Our strategic partner member Trilegal has written a comprehensive synopsis of the Union Budget proposals announced. The objective has been to offer a clear and accessible interpretation to Norwegian companies of the budget announcements.
Angel tax:
The Bill proposes to abolish the angel tax to enhance tax certainty and significantly reduce future litigation.
Changes to capital gains taxation:
Long-term gains: Long-term capital gains have been standardized to a rate of 12.5% across all asset classes, including listed and unlisted shares, effective immediately, regardless of whether the seller is a resident or a non-resident. Notably, there will be no indexation benefit or allowance for foreign fluctuations on the transfer of long-term capital assets. However, for real estate transactions, taxpayers have the option to choose between the new 12.5% rate without indexation or the previous 20% rate with indexation for properties purchased before July 23, 2024.
Short-term gains: The tax rate has been increased from 15% to 20% on short-term gains on listed equity shares and equity oriented mutual funds and units of a business trust under section 111A of the Act. Meanwhile, short term capital gains shall continue to be taxed at applicable rates.
Tax rate for foreign companies:
The Bill suggests lowering the corporate tax rate for foreign companies from 40% to 35% from 1 April 2024. However, certain income streams, such as interest, fees for technical services (FTS), LTCG, and dividends are subject to specified rates under the domestic tax laws read with the applicable tax treaty and would therefore remain unchanged.
Buy-back of shares:
The Bill proposes to overhaul the existing tax regime by treating the amount paid on the buyback of shares as a deemed dividend, taxable in the hands of the shareholders at the applicable tax rates. The cost of acquisition of such shares bought back shall be treated as a capital loss (applicable to both listed and unlisted shares).
GIFT IFSC
In order to promote more investment and employment, Union Budget proposes to incentivize the operations from International Financial Services Centre (IFSC) and in this context, it proposes certain amendments. Please do refer to the detailed analysis for more information on this.
Othertopics:
(i) Gift of assets
(ii) STT rates on sale of an option in securities
(iii) Direct tax amnesty scheme (Direct Tax Vivad se Vishwas Scheme, 2024)
(iv) Equalization levy
For a detailed summary and our analysis of the Budget 2024, please click here to download the file.
Please reach out to Trilegal lead contacts for NICCI, for any queries:
Yogesh Singh | Partner and National Head of Corporate Practice, Trilegal | Yogesh.Singh@trilegal.com
Bakul Anand | Head – Law Firm Relationships, Trilegal | Bakul.Anand@trilegal.com
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