The US-India Tax Forum, a dedicated policy group within the US-India Strategic Partnership Forum (USISPF), submitted a set of tax amendment recommendations for India’s Union Budget 2024-25. Union Finance Minister Nirmala Sitharaman will present the Budget on July 23. The proposals aim to foster a stable and predictable tax environment to boost investment sentiment across various sectors.
Rationalising Corporate Tax Rates
A key focus of the recommendations is the rationalisation of corporate tax rates. The Forum suggests creating parity in tax liabilities for domestic and foreign players, especially in sectors like banking where foreign branches face high taxes.
Reforming Capital Gains Tax Structure
The Forum also calls for significant capital gains tax structure reforms to simplify the current system. By harmonising tax rates and holding periods for investments across equity, debt, and immovable property, the Forum believes compliance burdens can be reduced. Additionally, the Forum proposes tax neutrality for reorganising mutual funds, aligning with global practices.
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Overhauling Transfer Pricing Regime
In response to the rapid digitalisation and cross-border trade, the Forum recommends overhauling India’s Transfer Pricing regime. Suggestions include improving processes for audits, dispute resolution, and appellate procedures, revising safe harbour provisions, and expediting the Advanced Pricing Agreement (APA) and Mutual Agreement Procedures (MAP).
Rationalising Customs Duty Rates
The Forum emphasises the rationalisation of customs duty rates on specific products for indirect taxes to support the “China plus one” strategy. They advocate for making the import of critical supply chain components cost-effective and streamlining customs processes to enhance domestic capabilities and competitiveness.
“The simplification of the withholding tax regime is among the top asks of the Tax Forum. With the increased adoption of technology and use of data analytics, the scope of Tax Deducted at Source (TDS) and Tax Collection at Source (TCS) provisions needs to be rationalised,” the US-India Tax Forum said.
Tarun Bajaj, Chairperson of US-India Tax Forum and former Revenue Secretary, Government of India, said, “The ensuing budget of the government is expected to build on the reforms previously implemented. It is expected to introduce targeted reforms in direct taxes and customs policies to enhance India’s economic partnerships globally.
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The industry should anticipate measures to streamline corporate tax structures and transactions, incentivize investments, and simplify customs procedures to facilitate smoother trade flows. These initiatives are crucial for fostering a conducive business environment and strengthening bilateral economic ties, ensuring mutual prosperity and competitiveness in the global market. They will also build on the ease of doing business for industries in India.”
The US-India Tax Forum has around 350 member companies. It is a leading platform that allows government of India policymakers, global tax experts, and the business community to engage and advocate for a tax environment conducive to making India an attractive investment destination.
