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Transfer Pricing Law in India

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By Gunjan Sinha, Dezan Shira & Associates

DELHI – India’s market began to emerge on the global stage in 1991 with the implementation of several governmental policies relating to foreign trade and foreign direct investment. This move towards globalization brought about new requirements relating to taxation and other laws as multinational corporations began investing in India and acquiring local companies.

There were many transactions taking place between the same group of companies and the transfer price between them started playing a major role in impacting the profits and losses of Indian companies. Amendment in taxation laws for such transactions then became the need of the hour so that tax planning could be kept under check and protect against tax evasion.

With these concerns in mind, the Indian Tax Authorities first introduced the Transfer Pricing Regulations (TPR) through the Finance Act, 2001, and made it effective from the Financial year ending March 2002. These provisions were set to be governed by the Income Tax Act, 1961, and were based on the Transfer Pricing guidelines of the Organization for Economic Co-Operation and Development.

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Individual Income Tax in India

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Source: businessweek.comBusinesses in India are required to withhold Individual Income Tax (IIT) from an employee’s salary on a monthly basis. During the first seven days of each month, employers must deposit the deducted tax from the previous month with the central government. The only exception to this rule involves the month of March, during which tax deducted may be deposited on or before April 30th.

Employers are required to withhold tax on various payments including rent, interest, dividend, royalty, and service income. In this sense, the compliance requirements for employers are more complex in India than in any of the other countries explored. Businesses should actively coordinate with employees to understand the details of supplementary income they are receiving and make the relevant calculations and submission of tax before deducting them from the salary.

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New Issue of Asia Briefing: Payroll Processing Across Asia

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Jan. 16 – The new issue of Asia Briefing Magazine, title Payroll Processing Across Asia, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the months of January and February.

Collecting tax revenue and administering social insurance are two of the most fundamental roles of government. When establishing or operating a business in Asia, companies must take special care to comply with regulations concerning taxes deducted at the source of employee payroll (withholding tax) and mandatory contributions to social insurance programs.

As you might expect in a region comprising so much diversity and complexity, the systems utilized by governments in places like China and Vietnam (countries with large populations and with a communist background) are substantially different than those in places like Hong Kong and Singapore – small jurisdictions with a distinctly capitalist outlook. India, a populous emerging nation with a democratic system of government, provides an interesting contrast in terms of how it taxes and supports its citizens.

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BJP Stuns in Election Outcome, Congress Party in Disarray

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By Edward Barbour-Lacey

Dec. 11 – India’s governing Congress party has suffered heavy losses in three state elections and has narrowly lost in a fourth. The Bharatiya Janata Party (BJP) was the clear winner across all the elections; however, the newly formed anti-corruption group Aam Aadmi (Ordinary People) Party (AAP) also saw large gains.

The elections held in Rajasthan and Madhya Pradesh were clearly won by the BJP. In Delhi, the capital of India, the Congress Party suffered a massive defeat.  After 15 years in power it appears that voters desperately wanted a change.  The BJP won 31 of the 70 seats, the AAP won 28, and the Congress Party was reduced to holding only 8 seats.

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New Issue of Asia Briefing: The 2014 Asia Tax Comparator

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2014-Asia-Tax-Comparator-Cover-250Nov. 21 – The new issue of Asia Briefing Magazine, titled The 2014 Asia Tax Comparator, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the months of November and December.

The opportunities to sell to the Asian consumer have never been more pronounced than they are today, and those opportunities will continue to expand and develop over the next three decades. Key to understanding and accessing this massive, dynamic new consumer market is the ability to understand the underlying tax treatments. To that end, we are pleased to present our third annual “Asia Tax Comparator” as Asia Briefing Magazine’s final issue of 2013.

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2013 Changes in Indian FDI Policy

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By Shawn Greene

Nov. 21 – Navigating foreign investment in India can be daunting. The World Bank’s Doing Business 2014 report ranks India among the most difficult countries in which to start a business – 179th out of 189 countries analyzed. As such, foreign firms are highly recommended to hire a professional services firm to assist with setup and investment in the country.

For foreign institutional investors (FII) and firms considering foreign direct investment (FDI), a familiarity with India’s recent changes in FDI policy is critical. Below, important amendments made to India’s foreign investment policy in 2013 are summarized, and changes currently under discussion for 2014 explored.

Amendments made this year in Indian FDI policy impact a number of key business sectors, and in many instances eliminate the need for foreign investors to obtain approval from the Indian Government before investing. Additionally, policy changes in 2013 alter the legal definition of ‘control’ and regulations for single and multi-brand retail trading.

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Visa Applications and Registration in India

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Sept. 30 – When applying for a long-term visa in India, there are a number of procedures and legal frameworks that must be understood. In this article, we discuss the documents necessary for a foreigner to work in India.

Visa Application
India provides two kinds of work-related visas: a business visa, also called a B visa, and an employment visa, also called an E visa. A multiple entry business visa can be granted for a period of up to five years, with the maximum allowable stay period per visit to be determined by the issuing Indian mission.

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Establishing a Trading Company in India

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By Dezan Shira & Associates, Delhi Office

Sept. 17 – India is fast emerging as a global trade dynamo with its vast natural resources and huge supply of skilled labor. Undertaking considerable industrial deregulation and other structural reforms, regulators in India recognizes that strong exports are critical for overall economic growth and poverty reduction. As such, export-led growth has become a key driver of trade in India – one of the most important trailblazers in the recent enormous expansion of international trade.

Indian trade has grown exponentially over the past few years, with exports rising at a rate well above the pace of growth of worldwide exports. In this atmosphere, opportunities have never been greater, and starting a trading business in India has never been easier.

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