Tuesday, April 30, 2013

P Chidambaram seeks foreign money with tax cut

Wednesday May 1,2013,Place: New Delhi -

Finance minister P Chidambaram on Tuesday laid out his remedy for the widening current account deficit (CAD): beginning June 1, a two-year cut in withholding tax to 5% from 20% on interest foreign investors earn on government securities and rupee-denominated corporate bonds.

This, Chidambaram said during his reply on 2013-14 Budget in the Lok Sabha, would attract inflows from "foreign institutional investors and qualified foreign investors".

He issued a series of tax-related clarifications, all aimed at allaying concerns of various ministries, investors and non-resident

Infrastructure bonds: As per the Income-Tax Act, the payment of interest by an Indian company to a non-resident on money borrowed in foreign currency under a loan agreement or through issue of a long-term infrastructure bond is subject to deduction of tax at the rate of 5%, instead of the general rate of deduction of 20%. If such non-resident does not provide his permanent account number (PAN) to the payer, then the tax is required to be withheld at the rate of 20%.

Considering the practical difficulties in obtaining bondholders, he proposed to provide that provisions of Section 206AA of the Act shall not apply to interest paid to a non-resident on long-term infrastructure bonds. The proposed amendment shall take effect on June 1.

Tax residency: Chidambaram clarified that tax residency certificate (TRC) issued by a foreign government will be a proof of residency for tax purposes.

Railways: He exempted the Ministry of Railways from payment of service tax from July 1 to October 1, 2012.

Agriculture: On the wealth tax on agriculture, Chidambaram said, "There was apprehension that wealth tax was being imposed on agricultural land. Let me make it absolutely clear that the policy of the UPA government is not to impose wealth tax on agriculture land."

News From: http://www.7StarNews.com

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