This could come as a huge relief as majority of the FIIs operating in India are registered in tax havens. The discussion paper also removed the ambiguity on income classification for tax computation.
Two case studies on how one can use the exemption method or the credit route
In a major relief to Indian information technology (IT) companies operating in Australia, Canberra has agreed to amend its domestic laws to stop taxing offshore income of such Indian companies, as part of the free trade deal inked. This may lead to savings up to $200 million each year for over 100 Indian IT companies operating in Australia. "The Government of Australia has agreed to amend the domestic taxation law to stop the taxation of offshore income of Indian firms providing technical services to Australia. "This will resolve the issue that the Indian government has raised about the double taxation avoidance agreement (DTAA) between the two governments for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income," said a commerce ministry official.
India and Myanmar have signed a Double Taxation Avoidance Agreement (DTAA), which provides that business profits will be taxable in the source state. In the case of India, the DTAA will cover income tax and surcharge and in the case of Myanmar, income tax and profit tax. However the maximum rate of tax to be charged in the country of source will not exceed 5 per cent in the case of dividends & 10% in the case of interest and royalties. The deal also has anti-abuse provisions.
Taking forward its efforts to track and unearth black money, India has now ratified its Double Taxation Avoidance Agreements with SAARC nations and the revised treaties will come into effect from next fiscal.
As per their law and Constitution, their international agreements are to be ratified by both houses of Parliament and local authorities.
Comptroller and Auditor General has pulled up the finance ministry for flaws in double taxation avoidance agreements
Mauritius on Friday said it has exchanged information related to over 170 cases with India over three years, and the two countries have made big progress on the double taxation avoidance treaty since 2006.
The industry employs about 10 million workforce.
Mukherjee, who is in Port Louis on a three-day visit, said the Double Taxation Avoidance Convention cannot be seen in isolation, separate from the many strands that weave the tapestry of India-Mauritius relationship and efforts, and it should remain focused on realisation of the full potential of the bilateral ties.
The JWG has had eight rounds of meeting since it was set up in 2006 but no mutually agreeable solution has been arrived at.
India and Switzerland on Monday signed the revised Double Taxation Avoidance Agreement, a move that will help the government seek details about illicit wealth allegedly stashed away by Indians in Swiss banks.
India and Qatar on Tuesday agreed to elevate their relationship to a strategic partnership and double bilateral trade to USD 28 billion over the next five years. Prime Minister Narendra Modi and Qatari Amir Sheikh Tamim Bin Hamad Al-Thani signed agreements and MoUs to strengthen economic cooperation, including a revised double taxation avoidance agreement. The strategic partnership will cover the "entire spectrum" of the bilateral relationship, including trade, energy security, and regional and international cooperation. Both leaders also discussed ways to further strengthen and broaden the energy partnership, including "exploring mutual investments." The Amir's visit provided an "excellent opportunity" for the top leadership of the two countries to discuss and "cement a strategic partnership for enhanced future cooperation."
The government may have to wait a little longer to get a trail of illegal money stashed by Indians in Liechtenstein.
There is a growing concern that many entities are routing their investments into the country through Mauritius to reap undue tax benefits.
Tax experts said as a result of the amendments, companies operating from countries with which India didn't have DTAAs, would try to shift to countries with which India had such agreements, including Mauritius.
In a significant development towards renegotiation of tax treaty with Mauritius, the Finance Ministry has written to the Ministry of External Affairs to take up the issue of including more areas of information exchange in the agreement between the two countries.
The form will be redesigned in such a way that investors could fill up most of the details themselves
Budget 2007 is expected to introduce major changes in non-resident taxation, partly aimed at making it easier for foreign companies to do business in India and encouraging greater investment inflows.
Treaty shopping by investors to be over if island nation budges on capital gains tax.
Black money is difficult to deal with.
The discussions on renegotiating the Double Taxation Avoidance Agreement, which comes in the wake of India seeking details of the black money stashed in Swiss banks, was earlier scheduled to be held in December.
Anti-money laundering efforts will not succeed unless banking secrecy laws are repealed.
India has bilateral tax agreements with more than 70 nations.
India and Cyprus had entered into a Double Taxation Avoidance Agreement in 1994.
Talks not to resume till the island nation expedites revision of double-taxation avoidance agreement.
More relief is in store as the revised draft suggested a less taxing dispensation for triggering the General Anti-Avoidance Rule.
The MoU deals with creation of a useful forum for exchange of views on financial and macro-economic issues. Official sources said the MoU will facilitate dialogue between the tax authorities of the two countries.
India can now sign treaties with five more countries in its pursuit to bring back black money stashed abroad with the Cabinet on Friday approving such pacts.
Other documents might be needed for investors from other nations
Renegotiated tax treaty to relax banking secrecy laws.
The amended treaty will enable India to get banking information in specific cases, beginning April 1, 2011.
Company analysts and tax experts say neither the foreign direct investment nor the portfolio investment by large institutions will be affected.
Efforts to initiate a double taxation avoidance agreement with Singapore has hit a roadblock. This is because of Singapore's reluctance to include an information-sharing clause in the agreement.
Having made no headway to amend a 26-year-old double taxation avoidance agreement with Mauritius, the finance ministry has hardened its stance against broadening India's economic engagement with the island nation.
Mukherjee and Swiss Foreign Minister Micheline Calmy-Rey signed the revised pact in New Delhi on Monday.
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