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News & Knowledge

India: Budget 2018 – Changes impacting foreign companies and non-residents

12th March 2018
DVS Advisors, Chennai (India)

MSI's Chennai based accounting member DVS Advisors LLP provides an overview of important amendments in the Union Budget 2018 impacting foreign companies and non-residents in India.

The Union Budget 2018 in India was introduced on 1st February, 2018 and was one of the shortest budgets in the last 10 years considering the direct tax amendments. It wouldn’t be critical to say that it was a “financially prudent yet a popularly marketable” budget this year. The Budget focused on many important amendments such as a reduction in the corporate tax rate, increase in interest deductions for senior citizens, re-introduction of long term capital gains tax, redefining the concept of “business connection”, faceless amendments, rationalising the summary assessments, etc. In this article, we have highlighted crucial amendments which would impact non-residents and foreign companies doing business in India.

LTCG on Sale of Equity Shares, Equity Units and Units of Business Trusts

Long term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10% of such capital gains exceeding one lakh rupees.

Conditions: This concessional rate of 10% will be applicable to such long term capital gains, if:

  1. Securities Transaction Tax (“STT”) has been paid on both acquisition and transfer of such equity share
  2. STT has been paid on transfer of such units.

Powers of Central Government:

  • Notify exempted transactions from payment of STT on acquisition of equity shares (we expect the transaction of bonus and rights shares to be exempted from payment of STT on acquisition)
  • Exempt transactions undertaken on recognized stock exchange located in any International Financial Services Centre (“IFSC”) and the consideration of such transfer is received or receivable in foreign currency.

Computation:

  1. No indexation benefit
  2. No benefit of computation of capital gains in foreign currency in the case of a non-resident
  • Deduction under Chapter VIA and rebate under Section 87A of the Act shall be allowed from the gross total income as reduced by such capital gains
  1. The cost of acquisitions in respect of the long term capital asset acquired by the assessee before the 1st day of February, 2018 , shall be deemed to be the higher of –
    1. the actual cost of acquisition of such asset; and
    2. the lower of –
      • – fair market value of such asset; and

–      full value of consideration received or accruing as a result of the transfer of the capital asset.

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About DVS Advisors LLP - Chennai

DVS Advisors LLP is a contemporary tax, legal and financial solutions provider with a specific focus on Direct, International and Indirect Taxation.

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