Taxation
Finance ministry notifies safe harbour rules

The ‘safe harbour’ rules would ensure certainty in taxation of overseas transactions between related parties and reduce transfer pricing-related cases

In a move aims to curtail tax-related disputes with multinational corporations (MNCs) operating in India, the finance ministry has notified ‘safe harbour’ rules. These rules are easier than those announced in a draft and would ensure certainty in taxation of overseas transactions between related parties and reduce transfer pricing-related cases.

 

"This is a welcome move. It reflects the fact that the Indian Government has its ears to the ground and is listening to the taxpayers and softening the disparity between the transfer pricing positions adopted by the revenue officials and the taxpayers to the extent feasible," said Fatema Hunaid, partner for tax and regulatory services- transfer pricing at Grant Thornton India LLP.

 

This follows a slew of transfer pricing disputes with many MNCs in the past year, which had hurt the investment environment.

 

The new rules will be applicable for five years beginning from Assessment Year 2013-14.

 

Safe harbour rules lay down the framework within which the Income Tax authority shall accept the transfer price declared by the taxpayer. Here, taxpayers follow a simple set of rules/margins under which transfer prices are automatically accepted by the Income Tax authorities.

 

Transfer pricing, or the value at which companies trade products, services, shares or assets between units across borders, is a regular part of doing business for a multinational. According to experts, transfer pricing is used by companies to minimise their tax payouts.

 

Hunaid said, "The rules seem like a condensed Advanced Pricing Agreement (APA) kind of mechanism for the taxpayers (IT, ITES, KPO and auto-components manufacturers, intra-group outbound loans and corporate guarantees).  Notwithstanding the similarity of the safe harbour rules with the APA regime, these do not have the trappings of a regular APA program and is quite real-time and cost effective in providing a fast-track transfer pricing certainty to the taxpayers so to say."

 

The rules also provide for an almost real-time audit by the revenue officials regarding the eligibility of the safe harbour claim of the taxpayers. The taxpayers have now also been provided with a resolution mechanism in case their claim is objected to by the revenue officials. This heralds real-time course correction by the taxpayers as against waiting for the normal period of three to four years from the end of the relevant financial year for a normal scrutiny audit to take place.

 

The other key highlights of the final safe harbour rules are that the turnover ceiling of Rs100 crore for IT/ITES has been removed entirely, thereby making this route available to the industry as a whole. A differential safe harbour profit margin declaration of 20% for below Rs500 crore and 22% for above Rs500 crore has been prescribed.  Another positive outcome for Knowledge Process Outsourcing (KPO) services in the final rules is that the initial profit margin of 30% has now been reduced to 25% and the definition has also been rationalised to remove regular Business Process Outsourcing (BPO) activities.

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Sensex, Nifty may continue to head higher for a few more days: Thursday closing report
On Tuesday, we had suggested that the index was coiled up to make a major move. Today, thanks to the policy of US Federal Reserve, it made a monster upmove. 
 
Unlike what the market anticipated, the US Federal Reserve after a two-day policy meeting refrained from reducing the economic stimulus of bond purchases. This lit a fire for all “risky” asset classes equities, commodities and currencies, especially of emerging markets. The market opened with a huge gap up and continued to move up. By the end of the session, the benchmarks hit their respective highs and ended almost at the same level.
 
The Sensex opened at 20,355 hit its highest since 11 November 2010, of 20,740 and closed at 20,647 (up 684 points or 3.43%). The Nifty opened at 6,044 and moved up to the level of 6,143, highest since 22 May 2013, and closed at 6,116 (up 216 pints or 3.66%). The National Stock Exchange (NSE) recorded a huge volume of 85.21crore shares.
 
Except for IT (down 0.03%) all the other indices on the NSE ended in the positive. The top five gainers were PSU Bank (8.25%); Bank Nifty (6.71%); Realty (5.86%); Finance (5.85%) and Infra (4.61%).
 
Of the 50 stocks on the Nifty, 47 ended in the green. The top five gainers were PNB (9.20%); Bank of Baroda (9.12%); Jaiprakash Associates (8.86%); Kotak Mahindra Bank (8.08%) and State Bank of India (8.05%). The top five losers were HCL Technologies (0.66%); Infosys (0.24%) and Coal India (0.13%).
 
The rupee surged on Thursday. The partially convertible rupee was at 61.67/68 per US dollar compared to its close of 63.38/39 on Wednesday.
 
With the US Fed not to immediately cut back on the monetary stimulus, it is looked upon as an opportunity to step up growth to 6.5% by March 2014, Dipak Dasgupta, the finance ministry's principal economic adviser told Reuters. The government's current growth forecasts range from about 5.3% to 6% for the fiscal year ending in March 2014.
 
Revenue Secretary Sumit Bose has said that the government has introduced a draft proposal to ease the taxation burden on the information technology (IT) sector to boost profits. Bose said the government had issued a notification to curb the disputes related to transfer pricing by relaxing the prevailing norms. The proposed norms, if finalised, would prevail for five fiscal years.
 
US indices closed in the green on Wednesday, after the Federal Open Market Committee at its two-day policy meet on Wednesday said it wants more evidence of an economic recovery before paring its $85 billion-a-month bond buying program. Fed Chairman Ben S. Bernanke said there is no fixed schedule for tapering and it could still start this year should data confirm the central bank's basic outlook. Meanwhile, the US Commerce Department reported that housing starts rose 0.9% to a smaller-than-expected 891,000 annual pace in August.
 
All Asian indices closed in the green. Jakarta Composite was the top gainer, up 4.65%.
 
Japan's exports rose the most since 2010 in August, boosting Prime Minister Shinzo Abe's growth drive on a weaker Yen. Japanese exports rose 14.7% on year in August, the Ministry of Finance said Thursday, as the nation's efforts to boost outbound shipments thanks a weaker yen was met with fiscal tightening in the U.S. and decelerating growth in emerging economies. European indices were trading in the positive. So were the US Futures.
 

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Blackberry messenger-BBM for Android, iOS devices by this weekend

Blackberry's BBM is coming to mobiles running Android and iOS during this weekend. Only issue is this would be available for user of Android 4.0 and above and iOS6 and iOS7

Smartphone maker Blackberry on Thursday announced it will provide its popular chat application BlackBerry Messenger (BBM) for devices running Android operating system (OS) from 21st September and for Apple iPhone users from 22nd September.

 

In a statement, the mobile handset maker said, “BBM will be available as a free download for Android smartphones running Ice Cream Sandwich and Jelly Bean (Android 4.0 and later version) beginning at 7 am EDT (Eastern Daylight Time) on 21st September. BBM for iPhones running iOS 6 and iOS 7 will become available for each market on the App Store schedule of 12:01 am local time on 22nd September.”

 

Android users in India will be able to download BBM from their Google Play Store on their phone from 4.30pm onwards on same day.

 

BBM, the first instant messaging application for phones, now has more than 60 million monthly active customers on BlackBerry alone, and majority use BBM an average of 90 minutes per day, the statement said.

 

As per market research and analyst firm IDC, over 5 million out of 6.1 million smartphones shipped to India in January to March 2013 period were Android phones. Apple’s iPhones constitute a very small number in Indian smartphone segment.

 

BBM customers collectively send and receive more than 10 billion messages each day, nearly twice as many messages per user per day as compared to other mobile messaging apps, it added.

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