Direct Taxes

Post-Budget Memorandum on Direct Tax Proposals under Finance Bill, 2023

Representation on issues emerging from proposed TCS amendments in Finance Bill 2023

Representation regarding TDS on Online games under Section 194BA of the Act

Representation on issues emerging from proposed TCS amendments in Finance Bill 2023

Representation on challenges in electronic furnishing of Form 10F for non-residents

The Forum made a detailed submission to the Ministry of Finance covering various suggestions on Transfer Pricing laws and policies, including compliances, audits, Advance Pricing Arrangements, and dispute resolution mechanisms.

US-India Tax Forum submitted its Pre-Budget Memorandum(s) to the Tax Planning Legislation Unit (for Direct Taxes) and Tax Research Unit (for Indirect Taxes – Customs) of the Ministry of Finance based on inputs received from more than 30 member companies across various sectors. Our recommendations cover duty rate changes, ease of compliance, ease of doing business, suggestions to reduce tax litigation, leveraging technology for tax administration etc., amongst other procedural and legislative changes. For further details, please write to Anikha Ashraf at [email protected]

Section 194R of the Income Tax Act mandates TDS on any benefit or perquisite provided to a resident in the course of business or profession. In response to numerous concerns and requests for clarification from the industry regarding the applicability of these provisions, the Central Board of Direct Taxes (CBDT) issued guidelines in Q&A form vide Circular No. 12, 2022 dated June 16, 2022. However, these guidelines resulted in further ambiguities on several practical and legal aspects. In continuation of its advocacy efforts, the Forum had collated details of these issues from its members and submitted a representation to CBDT earlier this week. We are now in the process of organising a consultation with concerned officials at CBDT to take the matter forward and seek necessary clarifications.

The Indian Government recently levied additional duties on export of domestically produced petroleum products by oil and gas companies as a ‘windfall tax’ to target the extraordinary gains made by these companies. As a Forum we would like to understand the broader industry perspective on these levies, and challenges faced if any, to enable us to engage with the Government and make appropriate representations as required. Further, the lack of parity in the corporate income tax rate between domestic and foreign companies discourages foreign investment in oil and gas exploration. We foresee this issue forming part of our broader pre-Budget consultations and engagements with the Government of India later in the year, and invite your inputs on the same.

Section 194-R, which came into effect on July 01, 2022 introduced TDS on benefits/ perquisites granted in the course of business to any resident taxpayer. While CBDT issued clarifications last month to address implementation issues arising from this levy, the industry has expressed numerous concerns from a practical and legal standpoint. In continuation of our advocacy efforts on Direct Tax matters, the Forum has collated details of such difficulties, and shall be organising a meeting with key officials from the Tax Policy and Legislation Unit of CBDT, and making a representation on behalf of the industry.

The Union Budget 2022 introduced a tax incident for virtual digital assets (VDA), bringing cryptocurrency transactions into the ambit of direct taxes. CBDT has now issued multiple clarifications recently to address ambiguities that may emerge from the applicability of TDS on VDAs:

  • Guidelines dated June 22, 2022 in Q&A form clarifying aspects such as person responsible for TDS compliances under Section 194S in different scenarios, valuation of consideration, etc. (summary of these guidelines can be accessed on our website here)
  • Guidelines dated June 28, 2022, to clarify aspects in relation to cryptocurrency transactions not routed through an Exchange
  • Notification No. 73/2022 dated June 30, 2022 to notify quarterly TDS statement in Form No. 26QF to be filed by cryptocurrency Exchange where the Exchange has entered into an agreement to undertake TDS compliances in lieu of the buyer
  • Notification No. 74/2022 dated June 30, 2022, to clarify that certain items (such as gift cards, vouchers, mileage/ reward points, website/platform subscriptions) shall be excluded from the scope of VDAs
  • Notification No. 75/2022 dated June 30, 2022, to clarify that NFTs whose transfer results in transfer of ownership of underlying tangible asset, shall be excluded from the scope of VDAs.

As part of our post-Budget engagements, the Forum had shared concerns emerging from the wide definition of VDAs and the applicability of Crypto Tax. In continuation of our efforts, the Forum would like to invite broader feedback from the industry with respect to the aforementioned clarifications/guidelines issued by CBDT.

The Forum made a detailed submission to the Ministry of Finance covering various suggestions on Transfer Pricing laws and policies, including compliances, audits, Advance Pricing Arrangements, and dispute resolution mechanisms.

US-India Tax Forum submitted its Pre-Budget Memorandum(s) to the Tax Planning Legislation Unit (for Direct Taxes) and Tax Research Unit (for Indirect Taxes – Customs) of the Ministry of Finance based on inputs received from more than 30 member companies across various sectors. Our recommendations cover duty rate changes, ease of compliance, ease of doing business, suggestions to reduce tax litigation, leveraging technology for tax administration etc., amongst other procedural and legislative changes. For further details, please write to Anikha Ashraf at [email protected]

Section 194R of the Income Tax Act mandates TDS on any benefit or perquisite provided to a resident in the course of business or profession. In response to numerous concerns and requests for clarification from the industry regarding the applicability of these provisions, the Central Board of Direct Taxes (CBDT) issued guidelines in Q&A form vide Circular No. 12, 2022 dated June 16, 2022. However, these guidelines resulted in further ambiguities on several practical and legal aspects. In continuation of its advocacy efforts, the Forum had collated details of these issues from its members and submitted a representation to CBDT earlier this week. We are now in the process of organising a consultation with concerned officials at CBDT to take the matter forward and seek necessary clarifications.

The Indian Government recently levied additional duties on export of domestically produced petroleum products by oil and gas companies as a ‘windfall tax’ to target the extraordinary gains made by these companies. As a Forum we would like to understand the broader industry perspective on these levies, and challenges faced if any, to enable us to engage with the Government and make appropriate representations as required. Further, the lack of parity in the corporate income tax rate between domestic and foreign companies discourages foreign investment in oil and gas exploration. We foresee this issue forming part of our broader pre-Budget consultations and engagements with the Government of India later in the year, and invite your inputs on the same.

Section 194-R, which came into effect on July 01, 2022 introduced TDS on benefits/ perquisites granted in the course of business to any resident taxpayer. While CBDT issued clarifications last month to address implementation issues arising from this levy, the industry has expressed numerous concerns from a practical and legal standpoint. In continuation of our advocacy efforts on Direct Tax matters, the Forum has collated details of such difficulties, and shall be organising a meeting with key officials from the Tax Policy and Legislation Unit of CBDT, and making a representation on behalf of the industry.

The Union Budget 2022 introduced a tax incident for virtual digital assets (VDA), bringing cryptocurrency transactions into the ambit of direct taxes. CBDT has now issued multiple clarifications recently to address ambiguities that may emerge from the applicability of TDS on VDAs:

  • Guidelines dated June 22, 2022 in Q&A form clarifying aspects such as person responsible for TDS compliances under Section 194S in different scenarios, valuation of consideration, etc. (summary of these guidelines can be accessed on our website here)
  • Guidelines dated June 28, 2022, to clarify aspects in relation to cryptocurrency transactions not routed through an Exchange
  • Notification No. 73/2022 dated June 30, 2022 to notify quarterly TDS statement in Form No. 26QF to be filed by cryptocurrency Exchange where the Exchange has entered into an agreement to undertake TDS compliances in lieu of the buyer
  • Notification No. 74/2022 dated June 30, 2022, to clarify that certain items (such as gift cards, vouchers, mileage/ reward points, website/platform subscriptions) shall be excluded from the scope of VDAs
  • Notification No. 75/2022 dated June 30, 2022, to clarify that NFTs whose transfer results in transfer of ownership of underlying tangible asset, shall be excluded from the scope of VDAs.

As part of our post-Budget engagements, the Forum had shared concerns emerging from the wide definition of VDAs and the applicability of Crypto Tax. In continuation of our efforts, the Forum would like to invite broader feedback from the industry with respect to the aforementioned clarifications/guidelines issued by CBDT.

The Hon’ble Finance Minister of India presented the Union Budget 2022 on February 1 2022. We have summarized some of the key tax announcements made in the Budget and you can access the updates here and here. Basis the feedback received from our members, USISPF shared a detailed to the Government on tax amendments proposed under the Finance Bill 2022.

Basis the inputs received from our members USISPF plans to submit a Pre-Budget Memorandum to the Ministry of Finance by next week.
CBDT, vide Notification No. 118 of 2021, notifies Income-tax (31st Amendment) Rules, 2021; CBDT on Aug 28, 2021 had released draft Rules for comments/suggestions from all stakeholders and general public. The final rules laying down conditions to implement the new law burying retrospective taxation. Please access the final rules here .

CBDT releases Notification No. 117/2021 dated 24th September 2021 to extend applicability of Safe Harbour Rules under Rule 10TD of Income-tax Rules to AY 2021-22. Please access the notification here

CBDT has announced further extension of due dates considering difficulties reported by the taxpayers and other stakeholders in e-filing of various Forms including the returns for Equalization levy. Click here to read CBDT Press Release.

In continuation to our advocacy efforts on Corporate taxes, Forum has submitted a detailed note to the new CBDT chairperson with a request for an industry consultation. We have as part of our note highlighted the need to bring in Direct tax policy reforms so as to improve ease of doing business and investment landscape across sectors.

Further to the difficulties reported in electronic filing of Forms 15CA/15CB on the portal CBDT has extended the date of filing Forms 15CA/15CB to Aug 15, 2021. Taxpayers can now submit the said Forms in manual format to the authorized dealers, advises authorized dealers to accept the Forms till Aug 15, 2021 for the purpose of foreign remittances. Click here to read CBDT Press Release.

In continuation to our advocacy efforts on Corporate taxes, Forum has submitted a detailed note to the new CBDT chairperson with a request for an industry consultation. We have as part of our note highlighted the need to bring in Direct tax policy reforms so as to improve ease of doing business and investment landscape across sectors.
The Central Board of Direct Taxes has issued guidelines providing clarification on the applicability of TDS provisions u/s 194Q. Please refer to the circular here.
In continuation to our advocacy efforts on Corporate taxes, Forum has submitted a detailed note to the new CBDT chairperson with a request for an industry consultation. We have as part of our note highlighted the need to bring in Direct tax policy reforms so as to improve ease of doing business and investment landscape across sectors.
In light of the COVID second wave several issues had emerged for companies with regards to Corporate taxes largely on account of the medical supplies given by companies to their employees. Given this Forum had submitted a detailed note to CBDT with detailed issues and recommendations and we are glad that many of our recommendations have come through as part of the recent CBDT press release. CBDT has announced tax exemption on ex-gratia sum received for death due to COVID-19 for FY 2019-20 and subsequent years without any limit if received by an employee from its employer but limited to Rs.10 Lakh in other cases. CBDT has also extended various timelines for compliance and assessment. Please access the press release here.
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:

US-India
US-India Tax Forum