Rukshad Davar chalks down his key insights and takeouts from the Union Budget 2020.
“The new tax proposals in the budget will significantly benefit foreign companies in India and will improve their return on investment in India.
- One, the removal of the dividend distribution tax at the Indian company level will leave a company with more money to distribute as dividend and will enable the foreign parent shareholder to avail of a reduced tax rate under the tax treaty, as also claim a tax credit in its home jurisdiction on the tax withheld.
- Two, exempting foreign companies from the requirement of filing their tax returns in India if they receive income by way of royalty or fees for technical services is a big positive, and will eliminate the cumbersome tax compliance burden on them.
- Three, the provisions on significant economic presence that constitute a taxable business connection in India for foreign companies have been deferred by a year.
With corporate rates for new manufacturing companies having been reduced to 15% last September, foreign companies should seriously look at the Indian market to set up manufacturing bases.”