Suggestions for Pre-Budget Memorandum 2024-25

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Suggestions for Pre-Budget Memorandum 2024-25

Tejasvi

@tejasvi

June 26, 2024

Public Policy

335

Based on inputs from the industry, Nasscom has submitted a detailed memorandum of suggestions for the Union Budget 2024-25 (Budget) to Ministry of Finance.

Our Budget suggestions are encapsulated under the following broad categories:

Improving the tax competitiveness under transfer pricing regime to boost India’s IT services exports and improve ease of doing business for the Global Capability Centres (GCCs)

Safe Harbour Regime

We have requested the government to substantially reduce the safe harbour margins under the following two category of services:

For ITeS and KPO – 10%;
For IT services including contract R&D – 12%

Further, we have also requested the government to abolish or increase the eligibility threshold for SHR to at least INR 2000 crores and do away with the distinction between IT/ITeS, and R&D in software development and KPO, as these definitions have outlived their utility, and such distinctions are not adopted or able to be followed by companies in practice. Accordingly, government should reduce the categories of services to account for blended/ integrated service offerings.

Advance Pricing Agreements

We have requested the government to prescribe time limit for conclusion of APAs and introduce fast-track process for filtration of renewal applications that involve roll over of existing APA to the future years with no or minimal change in facts. There is a need to introduce a system for filtration of applications for renewal of APA that involve roll over of existing APA to the future years with no or minimal change in facts and introduce provisions to suspend transfer pricing audits for the years that are expected to be covered as part of APA process.

Enabling direct listing in India of Indian-origin foreign incorporated start-ups which have India as one of their key business markets

In 2018, SEBI’s Expert Committee had recommended that equity shares of companies incorporated outside India should be allowed to be listed on Indian stock exchanges. These recommendations have not yet been implemented. The Indian capital market landscape has evolved materially since 2018 and has made listing in India an attractive and viable option for start-ups and investors. Hence, we have requested the government to consider implementing SEBI’s recommendations on this topic.

Need for studying the impact of twelve years of implementation of the angel tax to suggest the way forward

Since the introduction of Section 56(2)(viib) under Income Tax Act in 2012, various challenges have been recognised to tax as “income”, investments which were considered to be higher than the fair market value. Various attempts have been made by the government to make changes to this regime. However, the core issue of “taxing perfectly legitimate capital investment” as income, has not been addressed. There is no study available to highlight if this provision has led to better enforcement of tax compliance. Globally, there is no available example of any other country having a similar tax provision. Hence, we have requested the government to set up a group comprising officials from the CBDT, MCA, DPIIT, SEBI, RBI and industry to study the impact of the angel tax and suggest the way forward.

Proposed amendments under Income Tax Act, 1961 to promote ease of doing business under corporate tax

We have requested the government to increase the threshold for claiming deduction under S.80JJAA, prescribe monetary threshold for grant of per diem allowance by employer to its employees’ to meet daily expenses, reduce TDS rate under S. 194J for royalty payments for software, exclude remittances made for acquisition of shares under ESOP/ ESPP scheme from applicability of TCS. We have also submitted a detailed memorandum on amendments required under Income Tax Rules and other clarificatory issues.

The detailed Pre-budget memorandum 2024-25 is attached for your reference. Please write to tejasvi@nasscom.in and policy@nasscom.in for more information.

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