Direct Taxes

Central Board of Direct Taxes has prescribed revenue and user thresholds for applicability of new nexus rule under the Indian Tax Laws. For revenue-linked condition, a revenue threshold of INR 2 crores (INR 20 million) shall be applicable and for user-linked condition stated in (b) above, a user threshold of 3 lakhs (0.3 million) shall be applicable. These thresholds are applicable from 1 April 2022 (i.e. tax year 2021-22 onwards) aligning with the effective date of the new nexus rule. By notifying the revenue and user thresholds necessary to activate the provision, the CBDT has put SEP provisions into operation. Please refer to the notification here

Click here to read and download the CBDT Notification Nos. 23, 24 & 25 of 2021.

CBDT has introduced the Income-tax (9th Amendment) Rules, 2021 effective from April 1, 2021. It has further amended Rules 10DA and 10DB of the Income-tax Rules dealing with Master file and CbCR reporting for specified transactions of constituent entities of an international group. Please refer to the notification here.

The Central Board of Direct Taxes has issued second round of 34 Frequently Asked Questions (FAQs) to address the issues raised by stakeholders relating to the operation of The Direct Tax Vivad Se Vishwas Act 2020. The Circular is issued in continuation of an earlier circular (here) which contained the first round of 55 FAQs. In the same manner as the first round, the clarifications in second round deal with the issues of eligibility of a taxpayer to settle its case under the scheme in different situations, manner of computing the quantum of disputed tax payable, consequences of settlement under the scheme, certain procedural aspects etc. Please refer to the circular here and For further details please reach us here

As the world deals with disruption caused by the Pandemic and adopt measures to return to normalcy, containment measures ranging from lockdowns to ban on international travel may have resulted in employees of MNCs/U.S based entities to be stranded in non-home office locations/India. Recent announcement by the U.S to suspend H1B and other visas, are seen as an effort to augment employment in the U.S and may have also caused such visa holders to continue working from India for longer than planned/permissible. These can lead to concerns from a tax standpoint, such as creation of a taxable presence of the employer in India due to extended periods of stay by their employees, impact on employees taxation in India due to applicability of domestic residency rules as well as social security implications etc. Immigrations matters in such cases also add to the complications. While the OECD has expressed its views to address potential tax implications arising due to COVID, the Indian Revenue has limited its guidance to tax residency rules for such individuals which currently is applicable for year ended 31 March 2020. In this regards forum submitted a detailed note to CBDT with recommendations on urgent clarifications. 

Forum has submitted recommendations regarding the Income tax exemption for foreign OEMs in respect of contracts with DPSUs (currently such exemption is available only for contracts with Ministry of Defence. 

The Finance Act 2020 amended the scope of Equalisation Levy with effect from 1 April 2020 to cover consideration received/ receivable by non-resident e-commerce operators for e-commerce supply or services provided to specified persons subject to certain conditions. The new levy came into force from 1 April 2020. In order to enable the payment of equalisation levy within the due date of 7 July, the Central Board of Direct Taxes amended the existing EL payment challan ITNS 285 so as to permit the use of the same challan for payment of ESS EL. The modified challan includes an option to select “E-commerce operator for e-commerce supply or services” under the “Type of Deductor” head. Forum requested Ministry of Finance to bring out clarifications around the compliance difficulties being faced by companies. 

While the request for a deferral of the levy continues to be a larger industry ask, USISPF continues with its efforts to make its voice heard on some of the key clarifications required under the law. Forum recently shared industry recommendations to the Central Board of Direct Taxes. 

Section 194O as introduced in the Finance Act 2020 having an implication of 1% TDS levy on E-commerce companies was deferred to be implemented from 1st October 2020. USISPF had as part of our Tax Forum engagements held in February 2020 committed to support the GOI with draft FAQs on the TDS levy which will help clarify several ambiguities around the provision.

Union Budget 2020 proposed to insert a new section 194O under the Income-tax Act, 1961 where in it is proposed to levy withholding tax at the rate of one per cent on the payments made by e-commerce operator to e-commerce participants for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform. Forum has submitted a detailed note on how the said provisions can be implemented effectively with few clarifications.

Budget 2019 introduced a 2% TDS on the cash withdrawal of more than Rs. 1 crore from a bank account within a financial year. On behalf of our members USISPF has recommended to Ministry of Finance on the need to relook at this provision in the interest of Money Transfer companies.

Union budget 2019 introduced the levy of tax on buyback of shares by listed companies. The move is primarily initiated to discourage the practice of avoiding Dividend Distribution Tax, however there are significant concerns emerging from the industry on this provision. USISPF on behalf of its members have written a details note highlighting some of these concerns along with the recommendations.

Budget 2019 imposes a high surcharge on non- corporate FPIs impacting the overall investment climate. On behalf of our members USISPF has submitted a detailed note highlighting the impact of this provision and how can this be a dampener to the economic objective of driving investments in the country. 

Taking into cognizance, the significance of issues related to attribution of profits to a permanent establishment, as well to ensure better clarity and predictability in the tax regime on this debatable issue, a Committee was constituted by the CBDT to examine the existing provisions in the domestic income tax law and tax treaties inviting comments. After an extensive consultation with its members USISPF shared a detailed feedback to the CBDT.

Broadly our suggestions are around the following key areas :

  • Need for an international alignment and DTAAs safeguard around the suggestions of the committee
  • Need for the tax rules to be proportionate, neutral, equitable, and enforceable across all industries
  • Need for tax rules to be easy to comply with 
  • Need for committee to address challenges arising out of the fractional approach suggested and how that can lead to double taxation
  • Specific comments and industry recommendations on the proposed “three factor” formula and its applicability
  • Need for clarifications on ambiguities emerging from terms like ‘users’, ‘Indian operations’,’ assets’ etc
For further details please reach us here

As the world deals with disruption caused by the Pandemic and adopt measures to return to normalcy, containment measures ranging from lockdowns to ban on international travel may have resulted in employees of MNCs/U.S based entities to be stranded in non-home office locations/India. Recent announcement by the U.S to suspend H1B and other visas, are seen as an effort to augment employment in the U.S and may have also caused such visa holders to continue working from India for longer than planned/permissible. These can lead to concerns from a tax standpoint, such as creation of a taxable presence of the employer in India due to extended periods of stay by their employees, impact on employees taxation in India due to applicability of domestic residency rules as well as social security implications etc. Immigrations matters in such cases also add to the complications. While the OECD has expressed its views to address potential tax implications arising due to COVID, the Indian Revenue has limited its guidance to tax residency rules for such individuals which currently is applicable for year ended 31 March 2020. In this regards forum submitted a detailed note to CBDT with recommendations on urgent clarifications. 

Forum has submitted recommendations regarding the Income tax exemption for foreign OEMs in respect of contracts with DPSUs (currently such exemption is available only for contracts with Ministry of Defence. 

The Finance Act 2020 amended the scope of Equalisation Levy with effect from 1 April 2020 to cover consideration received/ receivable by non-resident e-commerce operators for e-commerce supply or services provided to specified persons subject to certain conditions. The new levy came into force from 1 April 2020. In order to enable the payment of equalisation levy within the due date of 7 July, the Central Board of Direct Taxes amended the existing EL payment challan ITNS 285 so as to permit the use of the same challan for payment of ESS EL. The modified challan includes an option to select “E-commerce operator for e-commerce supply or services” under the “Type of Deductor” head. Forum requested Ministry of Finance to bring out clarifications around the compliance difficulties being faced by companies. 

While the request for a deferral of the levy continues to be a larger industry ask, USISPF continues with its efforts to make its voice heard on some of the key clarifications required under the law. Forum recently shared industry recommendations to the Central Board of Direct Taxes. 

Section 194O as introduced in the Finance Act 2020 having an implication of 1% TDS levy on E-commerce companies was deferred to be implemented from 1st October 2020. USISPF had as part of our Tax Forum engagements held in February 2020 committed to support the GOI with draft FAQs on the TDS levy which will help clarify several ambiguities around the provision.

Union Budget 2020 proposed to insert a new section 194O under the Income-tax Act, 1961 where in it is proposed to levy withholding tax at the rate of one per cent on the payments made by e-commerce operator to e-commerce participants for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform. Forum has submitted a detailed note on how the said provisions can be implemented effectively with few clarifications.

Budget 2019 introduced a 2% TDS on the cash withdrawal of more than Rs. 1 crore from a bank account within a financial year. On behalf of our members USISPF has recommended to Ministry of Finance on the need to relook at this provision in the interest of Money Transfer companies.

Union budget 2019 introduced the levy of tax on buyback of shares by listed companies. The move is primarily initiated to discourage the practice of avoiding Dividend Distribution Tax, however there are significant concerns emerging from the industry on this provision. USISPF on behalf of its members have written a details note highlighting some of these concerns along with the recommendations.

Budget 2019 imposes a high surcharge on non- corporate FPIs impacting the overall investment climate. On behalf of our members USISPF has submitted a detailed note highlighting the impact of this provision and how can this be a dampener to the economic objective of driving investments in the country. 

Taking into cognizance, the significance of issues related to attribution of profits to a permanent establishment, as well to ensure better clarity and predictability in the tax regime on this debatable issue, a Committee was constituted by the CBDT to examine the existing provisions in the domestic income tax law and tax treaties inviting comments. After an extensive consultation with its members USISPF shared a detailed feedback to the CBDT.

Broadly our suggestions are around the following key areas :

  • Need for an international alignment and DTAAs safeguard around the suggestions of the committee
  • Need for the tax rules to be proportionate, neutral, equitable, and enforceable across all industries
  • Need for tax rules to be easy to comply with 
  • Need for committee to address challenges arising out of the fractional approach suggested and how that can lead to double taxation
  • Specific comments and industry recommendations on the proposed “three factor” formula and its applicability
  • Need for clarifications on ambiguities emerging from terms like ‘users’, ‘Indian operations’,’ assets’ etc

USISPF submission on request to exempt Online Information and Database Access Retrieval (‘OIDAR’) service providers from GST Annual and Audit report as required under Section 35(5) and Section 44 of the CGST Act, 2017 - GST

India Tax

USISPF submits feedback to the CBDT committee on profit attribution in case of a permanent establishment in India – May 2019 – Direct taxes

USISPF submits recommendations for Union Budget 2019 – June 2019 – others

The Union Budget will be presented by the newly-appointed Finance Minister Ms Nirmala Sitharaman on July 5, 2019 in first session of Parliament for the new Government that begins June 17 and continues till July 26, 2019. USISPF has submitted our key asks for Budget 2019 across industries as our Pre-budget memorandum. Focus of our recommendations this year is:

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US-India Tax Forum

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