On 28 February, India’s finance minister Pranab Mukherjee presented the annual budget for 2011 to parliament.
Key initiatives included a reduction of surcharge on tax from 7.5% to 5% for domestic companies and from 2.5% to 2% for foreign companies. Foreign dividends received by Indian companies from their foreign subsidiaries will be taxed at the rate of 15%. There are no changes to the corporate tax rate. The tax rates applicable to partnership firms and LLPs also remain the same.
To boost infrastructure projects, the government will create special purpose vehicles in the form of infrastructure debt funds to attract foreign capital. Interest payments are subject to withholding tax at 5% instead of 20%. Such income will be exempted from tax.
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