Here’s how Finance Act, 2017 will tax the Multinationals !!!

Everyone says rich get away from payment of taxes….They have their way when it comes to non payment of taxes...Is it true?? Are tax laws more liberal when it comes to catching of big fishes?? They were…..But recent amendment restricting interest deduction to non residents is a welcome move….It is heartening that government is taking bold steps to tax the rich also.

Every year, most of us claim home loan interest deduction…..In case of self occupied house property, if interest claimed exceeds Rs 200,000, then the law prohibits us….

Why??

Do you know? Or does anyone know?

May be not….For mango people, no rationale is given for limiting the benefits…

But why the rules be different for companies….companies have no such restriction to claim interest deduction….The only safeguard for revenue is interest must relate to business of the assessee…..

Also, few large Multinationals operating in India, avails loan from their associate companies, which are not situated in India….These loans are obtained by MNE’s just to avail deduction under Income Tax Act...Correspondingly interest paid will be the income of the associate entity from which loan is availed….Such associate company will also enjoy less tax because intentionally such associates are set up in tax haven jurisdictions. Tax havens like Singapore, Malaysia, charges very less rate of tax in their respective countries….

To break the above practices of MNE’s, income tax law has been amended by Finance Act, 2017….Now maximum interest deduction has been restricted to 30% of EBITDA….

However such restriction shall apply only when interest expense claimed exceeds Rs 1 crore…

No more goods days for MNE’s….But surely good days are there to come for us, as now much more direct taxes will be garnered....Less allowance for deductions will ensure income is not much reduced through deductions and, thus more taxes will now be collected…

The amendment brought in by Finance Act, 2017 is know an Thin Capitalisation rules...The extant provisions of this amendment can be looked here.

The above provisions will ensure that concept of “substance over form” maintains its integrity intact...The cost of loan in no case can exceed 30%...If MNE’s still claim more interest, then something is dubious….Especially in today’s context, where interest rates are negative almost around the world.. ..

Anyways, was the amendment the idea of Indian government….I bet you doubt…

Let me know by continuing the discussion in comments section….

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Here’s how Finance Act, 2017 will tax the Multinationals !!!

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Section - 10(23E) (of Income Tax Act, 1961), Income-tax Act.

Section - 10(23) (of Income Tax Act, 1961), Income-tax Act.

Section - 10(17A) (of Income Tax Act, 1961), Income-tax Act.

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Every year, most of us claim home loan interest deduction…..In case of self occupied house property, if interest claimed exceeds Rs 200,000, then the law prohibits us…. Why??Do you know? Or does anyone know?May be not….For mango people, no rationale is given for limiting the benefits… But why the rules be different for companies….companies have no such restriction to claim interest deduction….The only safeguard for revenue is interest must relate to business of the assessee….. Also, few large Multinationals operating in India, avails loan from their associate companies, which are not situated in India….These loans are obtained by MNE’s just to avail deduction under Income Tax Act...Correspondingly interest paid will be the income of the associate entity from which loan is availed….Such associate company will also enjoy less tax because intentionally such associates are set up in tax haven jurisdictions. Tax havens like Singapore, Malaysia, charges very less rate of tax in their respective countries…. To break the above practices of MNE’s, income tax law has been amended by Finance Act, 2017….Now maximum interest deduction has been restricted to 30% of EBITDA….However such restriction shall apply only when interest expense claimed exceeds Rs 1 crore… No more goods days for MNE’s….But surely good days are there to come for us, as now much more direct taxes will be garnered....Less allowance for deductions will ensure income is not much reduced through deductions and, thus more taxes will now be collected… The amendment brought in by Finance Act, 2017 is know an Thin Capitalisation rules...The extant provisions of this amendment can be looked here. The above provisions will ensure that concept of “substance over form” maintains its integrity intact...The cost of loan in no case can exceed 30%...If MNE’s still claim more interest, then something is dubious….Especially in today’s context, where interest rates are negative almost around the world.. .. Anyways, was the amendment the idea of Indian government….I bet you doubt…Let me know by continuing the discussion in comments section….

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Here’s how Finance Act, 2017 will tax the Multinationals !!!