Tax certainty: Presumptive regime key to boosting India's FDI flows

The challenge is not India's assertion of its tax rights but the opacity of the rules.

It is well acknowledged that India needs large amounts of foreign direct investment (FDI) to push up its investment rate and, in a sustainable manner, improve its growth rate. However, tax uncertainty remains one of the biggest drags on India’s full FDI potential. In this regard, the NITI Aayog’s latest “Tax Policy Working Paper” rightly diagnoses the core of the problem. Ambiguity in defining the “permanent establishment” (PE) and profit attribution rules has blurred the line between “business presence” and “taxable presence”, introducing a risk premium for investors. An unexpected PE trigger, exposing investors to retrospective tax demands,