Companies with as little as 20 percent of their global assets in India could find themselves facing tax bills in deals involving their domestic units under changes to the tax code that the government proposed on Tuesday.
The government’s Direct Taxes Code 2013 recommended the change along with a new income tax bracket that would require rich people to pay higher taxes.
A previous recommendation in 2010 said that indirect transfers should be taxed in India if the companies involved have at least 50 percent of their assets located in the country.
“This (50 percent) threshold is too high. There could be a situation that a company has 33.33 percent assets in three countries but it will not get taxed anywhere,” said the document, available on the Income Tax Department’s website.
Ketan Dalal, joint tax leader at PwC India, told India Insight that the “new threshold of 20 percent is very low”.