●● Global economy shows signs of turnaround (from Global economy shows signs of turnaround (from --0.8 percent to 3.9 0.8 percent to 3.9 percent)percent)●● Key Indicators: Baltic Dry Index, Oil prices Key Indicators: Baltic Dry Index, Oil prices ●● Will this last? Are there surprises in store?Will this last? Are there surprises in store?
●● Emerging economies lead the way (from 2.1 percent to 6 percent)Emerging economies lead the way (from 2.1 percent to 6 percent)●● Major concerns: capital inflows, inflation, foreign exchange manMajor concerns: capital inflows, inflation, foreign exchange managementagement
●● Developed economies expected to grow (from Developed economies expected to grow (from --3.2 percent to 2.1 3.2 percent to 2.1 percent)percent)●● Major concerns: unemployment, financial systemsMajor concerns: unemployment, financial systems
●● GG--20 Leaders pledge commitment to tackle crisis through country20 Leaders pledge commitment to tackle crisis through country--specific stimulus packagesspecific stimulus packages
●● Structural changes in the Indian economyStructural changes in the Indian economy●● High gross domestic savings (32.5 percent)High gross domestic savings (32.5 percent)
●● High gross domestic capital formation (percentHigh gross domestic capital formation (percent
●● Arrival of the Indian MNCArrival of the Indian MNC
●● Signs of growth revivalSigns of growth revival●● Second half witnessed a revival in Power, Telecom and Civil AviaSecond half witnessed a revival in Power, Telecom and Civil Aviationtion
●● Index of Industrial Production revives (7.7 percent)Index of Industrial Production revives (7.7 percent)
●● Rise in business confidence indexRise in business confidence index●● Pick up in corporate earnings and profitsPick up in corporate earnings and profits
●● Capital Markets Capital Markets –– FebruaryFebruary’’10 P/E at 19.93 percent10 P/E at 19.93 percent
●● Forex reserves rise by USD 31.5 bnForex reserves rise by USD 31.5 bn●● Foreign Direct Investment levels reach USD 27 bn (Dec Foreign Direct Investment levels reach USD 27 bn (Dec ’’09) 09)
●● Net FII positions stood at USD 191 bnNet FII positions stood at USD 191 bn
Attempt to don mantle of the fastest growing economy within next 4 years.Inflation and fiscal deficit remain key challenges
●● Simplification and Simplification and liberalisatonliberalisaton of foreign investment regimeof foreign investment regime
●● Relaxation of bank licensing policy for private players, NBFCsRelaxation of bank licensing policy for private players, NBFCs
●● Continued focus on infrastructural developmentContinued focus on infrastructural development●● Impetus to power Sector Impetus to power Sector –– competitive bidding for coalcompetitive bidding for coal
●● Focus on Focus on renewablesrenewables
●● Thrust on clean energyThrust on clean energy
●● Increased Allocations for infrastructure development, road & raiIncreased Allocations for infrastructure development, road & railwayslways
●● Introduction of new company lawIntroduction of new company law
●● Interest subvention for exports, housing financeInterest subvention for exports, housing finance
●● Recognizes the role of SEZsRecognizes the role of SEZs
●● Increased allocation to rural development programmes (Increased allocation to rural development programmes (NREGAsNREGAs, , Bharat Bharat NirmanNirman, , IndiraIndira AwasAwas YojnaYojna))
●● FourFour--pronged strategy for Agricultural growthpronged strategy for Agricultural growth●● Agricultural productionAgricultural production
●● Reduction in wastage of produceReduction in wastage of produce
●● Credit support to farmersCredit support to farmers
●● Impetus to food processing sector (ECB for cold storage)Impetus to food processing sector (ECB for cold storage)
●● Increased allocation for education, health, micro and small Increased allocation for education, health, micro and small enterprises, urban development & housing, unenterprises, urban development & housing, un--organised sectororganised sector
●● Nutrient based subsidy policy for fertiliser sectorNutrient based subsidy policy for fertiliser sector●● Strengthening transparency and public accountabilityStrengthening transparency and public accountability
●● Fiscal consolidationFiscal consolidation●● Roadmap for DTC and GSTRoadmap for DTC and GST
●● Calibrated exit strategy from fiscal stimulusCalibrated exit strategy from fiscal stimulus
●● PeoplePeople’’s ownership of s ownership of PSUsPSUs
●● Explicit reduction in domestic public debtExplicit reduction in domestic public debt--GDP ratioGDP ratio●● Decision on Kirit Parikh committee report in due courseDecision on Kirit Parikh committee report in due course
●● Surcharge reduced from 10 percent to 7.5 percent for domestic Surcharge reduced from 10 percent to 7.5 percent for domestic companiescompanies
●● Increase in weighted average deduction for R&D expenditureIncrease in weighted average deduction for R&D expenditure●● InIn--house R&D facility (200 percent)house R&D facility (200 percent)
●● Approved Research Associations, Universities, Colleges (175 percApproved Research Associations, Universities, Colleges (175 percent)ent)
●● Specified persons for Approved programmes (175 percent)Specified persons for Approved programmes (175 percent)
●● InvestmentInvestment--linked tax incentive for new 2 star or above hotelslinked tax incentive for new 2 star or above hotels
●● Relaxation in criterion for Tax Holiday on middleRelaxation in criterion for Tax Holiday on middle--income housing income housing projectsprojects●● One year extension of timeOne year extension of time--limit for completion of project limit for completion of project
●● Increased allocation for commercial builtIncreased allocation for commercial built--up spaceup space
●● Cut off date to start hotel / convention centre in NCR region Cut off date to start hotel / convention centre in NCR region marginally extendedmarginally extended
●● SEZ Units SEZ Units –– Clarification on computing Tax Holiday Clarification on computing Tax Holiday ●● Tax Holiday originally introduced FY06 onwardsTax Holiday originally introduced FY06 onwards
●● Computation Formula rationalised in FY10Computation Formula rationalised in FY10
●● Retrospective applicability Retrospective applicability –– Ambiguity now removedAmbiguity now removed
●● MAT Rate enhanced from 15 percent to 18 percentMAT Rate enhanced from 15 percent to 18 percent●● Transfer of shares of a company at nil or below fair value taxabTransfer of shares of a company at nil or below fair value taxable in le in
the hands of the recipientthe hands of the recipient●● Tax neutral merger, demerger and other business reorganizations Tax neutral merger, demerger and other business reorganizations excludedexcluded
●● Effective from June 1, 2010Effective from June 1, 2010
●● Double taxation on transfer of immovable property for inadequateDouble taxation on transfer of immovable property for inadequateconsideration rationalisedconsideration rationalised
●● ‘‘Source RuleSource Rule’’ for taxation of nonfor taxation of non--residents reiterated retrospectivelyresidents reiterated retrospectively
●● Technical Services rendered by nonTechnical Services rendered by non--residents in relation to mineral residents in relation to mineral oil exploration sector would not be covered under oil exploration sector would not be covered under ‘‘presumptive presumptive scheme of taxationscheme of taxation’’●● Higher tax exposure if services are effectively connected with aHigher tax exposure if services are effectively connected with a permanent permanent
●● Conversion of Company into LLP Conversion of Company into LLP –– Tax Neutral subject to Tax Neutral subject to conditions:conditions:●● CompanyCompany’’ Total sales /Turnover / Gross receipts in any of the 3 precedinTotal sales /Turnover / Gross receipts in any of the 3 preceding g
previous years not to exceed INR 60 lacsprevious years not to exceed INR 60 lacs
●● Applicable to private or unlisted public companies Applicable to private or unlisted public companies –– as per LLP Act, 2008as per LLP Act, 2008
●● Conversion as per provisions of section 56 or 57 of the LLP Act,Conversion as per provisions of section 56 or 57 of the LLP Act, 20082008
●● 3 year lock3 year lock--in period for distribution of companyin period for distribution of company’’s accumulated profits directly s accumulated profits directly or indirectly to the partnersor indirectly to the partners
●● Unabsorbed business loss and depreciation allowed to carried forUnabsorbed business loss and depreciation allowed to carried forward ward
●● Taxation in appreciation in the value of investments for non lifTaxation in appreciation in the value of investments for non life e insurances companies aligned with IRDA regulationsinsurances companies aligned with IRDA regulations
●● Disallowance of Expenditure Disallowance of Expenditure –– Marginal liberalisation of time limitMarginal liberalisation of time limit●● Expenditure not disallowed if tax deducted and deposited prior tExpenditure not disallowed if tax deducted and deposited prior to filing return o filing return
of income of income
●● Marginal increase in TDS threshold limits Marginal increase in TDS threshold limits
●● Interest on failure to deduct / deposit tax Interest on failure to deduct / deposit tax ●● Failure to deduct remains at 12 percent p.a. till date of deductFailure to deduct remains at 12 percent p.a. till date of deductionion
●● Failure to deposit hiked to 18 percent p.a. till date of depositFailure to deposit hiked to 18 percent p.a. till date of deposit
●● Is a hallmark of stability and continuity from a stable governmeIs a hallmark of stability and continuity from a stable governmentnt●● Reinforces the structural strength and resilience in the Indian Reinforces the structural strength and resilience in the Indian
economy economy –– Decades and decades of growth?Decades and decades of growth?●● Stimulates inclusive growth through increased outlays and forwarStimulates inclusive growth through increased outlays and forward d
looking reformslooking reforms●● Addresses fiscal consolidation through a combination of measuresAddresses fiscal consolidation through a combination of measures●● However, one needs to closely monitor:However, one needs to closely monitor:
●● InflationInflation●● Implementation of GST and DTCImplementation of GST and DTC●● Global eventsGlobal events
All in all, though not euphoric, a confident attempt
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
