Assocham: Exempt Foreign Earnings from Income Tax

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Apr. 14 – The Associated Chambers of Commerce and Industry of India (Assocham) has proposed that earnings made by Indian companies from overseas firms be exempted from income tax should their stake in the company be more than 10 percent.

This would make it easier for Indian companies to reinvest income earned abroad locally and help the country’s campaign to bring in more investment for major infrastructure projects. The chamber is proposing that a provision in the Draft Tax Code be revised to enable recipients of dividends and capital gains from sale of shares from overseas companies, wherein the Indian company has more than a 10 percent stake, be exempted from income-tax.

“These companies are reluctant to bring back the profits earned by their foreign subsidiaries in the form of dividends paid to their Indian holding companies, since the dividends are taxable at the rate of 35 percent,”  the chamber said.

One of the important sources of funds for this purpose is the wealth created by Indian businesses in other countries, Assocham President Swati Piramal told The Economic Times. “It is of prime importance that this source of funds is channelized in a proper manner for stepping up the pace of economic development in our country,” Piramal added.