Commentary: Chris Devonshire-Ellis Apr. 14 – The ability for Indian chartered accountants, cost accountants and company secretarial practices to obtain limited liability partnership status will take some time, even though the government has initiated the process. Despite the government approval, the three regulators concerned, the Chartered Accountants of India (ICAI), the Institute of Cost and […]
Apr. 7 – Foreign companies and non-resident individuals that need to send funds to foreign countries will need to notify the Income Tax authorities according to a new regulation by the Central Board of Direct Taxes. According to the new regulation 37BB, the company or individual that sends the money abroad will have to notify the income tax authorities before remitting money outside India so that the Indian tax authorities can keep a tab on the taxes paid on the remittances.
Apr. 3 – The Indian government is working towards making service tax payments within Special Economic Zones simpler and less bureaucratic. The Finance Ministry has written to the Election Commission seeking approval to eliminate the lengthy procedure which involves companies within SEZ’s paying service tax and then claiming refunds. Nonetheless, taxes will have to be paid for services rendered outside SEZ’s.
Mar. 31 – Indian financial policymakers have decided to adopt a reciprocity model for allowing foreign banks to set up branches or subsidiaries in India. They will also want foreign banks to list on the Indian bourses in order to have a presence in the Indian market.
Mar. 26 – The Supreme Court of India has ruled that a foreign company registered and situated abroad is liable to deduct tax on salary paid in the home country to their employees working in India, the Economic Times reported. Until now, the ruling held that TDS provisions could not extend beyond borders.
Mar. 9 – The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled on Monday that an expatriate responsible for operations of a company in India as well as other countries in the region need not pay taxes on his salary earned outside India if he can prove the work conducted out of India had nothing to do with his Indian operations. According to the ITAT ruling, if the expatriate fulfils the requirements, he will not be taxed on his salary for the days that he hasn’t been in India.
Tax liability in India is governed by the residential status of the individual during that tax year. Individuals are considered residents if they are in India for more than 182 days or more during the fiscal year or if they are in India for 60 days or more in a year provided that they have also been in India for an aggregate of 365 days or more in the preceding four tax years.
Mar. 5 – The reserve bank of India cut the repurchase rate, its lending rate to 5 percent, and its reverse repurchase rate to 3.5 percent, dropping both rates by half a percentage point. Exports in the US$1.2 trillion economy have fallen to an all time low since June 1998 when they fell 16.1 percent from the previous year. The Indian government said it made the unexpected move when the economy slowed beyond their expectations.
This is the fifth time India’s apex bank has cut its benchmark rates since October last year. The RBI cut repurchase rates in order to increase liquidity in the market while it cut its reverse repurchase rate so that commercial banks would not park their money with the RBI. The government expects the economy to grow at a six year low of 7.1 during this fiscal year ending March.
Mar. 4 – The Indian government is mulling over proposals to set up an independent regulatory body along the lines of the US Public Company Accounting Oversight Board (PCAOB) to better regulate and monitor the domestic audit industry. This comes on the back of the recent Satyam scandal where auditors failed to prevent India’s largest ever corporate fraud.
Currently, the overseeing of auditors is undertaken by the Institute of Chartered Accountants. They are said to be resisting the establishment of a new regulator, however the government is concerned that they too are failing in their duties. The proposal is set to be put forward to the Ministry of Corporate Affairs.
The following of the US model marks a step forward in compliance issues. The American PCAOB was established to replace the Public Oversight Board, an industry run, self regulating body that failed to monitor and spot US accounting scandals such as Enron and Worldcom. The PCAOB takes its regulatory powers from the Sarbannes Oxley act, which oversees the auditors of public listed companies, and also consulting and tax services, and the Indian government now appears keen to duplicate this model.