India: Areas of Direct Tax Code Concern Identified

by Lorys Charalambous, Tax-News.com, Cyprus

19 October 2009

Indian Finance Minister Pranab Mukherjee has announced that, following consultation with stakeholders on the forthcoming Direct Tax Code, several key areas of concern have been identified for further detailed examination.

At a recent meeting with representatives of trade and industry from all over the country, Mukherjee revealed that the areas in question are:

• The concept of a Minimum Alternative Tax based on gross assets;
• Capital Gains Taxation in the case of non-residents;
• The Income Tax Act and the Double Taxation Avoidance Agreement;
• The General Anti-Avoidance Rule (GAAR);
• Issues relating to effective management control and taxation of foreign companies in India;
• The taxation of charitable organizations; and
• The shift from an EEE to EET taxation system, with regard to retirement planning.

Commenting on concerns that the time-frame announced by the government for the introduction of the new legislation might result in an unsatisfactory regime being put in place with regard to one or all of the aforementioned areas, the Finance Minister sought to reassure those affected that "next steps would be taken only after a comprehensive review of the draft Direct Taxes Code by taking on board the suggestions received," according to a government statement released following the session.

“We want to present the stakeholders with a tax regime which is simple and broad based leading to lowering of tax rates, better tax compliance and reduced litigation,” Mukherjee explained.

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