In a move aimed at helping foreign banks set up subsidiary offices in the country,finance minister Pranab Mukherjee on Monday announced a tax neutral regime for such operations.
The Reserve Bank of India is formulating a scheme for subsidiarisation of Indian branches of foreign banks to ring fence Indian capital and Indian operations from economic shocks external to the Indian economic scenario. To support this effort,I propose to provide tax neutrality for such subsidiarisation, Mukherjee said while moving the Finance Bill,2012 for consideration and passage in the Lok Sabha.
The move will ease concerns of foreign banks that have been worried that converting their branch operations in India to a wholly owned subsidiary (WOS) would attract capital gains tax. The Reserve Bank of India is in the process of announcing new guidelines for new bank licenses and is keen to allow foreign banks to operate in the country through the subsidiary model.
In fact,the issue of capital gains tax was also first flagged by the RBI in its discussion paper on Presence of Foreign Banks in India. While pitching for local incorporation by foreign banks,the RBI discussion paper had noted,It appears that for any Capital Gains Tax arising out of transfer of property,goodwill and other assets of capital nature to its own newly incorporated subsidiary in India,the provisions of Section 47(iv) of Income Tax Act,1961 would be applicable to foreign banks converting their branches into subsidiaries.
TDS on realty deals withdrawn
Mumbai: The Finance Minister on Monday announced the withdrawal of TDS (tax deducted at source) on immovable property as proposed in the Budget. The Finance Bill had proposed that every transferee of immovable property (other than agricultural land),at the time of making payment for transfer of the property,should deduct tax at the rate of 1 per cent of such sum. Paras Gundecha,president,MCHI-CREDAI,said,This will help generate positive trends,though in a limited way,in the real estate market.