India: Entorn econòmic
A GST compensation cess applies on some demerit and luxury items, including automobiles and tobacco products.
Stamp duties and real estate taxes are imposed by municipal authorities and vary across states. A separate securities transaction tax (varying between 0.01% and 0.125%) continues to apply. Some demerit and luxury items are subject to a compensation cess (rates vary).
An equalization levy of 6% on the amount of consideration in excess of INR 100,000 for specified services received by a non-resident without a permanent establishment in India must be withheld by a resident payer or a non-resident payer with a PE in India.
In general, expenses are deductible if they are incurred wholly and exclusively for business or professional purposes, not in the nature of a personal expense, and if they are not capital in nature.
Allowable deductions include wages and salaries, bonuses and commissions, rent, repairs, insurance, royalty payments, certain taxes (sales, municipal, road, property and expenditure taxes, customs duties), interest, lease payments, depreciation, expenditure for materials and scientific research, etc. One-fifth of start-up expenditure is allowed as a yearly deduction, over a period of five years. Bad debts can be allowed as a tax-deductible write-off if they have been written off as irrecoverable.
Any charitable contribution made by a company to any charity is allowed as a tax-deductible expense (conditions apply), in a range from 50% to 100% of the charitable contribution, depending upon the nature of charity. No deduction shall be allowed in respect of contribution made in cash exceeding INR 2,000. If a business has opted for the reduced rate of tax of 22% under new tax regime, it is not allowed to claim deductions of charitable contributions (from FY 2020-21 onwards).
Losses can be carried forward and set off against income from the subsequent year (business and capital losses for 8 years), while carrybacks are not allowed.
Various incentives are provided for companies carrying out specific business activities in India, for example:
A property tax is levied by the governing authority of the jurisdiction in which the property is located, with rates varying from city to city. Stamp duties apply to all legal property transactions, with different rates being set by each state.
Social contributions paid by the employer amount to 12% of the employees’ salary (8.33% are allocated to the Employees’ Pension Fund, capped at INR 15,000/month for Indian employees). A reduced tax rate can apply for individual and Hindu Undivided Family (HUF) taxpayers.
From 1 April 2020, an equalization levy of 2% applies on the consideration from e-commerce supply and services made or provided by an e-commerce operator without a PE in India, and whose sales, turnover, or gross receipts from the e-commerce supply and services are at least INR 20 million during the tax year. Sale of goods or provision of services by an e-commerce operator to an e-commerce participant is subject to a 1% withholding tax.
An equalization levy of 6% on the amount of consideration in excess of INR 100,000 applies with regard to specified services (e.g. online advertising, the provision of digital advertising space, and other related facilities or services) received by a nonresident without a permanent establishment in India. The levy must be withheld by a resident payer or a non-resident payer with a permanent establishment in the country.
| India | South Asia | United States | Germany | |
| Number of Payments of Taxes per Year | 10.9 | 26.7 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 251.9 | 273.5 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 49.7 | 43.9 | 36.6 | 48.8 |
Source: Doing Business, Latest available data.
| Taxation Income (INR) | Progressive Tax Rate up to 30% |
| Less than 250,000 | 0% (exempt from income tax and the 4% health education cess; exemption limit raised to INR 300,000 for resident senior citizens with ages 60-80 and INR 500,000 for ages above 80) |
| 250,001 – 500,000 | 5% |
| 500,001 – 1,000,000 | 20% |
| 1,000,001 and above | 30% |
| Surcharge | In addition to the income-tax, a surcharge (SC) of 10% is to be levied where the total income of individuals is between INR 5 to 10 million; 15% where the total income of individuals is between INR 10 and 20 million; 25% between INR 20 and 50 million; 37% above 50 million On income arising on account of long-term capital gains, the rate of surcharge would be capped at 15%. |
| Health and education cess | 4% of the income tax and surcharge |
| Tax rebate | Resident individuals are eligible for a tax rebate of the lower of the income-tax or INR 12,500 where the total income does not exceed INR 500,000 |
| New Personal Tax Regime (NPTR) - optional regime effective from 1 April 2020 The taxpayer renounces to certain deductions or exemptions (consult the "Deduction" section) |
|
| Less than 250,000 | 0% |
| 250,000 – 500,000 | 5% |
| 500,000 - 750,000 | 10% |
| 750,000 - 1,000,000 | 15% |
| 1,000,000 - 1,250,000 | 20% |
| 1,250,000 - 1,500,000 | 25% |
| 1,500,000 and above | 30% |
| Alternative minimum tax (AMT) Applicable to business or profession income |
18.5% (plus surcharge and health and education cess) on the adjusted total income. |
On donation of a certain amount to specifically approved funds, charitable institutions, etc., an individual can claim a deduction of 50% to 100% of the amount donated, subject to certain legal restrictions. Deduction for funds, charitable institutions in excess of INR 2,000 to be allowed only when the donation is not made in cash. Following the COVID-19 outbreak, the government has set up a special "PM CARES Fund", with the donations made to the fund being 100% deductible without any cap.
Expenses relating to business income are deductible.
Following the introduction of the new optional personal tax regime, individuals who opt for such regime renounce to certain deductions or exemptions, including: house rent allowance; leave travel allowance; allowance under section 10(14) of the Income-tax Act (with some exceptions); standard deduction of INR 50,000 and deduction for professional tax; exemption of free food and beverages through vouchers provided by the employer; deduction of interest payment on housing loans for self-occupied property and restrictions on set-off of loss from let out property; relocation allowance; helper allowance; children education allowance; all Chapter VIA deductions of the Income-tax Act available for expenditure by way of employee’s contribution to provident fund, insurance premium, donations, medical premium, etc., except employer’s contribution to a notified pension scheme, such as National Pension Scheme (NPS). For further information, click here.
A foreign worker who is a citizen of a country with which India has signed a social security agreement is not required to contribute to the social security system if he/she is contributing to his/her home country’s social security, either as a citizen or resident, and enjoys the status of "detached worker" for the period, and according to the terms, specified in the relevant agreement.
Dividend income to a non-resident received on or after 1 April 2020 would be subject to tax in the hands of the shareholder at the rate of 20% unless a lower rate applies due to a tax treaty.
Interest: 10% when paid to a resident corporation/individual (7.5% between 14 May 2020 and 31 March 2021)/20% when paid to a non-resident corporation/individual. If the interest income derived by a non-resident does not fulfil the conditions prescribed by the law for concessional WHT rates, a rate of 30% (for individuals and entities other than a foreign company) or 40% (for a foreign company), plus the applicable surcharge and chess, will apply.
Royalties: 2% where the royalty is paid to a resident corporation/individual and is in the nature of consideration for the sale, distribution, or exhibition of cinematographic films; otherwise, the rate is 10% (1.5% and 7.5%, respectively, between 14 May 2020 and 31 March 2021)/ 10% when paid to a non-resident corporation/individual, plus surcharge and chess.
The rates may be reduced under a tax treaty.
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Actualitzacions: May 2023
