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Tax experiences of Indo-american joint ventures by Anand P Gupta (Working Paper, No. 1984/501)

By: Gupta, Anand P.
Material type: materialTypeLabelBookPublisher: Ahmedabad Indian Institute of Management 1984Description: 24 p.Subject(s): Joint Ventures | ManufacturingDDC classification: WP 1984 (501) Summary: The perception among many U.S. investors is that the tax rates in India are so high as to make potential investment in India unattractive. The purpose of this study is to analyze the system of corporate income tax currently in operation in India and to evaluate the actual tax experiences of selected Indo-American joint ventures. Five major conclusions emerge from the analysis presented in the study. Firstly, tax laws in India make no distinction between a hundred per cent Indian company and an Indo-American company. The nominal tax rates applicable to an Indo-American company are the same as those applicable to a company with no American equity. Furthermore, an Indo-American company is entitled to claim all the tax concessions available under the tax laws in India. Secondly, the nominal rates of corporate taxation in India are on the high side, but, because of the numerous concessions available under the Indian tax laws, the effective rates are generally much lower. Indeed, the effective rates in a large number of cases have been so low that the Government of India recently had to amend the Income Tax Act to ensure that companies in India pay a minimum tax, on at least 30 per cent of their profits.
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The perception among many U.S. investors is that the tax rates in India are so high as to make potential investment in India unattractive. The purpose of this study is to analyze the system of corporate income tax currently in operation in India and to evaluate the actual tax experiences of selected Indo-American joint ventures. Five major conclusions emerge from the analysis presented in the study. Firstly, tax laws in India make no distinction between a hundred per cent Indian company and an Indo-American company. The nominal tax rates applicable to an Indo-American company are the same as those applicable to a company with no American equity. Furthermore, an Indo-American company is entitled to claim all the tax concessions available under the tax laws in India. Secondly, the nominal rates of corporate taxation in India are on the high side, but, because of the numerous concessions available under the Indian tax laws, the effective rates are generally much lower. Indeed, the effective rates in a large number of cases have been so low that the Government of India recently had to amend the Income Tax Act to ensure that companies in India pay a minimum tax, on at least 30 per cent of their profits.

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