Kolkata City, India

Indian Investment Income – Income Tax Paradigm Shift

By Anjali Kukreja and Raghu Marwah, R.N. Marwah & Co. LLP

Globally, investors and companies are attempting to move out of China following the COVID-19 pandemic and are analysing alternative jurisdictions offering a high return on capital, low tax costs, and ease of doing business. India is seen as a very attractive destination based on these investor criteria. The world is today witnessing excess liquidity, due to slashed interest rates and different emergency measures taken by various countries to counter the pandemic-led economic fallout.

A lot of investors have channeled the excess liquidity into emerging markets, including the Indian stock market. Indian markets saw inflows of USD 3 billion of overseas funds in the first week of June 2020 alone. India has the highest inflows since April 2020, compared to other Asian countries like South Korea and Taiwan. The World Investment Report 2020, issued by the UN Conference on Trade and Development (UNCTAD), stated that a lower but positive economic growth in India in the post-pandemic period and India’s large market will continue to attract marketseeking investments to the country.

Apart from Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI), India is attracting foreign investors through the Foreign Direct Investment (‘FDI’) route (direct equity infusion), especially in the digital-driven service, electronic, and Food sectors. On the income tax front, the Indian government has removed the Dividend Distribution Tax (‘DDT’) of 20.56% on dividends paid by Indian companies, including subsidiaries of foreign companies. Hitherto, foreign investors faced high tax costs as no tax credits were available for DDT against tax payable on Indian dividends in their countries and tax treaties could not provide any relief. However, now foreign investors can avail from beneficial withholding tax rates of 5/10/15% under the relevant tax treaty as well as its tax credit.


Raghu Marwah

Raghu Marwah

GGI member firm
R.N. Marwah & Co. LLP, Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax
Bangalore, New Delhi, India
T: +91 11 4319 2000
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W: rnm.in

R.N. Marwah & Co. LLP is a CA firm that was established in 1946 by Late Mr. R.N. Marwah. Its head office is located in Janpath, New Delhi (India). Four major service divisions of the firm are audit & business advisory services, tax & regulatory services, legal & company law services and consultancy services. It has been serving huge international and domestic clientele since last 70 years.

Raghu Marwah is the Managing Partner at R.N. Marwah & Co. LLP, headquartered in New Delhi, and specialises in advising and rendering consultancy services to clients in relation to structuring strategic investments, arranging Foreign Direct Investments (FDI) – both debt and equity and M&A services.
Anjali Kukreja

Anjali Kukreja

GGI member firm
R.N. Marwah & Co. LLP, Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax
Bangalore, New Delhi, India
T: +91 11 4319 2000
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: rnm.in

Anjali Kukreja is a Manager at R.N. Marwah & Co. LLP, headquartered in New Delhi, and is an expert in the field of International Tax, with a keen interest in global M&A targeted at the mid-market audience.


Published: International Taxation Newsletter, No. 13, Autumn 2020 l Photo: Kolkata City, India

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