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TAX
KPMG IN INDIA
OPPI Knowledge Series
Impact of Direct Taxes Code Bill 2010September 2010
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2010 KPMG India Private Limited, an Indian private limited company and a member firm of the KPMG network of independent me mber firms affiliated with KPMG International, aSwiss cooperative. All rights reserved.
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Agenda1 Background
2 Corporate Tax3
4 Capital Gains
5 Overview Sources of Income
6
7
8
910
11
International Taxation
12
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2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), aSwiss entity. All rights reserved.
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15
Branch Profits Tax
Transfer Pricing
MATDeduction for Scientific R & D allowance
Tax Incentives - Others
SEZs / SEZ Units
14 DDT Credit
16 CFC17
Hits & Misses / Key focus areas for MNCs
Business income
Personal tax
Wealth tax
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Background
DTC 2009 unveiled in August 2009
The Government received over 1,600 representations on DTC 2009
RDP released in June 2010 on 11 specific issues
DTC 2010 tabled in the Lok Sabha on 30 August 2010
DTC 2010 to cost the Exchequer revenue loss of INR 531,720 Million on reduced rates
After clearance from the Parliamentary Standing Committee, the Bill may be passed inthe Winter Session
The DTC 2010 to be effective from FY commencing 1 April 2012
319 Sections and 22 Schedules in DTC 2010 vis--vis
298 Sections and 14 Schedules in the ITA
Simplified Legislation ?
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Category ITA (Headline Rates) DTC 2010
Income Tax - Indian Company 30 percent 30 percent
Income tax - ForeignCompany
40 percent
30 percent
Additional branch profit tax - 15percent
MAT 18 percent 20 percent
DDT 15 percent 15 percent
Income distributed by mutualfund to unit holders of equityoriented Funds
Not applicable 5 percent of income distributed
Income distributed by lifeinsurance companies to policyholders of equity oriented lifeinsurance Schemes
Not applicable 5 percent of income distributed
Corporate Tax Rates
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Personal Tax - Rates of income tax
Impact / Issues
Token reduction in tax liability (i.e. increase in net disposable income)
In case of Resident Women same exemption limit as Resident Men assessees
Education cess (@ 3 per cent) has been abolished
Existing Slabs
(As per ITA)
Proposed Slabs
(As per DTC 2010)
Tax Rate
(Per cent)
Upto INR 160,000* Upto INR 200,000* Nil
INR 160,001 to 500,000 INR 200,001 to 500,000 10
INR 500,001 to 800,000 INR 500,001 to 1,000,000 20
Above INR 800,000 Above INR 1,000,000 30
For resident Senior Citizens (i.e. 65 years of age or more) basic exemption limit enhanced to INR 250,000from INR 240,000
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Swiss entity. All rights reserved.6
Personal Tax - Definition of Residency
Category of Not Ordinary Resident
deleted but the concept remains
Individual can be either Resident or
Non Resident
Residency threshold for visiting Indiancitizens/person(s) of Indian origin
reduced to 60 days from 182 days
Expatriates of Foreign Nationality not
adversely affected qua Income-Tax;
however, adversely affected qua Wealth
Tax
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Swiss entity. All rights reserved.7
Personal Tax - Income from Employment
Employer defined
means a person who controls an individual under an express or implied
contract of employment and is obliged to compensate him by way of salary
Income from Employment = Gross Salary Specified Deductions
TDS on salary now on payment/ credit whichever is earlier
Additional burden of TDS on credit to books of accounts
Most exemptions/ deductions retained with minor tweaking
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Swiss entity. All rights reserved.8
Personal Tax Incentives
Impact / Issues
Retaining EEE taxation major relief in absence of established social security system
Withdrawals of Provident Fund, amounts received on death/ maturity of life insurance policy tax-free
Avenues reduced (no Housing Loan Principal, ELSS, Fixed deposits etc)
Incentives
Exempt Exempt Exempt (EEE) mode of taxing long term retiral savings retained
Deduction to approved provident funds, pension funds etc upto INR 100,000 p.a.
Deduction limits for life (premium less than 5 per cent) and health insurance premiums,tuition fees restricted to INR 50,000 p.a.
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Personal Tax Incentives
Investment ITA DTC 2010 Impact
Life InsurancePremium (LIP)
LIP deduction upto INR 1
Lakh (if premium < 20 percent of capital sum)
LIP deduction - upto
INR 50,000 (if premium
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