Budget 2018: Foreign tax credit norm review tops Nasscom’s wishlist

By: |
New Delhi | January 28, 2018 12:54 PM

Budget 2018: IT industry body Nasscom has advocated for a comprehensive review of foreign tax credit norms, while pitching for minimum alternative tax exemption and removal of "differential" tax rates for domestic and foreign start-up investors, as part of its budget wishlist.

Indian IT firms, IT firms, Nasscom,  CSR Leadership Conference, CSR platform Goodera,Budget 2018: Nasscom has also reiterated its request to address the ‘Angel Tax issue’ by recognising genuine angel investments in start-ups, he pointed out. (Website)

Budget 2018: IT industry body Nasscom has advocated for a comprehensive review of foreign tax credit norms, while pitching for minimum alternative tax exemption and removal of “differential” tax rates for domestic and foreign start-up investors, as part of its budget wishlist. Nasscom President R Chandrashekhar told PTI that the underlying principle for these recommendations is that domestic investors should not be taxed at a higher rate than foreign investors. Moreover, the tax rate for digital transactions should not be higher than same or similar transactions being conducted offline, he added. Nasscom has also reiterated its request to address the ‘Angel Tax issue’ by recognising genuine angel investments in start-ups, he pointed out. The IT industry has grown six-fold in revenue terms over a decade and continues to be the largest private sector employer in the organised sector.

The sector has grossed over $100 billion in exports, and employs nearly 3.9 million people directly. Representatives of Nasscom, which is seeking support for the industry to maintain and enhance its global competitiveness, had met Finance Minister Arun Jaitley last month as part of pre-budget consultation. Chandrashekhar said a comprehensive review of the foreign tax credit provisions will ensure efficiency and ease of compliance for exporters from India. “We have made suggestion on use of foreign tax credit such as allowing an option for carry forward of credit for maximum utilisation. “…and an option for consolidated filing wherein credit is calculated on clubbed foreign income and total taxes paid abroad, and not on a country-wise basis,” he added.

Watch video: Budget 2018: FM Jaitley can reduce Corporate Tax to 25%

On the long-term gains from sale of unlisted shares in start-ups, Chandrashekhar pointed out that the process attracts a tax of 20 per cent from domestic investors and 10 per cent from non-residents. “There is an adverse differential between taxation of domestic and foreign investment in start-ups and the Small and Medium Enterprises (SMEs)…the point we made is that we should not have a situation where the domestic investor is disadvantaged viz-a-viz a foreign investor,” he said. Besides, Nasscom has sought MAT exemption for start-ups, saying this would strengthen the entrepreneurial ecosystem in the country.

Also read: Budget 2018: Promises which are still work in progress

“We are saying that any service performed in a digital mode should not end up attracting a higher tax than if it were done manually. If the Government’s policy is digital economy, you cannot have a tax structure that works in the opposite direction,” he said. He cited the example of GST being levied on household services like plumbing that are offered through e-commerce platforms, but are otherwise not subject to GST. In the upcoming Union Budget 2018, industry is seeking support for mainting and enhance global competitiveness.

Watch video: Will Tax Slabs be revised in Budget 2018

“We had urged the government to look into such specific instances and offer relief, and the GST Council has announced a reduction in GST rate from 18 per cent to 5 per cent recently for such services,” he said. He asserted that applying GST to such services, when delivered online, is against the ongoing efforts to promote digital adoption in the country. He further said the industry is hopeful of continued support from the government in removing such anomalies. The Budget Session of Parliament is set to commence on January 29 and the Union Budget for 2018-19 will be presented on February 1.

Do you know What is Finance Bill, Short Term Capital Gains Tax, Fiscal Policy in India, Section 80C of Income Tax Act 1961, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.