Finance Minister Pranab Mukherjee today (May 07, 2012) announced that the General Anti-Avoidance Rules (GAAR) will be applied from 2013-14 onwards, deferring its application by a 1 year.
In the Finance bill 2012-13, the Finance Minister proposed the following amendments to its budget proposals of 2012-13:
Hiked threshold for Tax Deducted on Source (TDS) from Rs2 lakh to Rs5 lakh
Withdraws levy on all branded and unbranded jewellery. (earlier imposed as 1% duty)
Both these developments are positive for the branded jewellery players and specifically for Titan Industries.
He also clarified that the government will remove the provision where the onus imposed on the tax payer to prove that there was no tax avoidance. The onus is on tax officials.
He also said that tax rules would not be used with retrospective amendments on cases where final assessments have been made.
The finance minister also announced 0.2% securities transaction tax on deals involving unlisted companies instead of a withholding tax. The imposition of a withholding tax hurt private equity or venture capital companies that were looking to exit their early stage investments in private firms. This should come as a relief to investors.
Foreign institutional investors ( FIIs) were worried because the imposition of the rule in present form would mean paying tax on profits in India. GAAR was introduced by Mr Mukherjee in his Budget presented on March 16 with an objective to counter aggressive tax avoidance practices by companies. It empowered officials to deny tax benefits on transactions or arrangements which do not have any commercial substance or consideration other than achieving tax benefit.
Indian markets could have lost an estimated $10 billion worth investments from the overseas funds and ultra-rich foreign individuals over the past one month on taxation worries.
Speaking on amendments in the Finance Bill in parliament, Mukherjee also said the onus of proof will lie with the tax authorites and that the proposed retrospective amendment of income tax laws will not override tax break treaties.
'Deferment of GAAR is needed to bring about more clarity in guidelines and (put in place) the complete framework after stakeholder consultations to ensure its smooth implementation,' said Rahul Garg, leader (direct tax).
A deferment of GAAR can perk up sentiment in general, but the overall mood towards emerging markets is so weak there may not be a flood of investments, says Abheek Barua, chief economist, HDFC Bank. Under the GAAR regime, authorities can deny tax benefit to any arrangement that is entered into primarily to avoid tax. The rule will almost certainly tax foreign institutional investors that route portfolio investments into India through token operations in Mauritius with which India has a tax treaty.
View : The clarification given by FM is a kind of relief for markets which has been unnerved by possible introduction of GARR.
....more info
In the Finance bill 2012-13, the Finance Minister proposed the following amendments to its budget proposals of 2012-13:
Hiked threshold for Tax Deducted on Source (TDS) from Rs2 lakh to Rs5 lakh
Withdraws levy on all branded and unbranded jewellery. (earlier imposed as 1% duty)
Both these developments are positive for the branded jewellery players and specifically for Titan Industries.
He also clarified that the government will remove the provision where the onus imposed on the tax payer to prove that there was no tax avoidance. The onus is on tax officials.
He also said that tax rules would not be used with retrospective amendments on cases where final assessments have been made.
The finance minister also announced 0.2% securities transaction tax on deals involving unlisted companies instead of a withholding tax. The imposition of a withholding tax hurt private equity or venture capital companies that were looking to exit their early stage investments in private firms. This should come as a relief to investors.
Foreign institutional investors ( FIIs) were worried because the imposition of the rule in present form would mean paying tax on profits in India. GAAR was introduced by Mr Mukherjee in his Budget presented on March 16 with an objective to counter aggressive tax avoidance practices by companies. It empowered officials to deny tax benefits on transactions or arrangements which do not have any commercial substance or consideration other than achieving tax benefit.
Indian markets could have lost an estimated $10 billion worth investments from the overseas funds and ultra-rich foreign individuals over the past one month on taxation worries.
Speaking on amendments in the Finance Bill in parliament, Mukherjee also said the onus of proof will lie with the tax authorites and that the proposed retrospective amendment of income tax laws will not override tax break treaties.
'Deferment of GAAR is needed to bring about more clarity in guidelines and (put in place) the complete framework after stakeholder consultations to ensure its smooth implementation,' said Rahul Garg, leader (direct tax).
A deferment of GAAR can perk up sentiment in general, but the overall mood towards emerging markets is so weak there may not be a flood of investments, says Abheek Barua, chief economist, HDFC Bank. Under the GAAR regime, authorities can deny tax benefit to any arrangement that is entered into primarily to avoid tax. The rule will almost certainly tax foreign institutional investors that route portfolio investments into India through token operations in Mauritius with which India has a tax treaty.
View : The clarification given by FM is a kind of relief for markets which has been unnerved by possible introduction of GARR.
....more info