The Finance Minister while delivering the budget speech has set out a bold agenda - Transform, Energise and Clean India. In line with this, the budget proposals have focused on long-term requirements, and resisted populism. Some of the bold announcements include abolishing of the Foreign Investment Promotion Board to signal a change in the outlook towards attracting foreign investment, pushing the digital agenda to rein-in large cash transactions, ushering the much-needed transparency in electoral funding and promoting affordable housing. To signal further intent in boosting economic activity, corporate tax rates of companies with an annual turnover of under `50 crores has been brought down to 25 per cent, which as per the FM’s data will benefit 96 per cent of corporates presently filing tax returns.
Also, as a boost for domestic entrepreneurship, the FM has increased the period of tax holiday for eligible start-ups, protecting their eligibility to carry forward tax losses despite any changes in shareholding, as long as the initial shareholders continue to hold shares. The other positives include reducing the holding period to two years for immovable property in order to be eligible for a concessional capital gains tax rate and relaxing the domestic transfer pricing regime by excluding some transactions from its scope.
It is proposed that the amount of interest allowed as a deduction in cases of borrowings from, or guaranteed by, a related party being a non-resident would be restricted to 30 per cent of the adjusted earnings of the borrower with a limited eligibility to carry-forward and set-off such excess interest for a period of eight years.
While these are things to cheer about, Corporate India’s expectation to defer, if not abolish, provisions as to the Place of Effective Management, Income Computation Disclosure Standards and General Anti Avoidance Rules, have gone unanswered.
Krishna Kumar GV
Tax Partner,EY India