Legal & Regulatory
Government Retracts Pension Tax Introduced in Budget
Indian Finance Minister, Arun Jaitely, has withdrawn a proposal aimed at taxing withdrawals beyond 40 percent of the Employment Provident Fund (EPF) corpus in the Union Budget for 2016-17. Jaitely initially argued that this would discourage full withdrawals and help create a pension society in India. Taking salaried tax payers by surprise, the government was almost immediately inundated with heavy criticism from all political quarters. Assessing this overwhelmingly negative feedback, and with the fear it would hold up key legislation stated for the Budget session, the Prime Minister’s Office (PMO) recommended the complete withdrawal of the proposal. The Labor Ministry also stated its opposition to any kind of taxation on the EPF after coming under fire from trade unions and opposition parties.
In response to the public review, the finance ministry has rolled back both its decisions – to tax EPF withdrawals and the proposal to limit tax-free contribution by the employer to the EPF to US $2270 (Rs 1.5 lakh) per annum. Additionally, the proposal to offer 40 percent rebate on the already taxable National Pension System (NPS) stays in place, bringing relief to NPS subscribers.
By Dezan Shira & Associates
Editor: Tracie Frost
When Finance Minister Arun Jaitley released the 2016 Union Budget on February 29, the response was mostly positive. The budget aims to stick to the 3.5 percent fiscal deficit target, addresses pressing social and infrastructural needs, and, for the most part, uses reasonable assumptions to forecast India’s growth over the next three years.
The Modi government has consistently focused on increased ease of business, opening markets to foreign investment, building India’s industrial sector, and improving transparency in taxation and regulation. While this budget delivered more on rural and infrastructure spending, it certainly includes some business elements that are worth exploring in detail.
By Rohit Kapur
India Country Manager, Dezan Shira & Associates
Finance Minister, Arun Jaitley has presented his third Union Budget for the fiscal year 2016-17. He started his speech by saying that, inspite of headwinds faced on account of a slowing global economy, Indian GDP growth is amongst the highest in the world at 7.6 percent. Affirming that the economy is on the right track, Jaitley cited the Consumer Price Index (CPI) which shows inflation down to just 5.4 percent from a pervious high of 9.4 percent. With inflation under control, the central Reserve Bank of India (RBI) is likely to reduce the lending rates and thus give an impetus to production and consumption.
Government Clarifies Definition of Start-ups
The Department of Industrial Policy & Promotion (DIPP) issued a clarification on the government’s definition of start-ups in India. This is to standardize norms for ventures seeking eligibility for benefits under the Start-up India Action Plan.
According to DIPP guidelines, a venture is qualified as a start-up for up to five years from the date of its registration and if the firm’s turnover is less than US $3.7 million (Rs 25 crore). The firm must then be licensed as a start-up by the Inter-Ministerial Board of Certification to qualify for tax breaks and other benefits. The certification process will assess the following criteria as put forth by the DIPP – innovation, development, commercialization of new products, processes or services driven by technology or intellectual property.
Towards this, the start-up must submit an application on the mobile application or online portal of the DIPP. It should be supported by documents verifying that funding is not less than 20 percent in equity by an incubation fund, angel investor, or private equity fund that is duly registered with the Securities and Exchange Board of India (SEBI).
By: Dezan Shira & Associates
Editor: Kimberly Momin
The Department of Industrial Policy & Promotion (DIPP) is an important government organization that promotes and regulates industrial growth and production in India. It falls under the aegis of the Ministry of Commerce and Industry. Established in 1995, the DIPP was merged with the Department of Industrial Development in 2000.
Maharashtra Government to Provide 250 Services Online by August 2016
As per the Maharashtra Chief Minister Devendra Fadnavis, the state’s government will offer 250 services online by 15 August 2016. This is part of the campaign for Digital India and the state’s ambition to increase the ease of doing business through efficient digital governance. The online portal – ‘Aaple Sarkar’ – currently provides 150 online services. It will function as a platform where citizens can register complaints and send forth suggestions to the government.
Additionally, the Maharashtra government provides a single electronic window clearance system – prospective businesses will now require 26 permissions from a single electronic window instead of pursuing a 1 to 3 year process of gaining 76 permissions. Fadnavis further highlighted the state’s plans to set up start-up warehouses in partnership with the National Association of Software and Services Companies (NASSCOM). These initiatives seek to establish Maharashtra as a digital state by 2019.
New Tariff Policy to Regulate Power Rates
The Indian government has approved new amendments to the National Tariff policy, 2005, which will tighten regulations on power tariffs and promote clean energy. Amendments to the tariff policy include the insertion of the word ‘necessarily’ in Section 61 of the Electricity Act 2003, empowering regulators to determine power rates at a utility level. The new regulations authorize customers to make use of smart meters to check power thefts and net metering. Additionally, they allow customers to interact with distribution companies and save money by switching off appliances during peak hours. Power companies can now expand their existing generation capacity to 100 percent and pass central taxes onto consumers. Other recommendations in the policy include promoting the use of renewable sources of energy and creating an environment enabling competition, efficiency and improvement in power supply.
Regulatory, Accreditation and Marketing Sub-Committees to Oversee Medical Tourism
The Minister of State (Independent Charge) for Tourism, Culture and Civil Aviation Mahesh Sharma has announced that sub-committees will be formed to oversee the regulation, accreditation and marketing of medical and wellness tourism. The announcement was made at the first meeting of the National Medical & Wellness Tourism Board, which has been established to provide effective, time-bound solutions to the health tourism sector.