What You Need To Know About India's 2017-18 Budget

Author:Mr Mahesh Kumar and Farhana Siddiqui
Profession:Withers LLP

India's 2017-18 Budget is mostly populist with a big focus on infrastructure and rural development. While some proposals seek to improve ease of doing business in India, certain key areas of difficulty and uncertainty will continue to bother global investors. Singapore based funds, MNCs and other corporations are one of the largest investors into India. They will be impacted by the Budget as well as other recent developments including the amendment of the India-Singapore tax treaty and new anti-avoidance rules.  On the positive side, the Budget provides further stimulus for India's shift from a cash to digital economy. The number of India's internet users are likely to double to 600 million in 2020. More than half of this will be located in rural areas where over 70% of India's 1.2 billion population resides. Global investors are betting on a fintech boom in India. Several Singapore based funds including Temasek have invested majorly into Indian fintech opportunities. With Singapore emerging as a regional fintech hub, there is immense scope for deploying fintech products in India, which will continue to be one of the fastest growing economies.  India is actively trying to create an environment for startups to flourish. The Budget proposes to expand some of the tax incentives provided last year including a lower corporate tax rate of 25% and a 3 year tax holiday within a block of 7 years. However, so far many startups have faced difficulties in claiming such reliefs. While tapping global markets, Indian startups can continue to explore synergies with Singapore which is recognized for its competitive tax and business friendly environment.  There is significant scope for Singapore to play an active role in supporting India's smart city mission which seeks to establish 20 smart cities nationwide. Singapore is already collaborating with the State of Andhra Pradesh for design of its new capital city, Amaravati. The 2017 Budget has announced additional tax reliefs for development of this city.  Investors can continue to explore debt based investments which are popular in sectors such as infrastructure and real estate construction. Debt investments are more tax efficient and the Budget has extended the lower 5% withholding tax rate to certain types of debt investments made till 2020. These bonds are long term and subject to certain conditions including ceiling on interest payouts. For most debt investments, the Indian tax rate can range between...

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