The groups and consultants lobbying for MNCs want the government, in the Union Budget on February 28, to bring in clarity on taxation in case of sale or indirect transfer of Indian operations.
Tax experts want this term “value substantially” to be defined properly by putting in a threshold limit, preferably of 50% to avoid uncertainty and litigation.
“One of the key concerns of the foreign investors in respect of indirect transfer of shares is the lack of clarity as to what constitutes substantial value of assets situated in India.
The uncertainty over threshold has impacted the global acquisitions and group restructuring transactions (involving merger, demergers, business sale etc) wherein the shares of Indian company are also involved.
On the other hand, Internet and Mobile Association of India (IAMAI) is pitching for tax holidays like those available to the IT sector to help new-age digital companies and entrepreneurs expand their business and provide growth impetus to the fledgling industry.
The Software Technology Parks Of India (STPI) scheme for IT companies offered 100% tax deduction on profits. The exemption was discontinued after March 2011. But, there is no income-tax holiday available under the I-T Act for digital companies.
The first full budget of the new government should consider reforming taxation rules for effective functioning of Alternative Investment Funds (AIFs), Securitisation Trusts and Asset Reconstruction Companies (ARCs) Trusts.