New Delhi Nov 25 (UNI) To boost the competitiveness of Indian industry and give a fillip to inbound and outbound investment, it is essential to align tax laws and procedures with international norms, said an industry chamber.
Industry body Ficci has suggested an eight-point fiscal package in view of the rising share of India's trade and FDI in GDP.
In 2007-08, the economy is expected to clock a foreign trade turnover of over 350 billion dollar and FDI inflows are targeted at 30 billion dollar.
Discussing the elements of the fiscal package, Ficci said tax should be exempted or concession be provided on the receipt of dividend and capital gains to encourage subsidiaries of Indian companies abroad to repatriate their earnings into India.
Under the provisions of section 195, any sum payable to a non-resident and chargeable to tax, is subject to a withholding tax by the payer.
Though, the deductor or recipient can apply for a lower/nil rate, delays occur in the issuance of such certificates.
''It would be in fitness of things to provide an option to the deductor to remit 80 per cent of the amount sought to be remitted and to furnish a certificate from the bank for holding 20 per cent of the balance amount as 'good for payment' towards the tax liability, which may be paid later to the extent ultimately determined payable,'' said the chamber.
Ficci states that under the existing provisions, a person is eligible for tax credit paid outside India in respect of doubly taxed income, equivalent to the tax at the Indian rate of tax or the rate of tax of the said country, which ever is lower.
The chamber has suggested that there should be a consolidation of tax liability and in case the tax paid to the foreign country on income from outside sources is more than what it would be payable in India, the assessee should be eligible for tax credit deduction in respect of the excess part of the tax liability as well, as is in prevalent in many other countries.
In today's competitive environment many countries including Netherlands, Singapore, Luxembourg, Ireland, Spain, Austria have redesigned their taxation laws, to have low tax preferred jurisdiction with a view to attracting outbound investments.
This is termed as 'participation exemption'. At a time when India is restructuring its fiscal statutes and enacting altogether new Income Tax law, Ficci said it would be appropriate to introduce the concept of 'participation exemption' on the lines of provisions prevalent in other countries.