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Hyderabad, March 3

The Finance Bill 2006 has proposed some changes concerning international taxation, according to Mr P.V.S.S. Prasad, Chairman, Hyderabad Sub-Chapter of International Fiscal Association.

He said taxes paid in a foreign country by an assessee in India is not allowable as deduction under Sec 40 of the Income Tax Act. However, such assessee would be eligible for tax credit in respect of taxes paid in a foreign country as per Sec 90 or Sec 91 of the Act.

Increase in rate of minimum alternate tax (MAT) from 7.5 per cent to 10 per cent would effect even foreign companies.

However, MAT credit would be available for seven years as against five years. It is proposed that any transfer pricing adjustments made by an assessing officer resulting in an enhanced income, the same would not be eligible for any deduction under Sec 10AA in case of units in special economic zones.

New Section 90A is proposed to be inserted to facilitate two specified associations, one in India and another in a specified territory outside India to enter into an agreement for avoidance of double taxation, exchange of information for the prevention of the evasion or avoidance of taxes. Provisions of domestic taxation shall apply only to the extent where there are more beneficial to the assessee. Central Government will notify such specified associations and specified territories.

(This article was published in the Business Line print edition dated March 4, 2006)
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