Some key changes in direct tax laws
- MSMEs entities with a turnover of up to INR 50 crores to have a reduced corporate tax rate of 25%. Carry forward of losses allowed to startups despite change in 51% shareholding.
- Availability of Minimum Alternate Tax (“MAT”) credit carryforward to be increased to 15 years; Also, amendments to MAT provisions takes into account implications in light of introduction of Ind AS.
- A maximum limit on interest deductions in a year in the case of interest paid to associated enterprises proposed to be restricted to 30% annually. Unutilized interest deductions available for carry forward for up to 8 years.
- Conversion of convertible preference shares into equity shares not liable to capital gains tax
- A lower withholding tax rate of 5% for rupee denominated and foreign denominated bonds extended up to 2020.
- Indirect transfer tax provisions to not apply to Category I and II Foreign Portfolio Investors.
- Deemed income in case of unlisted shares transferred at less than fair market value
- In case of Joint Development Agreements, capital gains to arise at the hands of individuals and HUFs only in the year of project completion.
- The period of holding to be classified as a long-term capital asset reduced to 2 years in case of immovable property.
- The base year for the cost of inflation index for long- term capital gains changed from 1981 to 2001.
- Long term capital gains tax exemption in case of listed shares not available where no Securities Transactions Tax was paid at the time of acquisition of such shares.
- Domestic transfer pricing regulations to apply only where one of the entities have transactions with a related party that avails profit linked deduction, thus diluting the scope.
- Secondary adjustments in relation to transfer pricing introduced.
We will be examining some of these aspects in the coming weeks.