Budget 2015

16Feb

Union Budget 2015-16 India Suggestion : FM to set limit for taxing indirect share transfer by MNCs

Government is likely to define in the forthcoming budget the term ‘substantial value’ to tax MNCs for selling Indian operations by fixing 50 percent of their total asset base as the threshold.

Seeking to bring about clarity in taxation of indirect transfer of assets by MNCs, Finance Minister Arun Jaitley is likely to introduce the threshold to establish whether a overseas company has substantial business interest in India. Following the retrospective amendment to Income Tax Act in the wake of the Vodafone-Hutchison tax controversy, a company incorporated overseas is deemed to be situated in India only if it derives its “value substantially” from assets located within this country.

As the term “value substantially” is not defined, it has led to a significant subjectivity, uncertainty and litigation, tax experts said. The minister is likely to clarify the provisions in the Budget as it has become a sore point for foreign investors, they added. According to sources, the Finance Ministry is looking at introducing the threshold — 50 per cent of MNCs’ total asset base in India — for taxing indirect transfer of assets, which is in line with the recommendations of the Shome Committee.

The Parthasarathi Shome Committee, which has looked into the issue, has suggested that the government should introduce a 50 per cent threshold to bring about clarity with regard to taxation of indirect transfer of shares. The revised Direct Taxes Code (DTC) 2013 has provided for a 20 per cent as the threshold for triggering tax on indirect transfers of assets. “One of the key concerns of the foreign investors in respect of indirect transfer of shares is the lack of clarity as to what constitutes substantial value of assets situated in India.

Therefore, it is critical that government clarifies its position in this year’s Budget,” KPMG (India) Partner Tax Vikas Vasal said. The uncertainty over threshold has impacted the global acquisitions and group restructuring transactions (involving merger, demergers, business sale etc) wherein the shares of Indian company are also involved, said Gokul Chaudhri Leader (Direct Tax) BMR & Associates. “The investors are fearful of the prolonged litigation that could follow in view of multiple interpretations,” he added.

13Feb

Union Budget 2015 India Expectation: FM may announce Rs 45,000 crore disinvestment target for FY16

Finance minister Arun Jaitley is likely to announce an ambitious Rs 45,000 crore disinvestment programme for the year starting April 1 when he presents the Budget in parliament on February 28. That would allow him to keep the fiscal deficit on a tight leash while finding the money needed for a public spending push. Asset sales of that magnitude would put it on par with what government wants to raise in this fiscal year.

The Narendra Modi administration is likely to seek an early start to the disinvestment programme by lining up about 10 share-sale initiatives, including IPOs. The overall target could be higher after including residual stake sales.

Companies likely to be in the list include rail companies such as Container Corporation of India (Concor) and Ircon International.

“The target for the year could be in the range of Rs 40,000- 45,000 crore,” said a senior government official aware o ..

The government feels that it can get the sale process under way quickly with one offer a month as a large number of companies have already been cleared for stake sales or are in the process of being approved.

“We are in talks with various administrative ministries and in the process of identifying companies,” said the finance ministry official, requesting anonymity. “Cabinet approvals for some firms have already been taken. Unlike the last few years, the next fiscal disinvestment proces ..

Experts said it will be difficult for the government to meet the disinvestment target unless it puts stock in the big state-owned companies on sale.

13Feb

Union Budget 2015 India Predictions: Budget to boost infrastructure, financials

The government is embarking on a path of aggressive infrastructure build out by boosting government spending, announcement of landmark expenditure reforms aimed at substantial declines in delivery cost of subsidies and re-direct corresponding savings towards infrastructure creation and re-orient focus from fiscal deficit towards revenue deficit, in an effort to create room for more productive capital expenditure.

© 2008-14. All Rights Reserved. Epic Research Pvt. Ltd.