The proposal, which will be one of the biggest capital market reforms in recent years if it is implemented, has been made by a Group on the Review of Issue Process, which is likely to submit a report on Thursday or Friday.
Transfer pricing legislation was introduced in India in 2001 and has emerged as the single biggest source of courtroom battles between Indian tax authorities and companies, a large number of which are multinationals with operations in India.
Finance Minister P Chidambaram may introduce Controlled Foreign Companies rules to tax income from Indian-owned foreign subsidiaries. That means, irrespective of whether the income is brought to India or parked outside, Indian tax rates will be have to be paid on such income.
The empowered committee of state fnance ministers had recommended to the finance ministry that the Centre should provide direct budgetary support and transfer more services to states on account of the rate cut, sources said. States have refused to hike the value-added tax rate on more than 250 items like drugs, agricultural and industrial inputs from 4 per cent to 5 per cent to make up for revenue loss.
Even as the debate over off-Budget liabilities continues, former finance ministry bureaucrats and leading economists say it's time the government went beyond the targets in the Fiscal Responsibility and Budget Management Act.
The proposal is being examined by the finance ministry in the run-up to Budget 2008-09. The banks have told Finance Minister P Chidambaram that there is a considerable divergence between the provisions made according to the RBI guidelines and the deductions allowed by the Income Tax Act.
Many financial sector reforms suggested by the Percy Mistry Committee may not figure in Budget 2008-09.
The Reserve Bank of India has told parliamentarians that it is concerned over the stock market exposure of various non-banking financial companies (NBFCs) promoted by leading banks in the country.
FM is considering extension of the sunset clause for housing projects in Budge 208-09.
Demat of TDS certificates is likely to be deferred by a year or at least six months.
Professional sportspeople may soon have to pay at least 10.3 per cent as tax on their match fees and money for endorsing corporate logos on their apparel and other gear.
The finance ministry is considering a proposal to advance the due date for filing income tax returns by two months for all direct taxpayers, both salaried individuals and companies.
"This is the result of tighter fiscal discipline imposed by the fiscal responsibility framework ... and an optimistic revenue outlook driven by the buoyancy in revenue collections during the last three years of the 10th Plan," the 11th Plan document points out.
Interest income from investments in infrastructure bonds for sectors like power and roads among others may be exempted from income tax.
Weights of the fuel group are set to rise in the revised Wholesale Price Index.
Riding on a buoyant economy and better tax compliance, gross tax revenue collections are likely to surpass the Rs 6,00,000 crore (Rs 6000 billion) mark in 2007-08. In other words, tax revenue is expected to double compared with Rs 3,04,958 crore (Rs 3049.58 billion) in 2004-05.
Taxi and bus fleet owners and contractors providing raw materials, electrical work and furniture in civil construction are likely to come under the presumptive income tax net from 2008-09.
The committee on financial inclusion, headed by C Rangarajan, the chairman of Prime Minister's Economic Advisory Council, has recommended that the profits transferred to their reserves by such banks should be exempted from tax till the banks achieve the standard capital adequacy ratio (CAR).
The finance ministry is considering this move on account of better levels of tax compliance and the ongoing buoyancy in direct tax collections, a senior government official told Business Standard. The surcharge, a sort of "tax on tax" is paid by 2-3 million, of the total 31.9 million assessees who are liable to pay tax.
The reason for the largesse, a first in the revenue department, is on account of direct and indirect tax collections exceeding the target (Budget estimate) for 2006-07. Total revenue collections stood at Rs 470,987 crore (Rs 4,709.87 billion) for the year, against the targeted Rs 439,952 crore (Rs 4399.52 billion).
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