India: La fiscalidad

Consumption Taxes

Nature of the Tax: Value Added Tax (VAT) and Sale taxes, depending on the State. For more details, consult the business portal of India. A nationwide Goods and Services Tax (GST) whose rate will be around 14-16% is expected to be launched in April 2012.
Standard Rate: 12.5%
Reduced Tax Rate: The lower rates are 4% (agriculture and industrial inputs) and 1% (gold and silver ornaments).
Exclusion From Taxation: The State is not authorized to impose state VAT on the imports of goods into India or exported out of India.
Method of Calculation, Declaration and Settlement: The interstate sales tax levied by the central government is known as central sales tax (CST) and intra state sales tax levied by respective state governments is known as local sales tax (LST/VAT). VAT has replaced existing local sales tax laws in almost all the states of India.
For details consult the Income Tax Department.
Other Consumption Taxes: Service Tax (12%) applies to more than 100 services. For details visit the web site: Service Tax.
Excise Duty: 8% (on drugs, pharmaceuticals, cans, paper, Water filtration and purification devices, etc), 12% (small cars, packaged software), 14% (cement) and 24%.
For further information consult the Central Board of excise and Customs.

Corporate Taxes

Tax Base For Resident and Foreign Companies: Resident companies are subject to tax on gross worldwide income while non-resident companies are taxed only on Indian-source income.

Tax Rate

Corporate tax rate	30% for domestic companies and 40% for foreign companies and branches of foreign companies.
Surcharge	5% (2,5% for foreign companies) if turnover in excess of INR 10 millions.
Education cess	3%
Effective tax rate	32.445% for Domestic Company and 42.024% for Foreign Company

Tax Rate For Foreign Companies: Non-resident companies and branches of foreign companies are taxed at a rate of 40% and a cess of 3% bringing the effective tax rate to 41.2% , and 42.23%.
Capital Gains Taxation: Long-term capital gains: 20% flat with indexation or 10% flat without indexation.
Short-term capital gains: 10%.
Gains from the sale of long-term capital assets are exempt from capital gains tax if they are reinvested in certain securities within six months and locked in for three years.
Main Allowable Deductions and Tax Credit: Specific deductions are allowed:

- A 100% deduction for interest payments on borrowed capital,
- Capital expenditure on research conducted in-house and for payments made for scientific research to specified organizations,
- Interest, royalties and fees paid outside of India to overseas affiliates or in India to a non-resident provided tax as required is withheld,
- Payments to employees under voluntary retirement schemes may be deducted over five years,
- Business losses (conditions apply).

Indian tax law does not permit companies to take a deduction for a general bad-debt reserve, although specific bad debts may be deducted when written off. For additional information, consult the Deloitte Tax Guide.
Other Corporate Taxes: A minimum alternative tax (MAT) is also imposed on corporations. If a company's tax liability is less than 10% of book profits, the book profits are deemed to be total income and are charged to tax at 10%, plus the applicable surcharge and cess.
A ‘fringe benefits tax' of 30% is imposed on the value of fringe benefits that companies provide or are deemed to provide to their employees.

Country Comparison For Corporate Taxation

	India	South Asia	United States	Germany
Number of Payments of Taxes per Year	60.0	31.1	11.0	16.0
Time Taken For Administrative Formalities (Hours)	271.0	282.9	187.0	215.0
Total Share of Taxes (% of Profit)	71.5	39.9	46.8	48.2

Source: Doing Business - Last Available Data.

Individual Taxes

Tax Base For Residents and Non-Residents: An individual is resident in India if the individual spends at least 182 days in the country in a given year, or 60 days if the individual has spent at least 365 days in India in the preceding four years. Residents of India are normally taxed on worldwide income. Non-residents are liable for tax on income sourced in India. However, expatriates who have lived in India for two years are normally liable for tax on their foreign income.

Tax Rate

Taxation Income (INR)	Progressive Tax Rate up to 30%
Less than 160,000	0%
160,001 – 500,000	10%
500,001 – 800,000	INR 4,000 plus 20% of the amount exceeding INR 150,000
800,001 and above	INR 24,000 plus 30% of the amount exceeding INR 250,000

Allowable Deductions and Tax Credit: Deductions are allowed for contributions to life insurance, recognized provident funds, national savings certificates, the national savings scheme, income from certain mutual funds and dividends, and some educational expenses up to an overall ceiling of INR 100,000.
Special Expatriate Tax Regime: There are no special exemptions or deductions available to foreign nationals working in India, except for local living allowances, which are exempt to the extent expense is actually incurred.
Capital Tax Rate: All individuals and other specified persons must pay a 1% wealth tax on the aggregate value exceeding INR 1.5m of non-productive assets such as land; buildings not used as factories; commercial property not used for business or profession; offices or residential accommodation for employees; gold, silver, platinum and other precious metals, gems and ornaments; and cars, aircraft and yachts.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: Treaties signed with countries for avoidation of double taxation.

Withholding Taxes: Dividends: 0%, Interest: 20%, Royalties:10%

Sources of Fiscal Information

Tax Authorities: Income Tax Department
Ministry of Finance
Other Domestic Resources: Central Board of Excise and Customs
Income Tax Act 1961
Department of Commerce
Service Tax
National Website of Income Tax Department of India
Country Guides: PKF Tax guide on India
India Deloitte International Tax and Business Guide

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Accounting Rules

Accounting System

Accounting Standards: Indian Accounting Standards (IAS) are based on the statements issued by the Institute Of Chartered Accountants of India (ICAI).
Accounting Regulation Bodies: Institute of Chartered Accounts of India
Accounting Law: - Income Tax Act;
- Indian Companies Act;
- Regulations from Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI).
Difference Between National and International Standards (IAS/IFRS): India is entering the arena of international accounting standards (IAS).

Accounting News: Accounting news in India
India accounting news

Accounting Practices

Tax Year: The fiscal year begins on 1st of April and ends on the 31st of March of the next year.
Accounting Reports: 'Balance Sheet' and 'Profit & Loss' report.
Publication Requirements: The "balance sheet" and ‘profit and loss account' need to be published every fiscal year.

Accountancy Profession

Accountants: In order to become a certified accountant, one needs to become member of ‘The Institute of Chartered Accountants of India (ICAI)' by passing a 3-tire examination conducted by ICAI. The qualified accountant is then named "Chartered Accountant (CA)".
Professional Accountancy Bodies: ICAI, Institute of Chartered Accounts of India
Member of the International Federation of Accountants (IFAC): Yes

Member of Other Federation of Accountants: Member of the Confederation of Asian and Pacific Accountants (CAPA)
Audit Bodies: Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organization. For more information, consult the Auditors Association of Southern India and The Institute of Cost and Works Accountants of India (ICWAI)

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