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The Implications of India’s Minimum Alternate Tax (MAT) for Foreign Investors

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By Dezan Shira & Associates
Editor: Nishant Dixit

The general optimism over India’s foreign investment climate under the business-friendly leadership of Narendra Modi is starting to fade away as the country institutes major tax demands on foreign investors.

In April, over 100 Foreign Portfolio Investors (FPI) were served tax notices requiring them to pay the Minimum Alternative Tax (MAT) which traditionally has not been applied to foreign funds.

The controversy over MAT is ongoing as it has already appeared in three major cases: Vodafone (US$2.5 billion tax bill), Nokia (US$340 million), and Cairn Energy (US$1.6 billion). The most recent MAT related tax demands could be as high as US$8 billion.

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Managing Your Accounting and Bookkeeping in India – New Issue of India Briefing Magazine

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Cover 250 x 350The new issue of India Briefing magazine, titled “Managing Your Accounting and Bookkeeping in India“, is out now and available as a complimentary download in the Asia Briefing Bookstore.

Contents
  • Ind-AS: Preparing for India’s New Accounting Standards
  • Complying with India’s Tax Filing Requirements
  • Remitting Profits from India: Procedures & Regulations for Foreign Businesses

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New Foreign Trade Policy to Back-end Export Targets

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By Adam Pitman
International Business Advisory Manager, Dezan Shira & Associates 

Make in India. Digital India. Skill India. The list of slogans for the government’s economic initiatives is ever expanding. This public relations effort remains critical for the government, which needs to reshape how foreign businesspeople perceive India to increase foreign investment. However, many local businesspeople are concerned that the government has not implemented more measures to support its bold sloganeering.

The Modi administration’s first Foreign Trade Policy, unveiled on April 1, represents a pragmatic step forward in this regard. Much like the admiration’s first budget, unveiled on February 28, the policy targets critical industries with useful reforms and incentives. Perhaps more importantly, however, the trade policy has sought to back-end the government’s ambitious goals.

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State Spotlight: Investing in Karnataka’s Manufacturing Sector

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By Dezan Shira & Associates
Editor: Nishant Dixit

Karnataka is pushing for industrial growth in regions beyond the city of Bangalore, its central technology and innovation hub. As it seeks to increase investment in manufacturing, development of large scale industrial infrastructure and incentives for Small and Medium Enterprises (SMEs) will be key components of this push.

Karnataka Background

With a population totaling 62 million, Karnataka is one of the more industrialized states in India and is the fifth largest contributor to India’s manufacturing GDP. About 18 percent of Karnataka’s total GDP is created by the manufacturing sector.

Bangalore is dominant in Karnataka foreign direct investment (FDI) – between 1993 and 2005, 90 percent of all FDI in Karnataka was concentrated in Bangalore. Although Karnataka is most known for its IT sector, the state has manufacturing capacity in electronics, garments, aerospace and defense, automobiles, biotechnology, and steel production. However, it has been losing investment to established industrial states such as Maharashtra, Gujarat, and Tamil Nadu. Karnataka’s manufacturing sector only saw a marginal growth of less than one percent between 2005 and 2011.

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Foreign Investment Opportunities in India’s Growing Biotechnology Industry

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By Dezan Shira & Associates
Editor: Nishant Maddineni

India’s biotechnology industry is growing at an exponential rate, with the country’s bio-economy valued at US$4.3 billion at the end of 2013 – up from US$530 million in 2003. As a result, India now has the third largest biotech industry in the Asia-Pacific region and the most US FDA-approved plants after the U.S. With strong support from the Indian government, the industry is expected to grow at an average growth rate of around 30 percent a year to reach US$100 billion by 2025.

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Expecting in India: Employee Maternity Pay and Leave

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By Dezan Shira & Associates
Editor: Rebecca Choong Wilkins

In a recent interview, Kiran Mazumdar-Shaw – founder of Biocon, India’s biggest biotechnology company – spoke of the obstacles facing India’s female workforce. Namely, the attitudes of women returning to work after taking a leave of absence, such as maternity leave.

According to Mazumdar-Shaw, women in India tend to backtrack, opting for less ambitious roles which waste their expertise and experience. She identified mentorship and not policy as the means to instigate change. Before this, however, ensuring employers are in compliance with maternity laws can be its own challenge.

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Outsourcing BPO Services to India’s Lower-Tier Cities

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By Dezan Shira & Associates
Editor: Nishant Maddineni

With fierce competition for business process outsourcing (BPO) services from other Asian countries, state governments in India are increasingly looking to encourage companies to invest in rural BPO centers.

Outsourcing business processing services initially became popular for foreign businesses as a strategy to cut costs and improve organizational efficiency. With real estate prices and labor costs increasing in major Indian cities, numerous companies have taken up government initiatives to open BPO centers in rural areas.

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India’s FY 2015-16 Budget: Meaning and Implications for Foreign Investment

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By Chris Devonshire-EllisTarun Manik and Nishant Dixit
Dezan Shira & Associates

Although lacking the “big bang” that was speculated before its release, India’s budget for FY 2015-16 creates important opportunities for foreign investors through small but meaningful reforms. The budget was announced on 28th February, 2015, by India’s Finance Minister Arun Jaitley. It proposes a number of foreign investment and tax reforms with important consequences for investors including lower compliance costs, increased certainty in the tax regime, and an improved business environment.

The budget proposals seek to improve India’s business and investment environments by improving ease of doing business in the country. In February, the government launched an e-biz portal which integrates 14 regulatory permissions at one source. The finance minister said in the budget speech that he intends to appoint an expert committee to prepare a draft legislation which will expedite regulatory permissions.

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