Direct Tax Advisory: India’s taxation
system is among the more complex systems globally and is constantly being updated to account for
changes in the economy and policy. The system remains prone to delays and inefficiencies as well as
substantial tax burdens for a misstep or lack of knowledge. There are additional restrictions on
foreign nationals and companies, as well as international transactions between group companies.
At present, a company operating in India may need to pay three kinds of direct taxes – Corporate
Taxes, Minimum Alternative Tax (MAT), and Dividend Distribution Tax (DDT). These are the broad
guidelines for these taxes –
- Corporate Tax –
For a domestic company, the prevailing tax rate is 30% (or 25% for SMEs). In addition to
this, a surcharge may apply (based on the company’s profit levels) and a cess of 4% applies to
all companies (irrespective of profit levels). Foreign companies are required to pay a basic tax
rate of 40% (plus surcharge and cess).
- Minimum Alternate
Tax – Because of the differences between calculation of accounting profit and
taxable profit, the Government introduced MAT which is applicable on book profits (if they
exceed tax profits). The MAT rate is currently 18.5% of the book profits plus surcharge and
cess. Every entity would need to pay the higher of corporate tax or MAT.
- Dividend
Distribution Tax – DDT is a tax payable by domestic companies on the dividend that
they pay out, since that dividend is tax free in the hands of the shareholder. On the other
hand, if a shareholder receives dividend from a foreign company, he or she is liable to pay tax
on it. The current DDT rates are 15% on dividend amount, plus surcharge and cess.
AMA’s tax practice is a long-established one with specialists across all regulations and experience
with Income tax preparation, assessment, scrutiny and dispute cases. Our tax consulting practice
assists our clients with the following services:
- Tax planning and optimisation strategy for Indian and overseas
companies
- Tax planning and optimisation for proposed transactions such as
mergers and acquisitions (see Transaction advisory services for more details)
- Financial due diligence for proposed transactions
- Ongoing direct tax payments and self-assessments for companies and
firms
- Ongoing tax compliances (TDS, professional tax, etc.)
- Income Tax preparation and Filing of tax returns for companies and
firms
- Liaising with Income Tax authorities in cases of tax demands,
scrutiny or disputes
- Tax audits for companies and firms in form 3CD as prescribed by the
Income Tax authorities
- Employee tax calculations for companies and firms
- Interpretation of international tax codes and Double Tax Avoidance
Agreements (DTAA) across geographies
- Transfer pricing studies (see Transfer pricing for more details)