Budget promises tax deductions, but high service costs

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The Indian government in its 2012-13 Union Budget proposed legislative amendments to its income tax laws and introduced significant changes through the Finance Bill, 2012.

Businessman_looking_at_dollar_signs_through_telescopeAmendments to sections 2 and 9 of the Income Tax Act, 1961

  • The current definition of “capital asset” includes property of any kind held by a taxpayer (with certain exceptions). The government proposes to expand this definition to include any rights in (or in relation to) an Indian company, including the right to manage and control it.
  • A “transfer” is defined as a sale, exchange, extinguishment or relinquishment of rights. The government proposes to include in this definition the creation or disposal of any interest in any asset in any manner whether directly, indirectly, absolutely, conditionally, voluntarily, involuntarily by way of an agreement entered into in India or outside India.
  • Amendments to section 9(1)(i) clarify that the expression “through” will include and be interpreted as “by means of”, “in consequence of” or “by reason of”. In addition, a share or interest in a company or entity registered or incorporated outside India will be deemed to be situated in India if the share or interest derives its value substantially from assets located in India.

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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.

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