May 9 – Last week, the Bombay Stock Exchange (BSE) became India’s first stock exchange to launch an Islamic-focused Index, calling it the S&P BSE 500 Shariah Index. The Shariah Index will be the first index launched since S&P Dow Jones and BSE announced their strategic partnership in February, joining a long list of well-known indices around the globe.
Its main differentiating feature will be its compliance with Islamic canonical law in choosing investments. This will allow for further inclusion of India’s estimated 170+ million Muslims in India’s markets, providing them with certainty in not violating religious law with their investments.
The index will specifically exclude firms dealing with pork or tobacco products, newspapers and other media firms, any businesses dealing in alcohol or pornography, and other firms dealing in products incompatible with Islamic standards. Most notably, since Islamic law forbids gambling, derivatives, futures, and other similar financial products will not be eligible for this index. Continue reading
By Manoj Kumar & Chris Devonshire-Ellis, Dezan Shira & Associates
May 7 – India is often perceived as an investment destination full of red tape and bureaucracy, yet in fact with some attention to detail, the legal and financial operational procedures can be relatively easily expressed – if you know what you are doing. As always, forearmed is forewarned, and any successful business should have its operational procedures laid down and working efficiently. Annual audit procedures help assess companies for purposes of taxable income, but they can also provide a working blueprint of the company which can help management evaluate company efficiencies and deficiencies.
In this article, we explain the procedures that a foreign-invested enterprise (FIEs) in India can expect to go through during the audit process, and outline some of the guidelines to prepare yourselves for the inevitable questions your auditors will have. Continue reading
By Sondre Ulvund Solstad
May. 3 – India will cut the tax rate on income earned by non-residents from investments in corporate and government debt. The cut is part of India’s Finance Bill which was passed by the lower house of the Indian parliament on Tuesday. Several other key changes were also announced during the session, including changes to tax on income from infrastructure bonds and loan agreements, tax residency procedures, and a clarification regarding the applicability of the wealth tax on agricultural land.
The tax cut will lower the withholding tax rate on interest earned by foreign investors on government securities and rupee-denominated corporate bonds from 20 percent to 5 percent. Taking effect from June 1, the cut will be in effect for two years. It is seen as part of Finance Minister Chidambaram’s efforts to reduce the current Indian account deficit in the short term and spur growth in the long term by increasing foreign investment. Continue reading
By Dezan Shira & Associates, Delhi Office
Apr. 30 – Payroll , or employee compensation management, is a multifaceted process. As part of payroll, businesses generally compute and withhold government taxes like social security and individual income taxes from an employee’s salary. Many companies also have benefit plans like health insurance, which include deductions of premiums from its employees’ salaries according to employee customization, adding another layer of activity for payroll processing.
To help shed some light on this complicated process, in this article we discuss allowances (including housing and leave travel assistance) and the benefits of outsourcing payroll. Continue reading
Apr. 25 – The World Bank has listed India as the world’s largest recipient of remittances from its overseas diaspora in 2012 after having received over US$69 billion in remittances.
Following India is China (US$60 billion), the Philippines (US$24 billion), Mexico (US$23 billion), Nigeria (US$21 billion) and Egypt (US$21 billion). Pakistan, Bangladesh, Vietnam and Lebanon are also on the list of large recipients.
Remittance flows to developing countries reached US$401 billion in 2012, a 5.3 percent year on year increase. This number is expected to grow by an average of 8.8 percent annually over the next three years to reach US$515 billion by 2015. Remittance flows to South Asia increased by 12.8 percent to US$109 billion. Continue reading
Apr. 24 – The new issue of India Briefing Magazine, titled An Introduction to Audit in India, is out now and available as a complimentary PDF download on the Asia Briefing Bookstore.
To coincide with the commencement of India’s annual audit season, this issue of India Briefing Magazine provides an overview of Indian audit procedures for the non-audit foreign executive based in India, as well as for the CFO at the head office who may not be familiar with India’s specific audit regulations and accounting standards. We aim to highlight some of the key areas for both levels of international executives responsible for their Indian businesses.
Also in this issue, we examine how India’s accounting standards differ from the globally accepted IFRS and IAS protocols, and why it is important to be aware of such discrepancies. We also outline the standard steps and procedures an Indian auditor will go through during the audit process and explain pre-audit preparations that can be carried out to make the process easier to follow and understand for foreign executives. Such preparations will also help the auditor conduct the necessary audit work in a straightforward and efficient manner with clear results that can be used as part of an internal health check for the company. Continue reading
Apr. 23 – Individual income tax (IIT) is the direct tax paid on personal income by an individual or a company to the central government. The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue under the Ministry of Finance. In this article, we discuss income source and residency, income tax payment, the definition of salary, income tax rates and tax deductions at source.
Income Source and Residency
Personal taxation in India depends on the income source and a person’s residential status, which is determined by the length of time spent in India. Residential statuses include: resident and ordinarily resident (ROR), resident but not ordinarily resident (RNOR) or non-resident (NR). Continue reading
By Himanshu Joshi, Accounts Associate, Dezan Shira & Associates
Apr. 16 – In India, the Income Tax Act, 1961, provides special treatment for the taxation of the income of an off-shore fund. An off-shore fund is classified as a fund, institution, association or body, whether incorporated or not, established under the laws of a country outside India, which has entered into an arrangement for investment in India with any public sector bank, public financial institution, or mutual fund in an arrangement approved by the Securities and Exchange Board of India (SEBI).
Special tax rates are applicable on the following kinds of income of an off-shore fund:
- Dividends or interest received in respect of units purchased in foreign currency
- Long term capital gain (LTCG) derived from the transfer of units purchased in foreign currency Continue reading