Following the retrospective amendment to Income Tax Act in the wake of the Vodafone-Hutchison tax controversy, a company incorporated overseas is deemed to be situated in India only if it derives its "value substantially" from assets located within this country.
Tax experts want this term "value substantially" to be defined properly by putting in a threshold limit, preferably of 50% to avoid uncertainty and litigation.
"One of the key concerns of the foreign investors in respect of indirect transfer of shares is the lack of clarity as to what constitutes substantial value of assets situated in India. Therefore, it is critical that government clarifies its position in this year's Budget," KPMG (India) Partner Tax Vikas Vasal said.
The uncertainty over threshold has impacted the global acquisitions and group restructuring transactions (involving merger, demergers, business sale etc) wherein the shares of Indian company are also involved, said Gokul Chaudhri Leader (Direct Tax) BMR & Associates.
On its part, the pharmaceutical sector wants Finance Minister Arun Jaitley to grant more tax incentives for research and development (R&D) activities.
In its Budget proposals, the Commerce Ministry has sought "weighted average tax benefit of 400% for R&D activities for the sector".
On the other hand, Internet and Mobile Association of India (IAMAI) is pitching for tax holidays like those available to the IT sector to help new-age digital companies and entrepreneurs expand their business and provide growth impetus to the fledgling industry.
The Software Technology Parks Of India (STPI) scheme for IT companies offered 100% tax deduction on profits. The exemption was discontinued after March 2011. But, there is no income-tax holiday available under the I-T Act for digital companies.
Established in 2004, IAMAI has members like Amazon, eBay, Facebook, Flipkart, Google India, OLX, mydala and Itzcash.
The medical device manufacturers have sought import duty concessions in the next budget, while the Association of Indian Medical Device Industry (AIMED) is seeking a blanket ban on 100% FDI in the brown-field projects.
The first full budget of the new government should consider reforming taxation rules for effective functioning of Alternative Investment Funds (AIFs), Securitisation Trusts and Asset Reconstruction Companies (ARCs) Trusts, CII said.