India Budget 2016 – Highlights

Global Tax Update:March 2016/India

The Indian Finance Minister presented the union budget 2016 (the Budget 2016/ the Budget) for the fiscal year 2016-17 on 29 February 2016. We have summarized a few key tax proposals of the Budget 2016 in this newsletter. (Global Tax Update:March 2016/India)

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We have summarized a few key tax proposals of the Budget 2016 in this newsletter. 

1. Corporate tax rates

No change in basic tax rate for companies which is 30% for domestic companies and 40%1 for foreign companies. It may be noted that a subsidiary or joint venture company incorporated in India by a foreign company is regarded as a domestic company. Three new proposals have been made this year:

2. Implementation of Base Erosion Profit Sharing (“BEPS”) Action Plans

As part of the Budget 2016, the Indian Government made four BEPS announcements.

3. Measures to increase ease of doing business

Finance Act, 2015 amended the provisions pertaining to residential status according to which a foreign company is treated as resident in India if its PoEM in that year is in India. Considering the various issues relating to implementation of PoEM, it is proposed to defer the applicability of PoEM based residency test by 1 year, i.e. from 1 April 2016. A transition mechanism is proposed for a company which is incorporated outside India and has not earlier been assessed to tax in India.


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