India taxation move 'to attract GCC investment'
Manama, July 17, 2014
Non-Resident Indians (NRIs) in Bahrain foresee an influx of GCC investment in India in the coming years, with the debut budget of the new Indian government clarifying its stance on retrospective taxation.
Prime Minister Narendra Modi's new government has presented its maiden budget in the Indian parliament, said a report in the Gulf Daily News (GDN), our sister publicaiton.
According to Indian community members, the budget, from an NRI point of view, has long-term benefits, particularly the government's commitment that it would reconsider retrospective taxation.
Until recently, old proceedings were being taxed as per the new rules.
UK-based telecom company Vodafone is facing tax claims and interest totalling more than $4.6 billion in India, which includes $2.45 billion for acquiring Hutchinson's stake in 2007, according to the company's annual reports.
This follows the previous Indian government adopting a retrospective tax amendment in 2012, a move that invited criticism from both domestic and overseas investors.
Finance Minister Arun Jaitley acknowledged the sovereign right of the government to undertake retrospective legislation during his budget presentation, stressing that this power has to be exercised with extreme caution and judiciously, keeping in mind the impact of such measures on the economy and the overall investment climate.
Bahrain Chapter of the Institute of Chartered Accountants of India (BCICAI) senior member Sumit Dhadda, who described the budget as balanced, said Jaitley's statement will lure in more GCC investors unlike the past two to three years.
"Global investors don't mind paying tax, but they cannot stand uncertainty on taxations," Dhadda told the GDN.
"After the Vodafone issue, GCC investors were shying away from India but the new government's stance is helpful.
"It boosts the confidence of global investors in India.
"Raising housing loan interest from BD975 ($2,571.8) to BD1,300, will also benefit NRIs.
"Deductions under section 80c of the Indian Income Tax Law, which includes insurance benefit schemes and increased baggage allowances, are also beneficial for NRIs," he added.
BCICAI chairman Sanjay Gupta noted that the 2014 budget had something for everyone - be it for investors or NRIs.
"Increase in allowance for customs duty-free imports from existing BD157 to BD283, will provide relief to NRIs visiting home on vacation.
"Meanwhile, the increase in the limit of foreign direct investment in the insurance and defence sectors from the existing 26 per cent to 49 per cent demonstrates the commitment of the current government to open up the Indian economy to more foreign investment.
"NRIs who have taxable income from domestic (Indian) sources will benefit from the increase in basic exemption limit for income tax by BD314.
"Also the increase in tax exemption limit for small savings will benefit NRIs who have taxable income in India," he added.
Academician Joel Indrupati said NRIs may not "immediately jump in, but will invest in due course of time".
Xerox Bahrain chief financial officer Meenakshi Sundaram and Indian Community Relief Fund chairman Bhagwan Asarpota said the budget had very little to offer directly to the NRIs.
"However, it must be welcomed as it opens up a plethora of opportunities for NRIs to invest in different sectors, especially real estate, infrastructure and power," said Sundaram.
"The Modi government has limited space to manoeuvre, with the inherited negatives of the past government, but their next budget will scope for long-term economic recovery for India," said Asarpota. - TradeArabia News Service