India

Corporate - Significant developments

Last reviewed - 24 May 2022

Updated return

Finance Act 2022 has introduced provisions related to filing of the updated return within 2 years from the end of relevant Assessment Year by payment of additional tax over and above the regular taxes and interest as applicable depending upon the delay in filing. Further, the updated return cannot be filed in certain cases including the following:

  • Updated return is a return of loss or has the effect of decreasing tax liability or increasing tax refund
  • Updated return has already been filed for the said year
  • Assessment or reassessment for the relevant year is completed.
  • Prosecution / search seizure proceedings have been initiated for the said year.

Virtual Digital Assets - Crypto taxation

The Finance Act, 2022 has introduced provisions to bring Virtual Digital Assets (VDA) (including crypto currencies, NFTs etc) into the tax ambit. The gains arising on transfer of VDA would be taxable at 30% without providing any deduction of expenses other than cost of acquisition. Further, any loss arising on transfer of VDA is not permitted to be set-off against any other income in the current year or subsequent years.

Tax is to be deducted @1% payment to a resident on transfer of VDA with effect from 1 July 2022.

To address industry level issues of the stakeholders, CBDT has issued income tax Circular No. 13 and Circular No. 14 of 2022 providing guidelines for removal of difficulties under the above-mentioned provisions.

Withholding tax provisions introduced on benefit or perquisite of a business or profession

The Finance Act, 2022 has introduced withholding tax provisions to be applied on benefit or perquisites arising to a resident from business or profession. It has been provided that any benefit or perquisite arising to a resident during the course of business or exercising a profession would now be subject to withholding tax of 10%, if the aggregate value of such benefit or perquisite exceeds the prescribed threshold. This provision is effective from 1 July 2022.

To address industry level issues of the stakeholders, CBDT has issued income tax Circular No. 12 of 2022 and a further Circular No. 18 of 2022 providing guidelines for removal of difficulties under the above-mentioned TDS provisions.

Electronic filing of Form 10F for undertaking tax treaty benefits

A non-resident claiming benefit of any tax treaty in respect of any income earned in India is required to furnish certain details in notified Form 10F as per the provisions of domestic tax laws. The said Form 10F, earlier, was required to be provided in a physical manner.

The CBDT as per a recent notification has mandated the e-filing of various forms including Form 10F on the Income tax e-filing portal effective on an immediate basis.

Impact of Indian Supreme Court decision on Secondment structures

In a recent judgement [Northern Operating Systems Private Limited - Civil Appeal No. 2289-2293 of 2021], Indian Supreme Court in the context of service tax laws examined the secondment and employment agreements and applied the principle of ‘substance over form’ to conclude that employee secondments by the overseas group company will be considered to be 'manpower supply service' liable to service tax. Given the significance of the Supreme Court's observations, it can have far reaching implications on the existing secondment arrangements from an income tax and transfer pricing perspective also.