Budget expectations

The Budget is expected to focus on measures to spur demand and lift economic growth. We hope that the tax proposals in the Budget enable ease of doing business, simplify tax issues, promote investment flows and tax certainty.

Key expectations from the Budget are as follows:

1. To provide impetus on ease of doing business in India, the Government may take the following steps:

• Rationalise the taxation of start-ups by aligning the existing provisions with the recent notification issued by the Department for Promotion of Industry and Internal Trade (DPIIT).
• Provide measures to improve the existing dispute-resolution process or mechanisms to reduce backlog of tax cases.
• Provide exemption to foreign companies with respect to filing of tax returns in India.

2. To simplify tax issues, the Government may shift the mode of dividend taxation to the classic tax withholding from dividend distribution tax.

3. To stimulate investment flows, the Government may enhance the benefit of concessional tax-withholding rate to other forms of funding such as INR denominated External Commercial Borrowings (ECBs), Compulsory Convertible Debentures (CCDs), Non-Convertible Debentures (NCDs), etc., and extend the sunset date of 1 July 2020.

4. In terms of tax certainty, the Government may carry out the following measures:

• Issue safe harbor rules to mitigate inadvertent tax-presence creation on account of secondment or deputation of employees by MNCs to India.
• Clarify its intent on the applicability of general anti-avoidance rule (GAAR) vis-à-vis principle purpose test (PPT) as provided in India’s tax treaty framework with Singapore, Netherlands, France, etc.
• Issue clarifications for efficient application of the newly introduced corporate tax rates.