ANNOUNCEMENT 30 Apr 2013In April 2013, the government of India announced changed incentives for foreign investors entering the country.
NUMBER OF INTERVENTIONS
On 30 April 2013, the Lower house of the Indian Parliament, the Lok Sabha, passed the Finance Bill 2013. The bill will now move to the Upper House of the Parliament and then to the President for his assent. Amendements affecting foreign commercial interests can be summarised as follows:
1) The exemption from the tax on income received in India (in local currency)
by a foreign company from its sales of crude oil has been extended to cover income from sales of any other good or service.
2) According to the Finance Bill 2012, the interest earned by nonresidents on borrowings in the form of approved loans or long-term infrastructure bonds in foreign currency was subject to a withholding tax at a concessional rate of 5 per cent. However, in the absence of a Permanent Account Number (PAN) of the payee, the withholding tax was 20 per cent. Such a distinction has been removed in the draft Finance Bill 2013. Even in the absence of a PAN, the interest is subject to a withholding of only 5 per cent. This provision is planned to come into effect on 1 June 2013.
3) A concessional withholding rate of 5 per cent, instead of 20 per cent before, has also been allowed on the interest payable to Foreign Institutional Investors and Qualified Foreign Investors on Rupee-denominated bonds of an Indian company or Government Security. Such interest has to be paid after 1 June 2013 and before 1 June 2015 to be applicable for the concessional rate. In the absence of a Permanent Account Number, the withholding rate applicable will be 20 per cent as before.