Doing Business in India? This New Rule Could Cost You
by Dafydd Williams, Senior Director Advisory Services APAC, High Street Partners
If you’re a nonresident doing business in India, a couple of newly issued regulatory changes are likely to affect your business. Get ready for even more paperwork.
First, if you’re availing yourself of benefits under the Double Tax Avoidance Agreement, you now have another compliance requirement on your plate. A rule issued on August 1 (but retroactively effective from April 1) requires you to fill out the new Form 10F in addition to the already-required Tax Residency Certificate.
The form itself is not particularly burdensome, but if you fail to make sure your business and its customers understand the new requirement, it could cost your business revenue in the form of unnecessary tax withholdings.
That’s because your customers in India, who have already received Tax Residency Certificates from you, may not be aware of the new form or what to do with it. It’s possible that customers, finding themselves out of compliance with double tax avoidance requirements or otherwise confused, will revert to unnecessarily high tax withholdings in their payments to you.
To avoid that scenario, familiarize yourself with the mechanics of the new requirement and proactively ensure that all of your customers are aware of it, are prepared for it, and are not going to increase their withholdings. The issuing of the new rule also makes the perfect occasion for you to review your tax treaty benefits in India. It’s as good a time as any to ensure that you’re aware of all the opportunities for avoiding double taxation and that your customers in India are withholding properly.
Another new regulatory change out of India, this one for processing remittances to non-residents, is more of a mixed bag. Currently, when making payments to a non-resident that are liable to taxation, the payer must submit two forms, 15CA and 15CB. But new rules effective in October revise the requirements for the two forms. For one, the rules specify cases in which Form 15CB is not required, a welcome relief. However, they also revise the information called for in Form 15CA, and now there’s more of it. So, while the new rules are intended to reduce overall regulatory burden, they could mean more work for you.
All of this might have you wondering whether your business is up to speed on regulatory compliance and taking advantage of all available tax benefits in India. If that’s the case, it could be time for a more thorough review.
For more information, read Dafydd's post "India’s Regulatory Reforms Are Steps in the Right Direction."