing profits in case of SEP
    • Clarity around India’s position on BEPS 2.0 implementation

1. The Central Board of Direct Taxes (CBDT) has launched the e-Dispute Resolution Scheme (e-DRS) for taxpayers to resolve matters related to Income Tax assessments. For details access here

2. TDS / TCS rationalization:

● Harmonization of rates in the TDS framework
● Dispensation of requirement for dissemination of quarterly TDS / TCS certificates.
● Simplify compliance burden in respect of foreign remittances

3. Transfer Pricing:

● Scope of safe harbour rules to be expanded, and mark-ups to be rationalized
● Streamlining of transfer pricing assessment procedure.
● Fast track APA and MAP procedures

4. Policy measures to incentivize specific sectors:

● Viz; concessional tax regime, tax credits, incentives etc.

5. Rate Rationalisation:

● Parity in tax rates for branches of foreign companies, clarifications around TCS on remittances under LRS, etc.

6. Clarity around digital taxes:

● Clarity around 6% interim levy (6% Equalisation levy)
● Certain transactions be excluded for SEP constitution
● Notifications be for enforcement of Most Favored Nation (MFN) clause under India’s tax treaties with France, Belgium, Netherlands etc. with retrospective effect.
● Formal guidelines for attributing profits to Permanent Establishments (PE).

7. Investment/ funding related matters:

● GIFT City related issues (clarification w.r.t. taxability of interest income under section 115A, clarification on validity of Nil withholding tax certificate issued under section 195(3) to an IFSC unit claiming tax holiday, etc.

8. Dispute Resolution:

● Framework for negotiated settlement or mediation for large taxpayers
● Standard Operating Procedures (SOPs) to mitigate challenges under faceless assessments

August 2024

1. A Comprehensive Review of the Income Tax Act:

● Tax certainty
● Faster dispute resolution
● Use of technology
● Simplification of provisions
● Ease of compliance

2. International Tax:

Transfer Pricing (TP):

● Suggestions around revision of safe harbour rules
● Streamlining of TP assessment procedure.
● Fast track Advance Pricing Agreement (APA) and Mutual Agreement Procedures (MAPs) procedures

Digital tax:

● Continued advocacy towards clarity around 6% equalisation levy
● Certain transactions be excluded for Significant Economic Presence (SEP) constitution and need for specific rules be issued for attribution of profits when SEP is triggered
● Notifications be for enforcement of Most Favoured Nation (MFN) clause under India’s tax treaties with France, Belgium, Netherlands, Mauritius etc. with retrospective effect.
● Formal guidelines be issued for attributing profits to Permanent Establishments (PE)

3. Ease of compliance:

● Address issues under return filing
● Faster refunds
● Less complex audit /assessment procedures

4. Dispute Resolution:

● New framework be introduced for negotiated settlement or mediation for large taxpayers
● Issue Standard Operating Procedures (SOPs) and guidelines to mitigate challenges under faceless assessments

5. Driving investments in India:

● Extend ‘tax neutrality’ to reorganisation by non-corporate investment funds outside India, akin to Indian mutual funds
● Provide relief from deemed dividend provisions for corporate treasury centres in International Financial Services Centre (IFSC) on receiving loan or advances from their group companies
● Exclude ‘Finance Companies’ including treasury centres in IFSC from Section 94B, at par with NBFC

6. Rationalization of TDS/TCS provisions:

● Harmonization of rates in the TDS framework.
● Dispensation of requirement for dissemination of quarterly TDS / TCS certificates,
● Simplify compliance burden in respect of foreign remittances

July 2024

1. Focused advocacy on:

∘ Request for concessional rate for Maintenance Repairs and Operations (MRO) companies
∘ Need for safe Harbour rules for MRO companies
∘ The need to reassess Angel Tax provisions.
∘ Clarity on Employee Stock Ownership Plan taxability in India
∘ Need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such fund
∘ Need for corporate tax parity for foreign banks operating as branches in India
∘ Request for release of notification for enforcement of Most Favoured Nation clause in specific bilateral treaties
∘ Request to extend benefit available to companies under section 115BAB specifically for manufacturing of automobile industry products, renewable generation projects such as solar power, wind power, hybrid power, green hydrogen, green ammonia
∘ Transfer pricing issues such as mark-up relating to share-based payments made to Indian employees, secondary adjustments rationalisation, safe harbour rules etc.

June 2024

1. Submitted a pre-budget memorandum on tax proposals to the Ministry of Finance, for the upcoming budget in July 2024

2. Focused advocacy on:

∘ The need to reassess Angel Tax provisions.
∘ Clarity on Employee Stock Ownership Plan (ESOP) taxability in India
∘ Corporate tax parity for foreign banks operating as branches in India
∘ Need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such funds
∘ Need for corporate tax parity for foreign banks operating as branches in India
∘ Request for release of notification for enforcement of MFN clause in specific bilateral treaties
∘ Request to extend benefit available to companies under section 115BAB specifically for manufacturing of automobile industry products, renewable generation projects such as solar power, wind power, hybrid power, green hydrogen, green ammonia
∘ Advocacy on transfer pricing issues such as mark-up relating to share-based payments made to Indian employees, secondary adjustments rationalisation, safe harbour rules etc

3.We met CBDT officials to discuss:

∘ Need for corporate tax parity for foreign banks operating as branches in India
∘ Clarifications required for ESOPs taxability in India

May 2024

1. Focused advocacy on

∘ Request for release of notification for enforcement of MFN clause in specific bilateral treaties
∘ Advocacy on transfer pricing issues such as mark-up relating to share-based payments made to Indian employees, secondary adjustments rationalisation, safe harbour rules etc
∘ need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such funds
∘ request to extend benefit available to companies under section 115BAB specifically for manufacturing of automobile industry products, renewable generation projects such as solar power, wind power, hybrid power, green hydrogen, green ammonia
∘ need for corporate tax parity for foreign banks operating as branches in India
∘ Clarifications required for ESOPs taxability in India
∘ Advocacy on transfer pricing issues such as mark-up relating to share-based payments made to Indian employees, secondary adjustments rationalisation, safe harbour rules etc

2. Meet CBDT officials to discuss

∘ need for reciprocal tax treatment upon reorganization of foreign regulated funds investing in Indian securities as given in the home country of such funds
∘ Clarifications required for ESOPs taxability in India
∘ need for corporate tax parity for foreign banks operating as branches in India

April 2024

1. Focused advocacy on

∘ Need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such funds
∘ Request to extend benefit available to companies under section 115BAB specifically for manufacturing of automobile industry products, renewable generation projects such as solar power, wind power, hybrid power, green hydrogen, green ammonia
∘ Need for corporate tax parity for foreign banks operating as branches in India
∘ Clarifications required for ESOPs taxability in India
∘ Forum to reinitiate advocacy on transfer pricing issues such as mark-up relating to share-based payments made to Indian employees, secondary adjustments rationalisation, safe harbour rules etc
∘ Need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such funds
∘ Applicability of section 56(2)(x) in case of purchase of shares of a listed company pursuant to the valuation methodology under Rule 11UA

2. CBDT signs record number of 125 Advance Pricing Agreements (APAs) in FY 2023-24. Please access the press release here

3. Directorate (Systems) mandates e-filing various forms falling under Transfer Pricing domain and verification as per Income Tax Act. Official notification can be accessed here (Notification no. 01/2024).

4. Reinitiate advocacy on transfer pricing issues such as mark-up relating to share-based payments made to Indian employees, secondary adjustments rationalisation, safe harbour rules etc

March 2024

1. CBDT proposes a ‘mismatch communication’ exercise for AY 2021-22 under e-Verification Scheme. Press release can be accessed here

2. CBDT amends rules in Form 3CEB with respect to Specified Domestic Transactions (SDTs). Official notification can be accessed here

3. Focused advocacy on

∘ Applicability of section 56(2)(x) in case of purchase of shares of a listed company pursuant to the valuation methodology under Rule 11UA
∘ Need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such funds
∘ Request to extend benefit available to companies under section 115BAB specifically for manufacturing of solar modules, electrolysers and green hydrogen
∘ Tax reforms for business trusts (REITs and InvITs)
∘ Issue of obtaining mobile OTP by non-residents for e-filing of Form 10F
∘ Enforceability of MFN clause as per India’s DTAA with a few OECD member countries
∘ Need for corporate tax parity for foreign banks operating as branches in India

Feb 2024

1. Focused advocacy on

∘ Issue of obtaining mobile OTP by non-residents for e-filing of Form 10F
∘ Enforceability of MFN clause as per India’s DTAA with a few OECD member countries

2. Government of India has notified the Finance Act, 2024. Official notification can be accessed here

3. CBDT issues order giving effect to the Budget proposal of remitting petty tax demands outstanding as on Jan 31, 2024. Official order can be accessed here

4. Forum to engage with CBDT to address issue of obtaining mobile OTP by non-residents for e-filing of Form 10F

5. Forum to initiate advocacy for withholding taxes on fees for technical services in light of enforceability of MFN clause as per India’s DTAA with a few OECD member countries

6. Continued advocacy on

1. Need for reciprocal tax treatment upon reorganisation of foreign regulated funds investing in Indian securities as given in the home country of such funds.
2. Request to extend benefit available to companies u/s 115BAB specifically for manufacturing of solar modules, electrolysers and green hydrogen.
3. Tax reforms for business trusts (REITs and InvITs).

7. Ongoing advocacy with CBDT on industry request to extend benefit available to companies u/s 115BAB specifically for manufacturing of solar modules, electrolysers and green hydrogen

Jan 2024

1. CBDT, vide Circular No. 1/2024 dt. Jan 23, 2024, releases Explanatory Notes to the Provisions of Finance Act, 2023. Refer the circular here

2. CBDT issues another set of guidelines for the deduction of tax at source on e-commerce transactions under Section 194-O of the Income-tax Act, 1961. Refer the guidelines here and a summary of key clarifications issued here

3. CBDT notifies Investment in Financial Product by Non Residents With ‘IFSC Capital Market Intermediary’. Refer the notification here

4. Submitted representation with Central Board of Direct Taxes (CBDT) on challenges being faced by taxpayers during assessment proceedings.

5. Initiate advocacy on need for reciprocal tax treatment upon reorganization of foreign regulated funds investing in Indian securities as given in the home country of such funds.

6. Ongoing advocacy with CBDT on industry request to extend benefit available to companies u/s 115BAB specifically for manufacturing of solar modules, electrolysers and green hydrogen

7. Initiate advocacy regarding certain tax reforms for business trusts (REITs and InvITs) to make them more investor friendly, improve liquidity and enhance their growth in India.

8.Inputs invited on CBDT guidelines for the deduction of tax at source on e-commerce transactions under Section 194-O. Refer guidelines here and a summary of key clarifications here

For further details please reach us here