Mumbai: Business Processing Outsourcing centres in India would be subjected to taxation under the new proposed Direct Tax Code (DTC) but some clarifications, especially on double taxation, were still needed, an expert said.
“The (tax) exception given to BPOs has to be withdrawn under section 10 (A) of Income Tax Act. There is no provision in DTC for any such extension of benefits,” tax expert and International Fiscal Association of India Branch Chairman T.P. Oswal told said.
According to him, the BPOs can be taxed on the basis of the profit they make in India and also overall profit.
“According to the Organisation for Economic Co-operation and Development (OECD), a France-based grouping of 30 developed nations, these BPOs can be taxed on the basis of the overall profit of the company. But according to a ruling of the Supreme Court it is not possible,” he said.
BPOs can approach the government under the Advanced Price Arrangement (APA) for a clarification about the taxation process, to avoid any incident of double taxation, Oswal said.
“There is a new provision called Advanced Price Agreement (APA) included in DTC. The BPOs can approach the government and ask for a clarification,“ the tax expert said.
“No amendments or circular will carry retrospective effect in this regard and the vested rights of the tax-payer will not be taken away. Their agreement under APA will be unchangeable for a maximum of five years,” Oswal added.