kpmg in india’s pre-budget survey 2020-21 · india’s union budget for 2020 is scheduled to be...

1KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the

KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights

reserved.

KPMG in India’sPre-Budget survey 2020-21

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January 2020



reserved.

KPMG in India’s pre-budget survey 2020 findings

India’s Union Budget for 2020 is scheduled to be presented on 1 February 2020. It is expected that the Finance Minister will consider several far reaching economic and fiscal measures to boost India’s economic growth.

KPMG in India has through its pre-budget survey conducted in January 2020 tried to capture expectations of key stakeholders on various tax aspects of the budget. The findings of this survey are briefly set out below:

Direct tax rates

• The year 2019 saw the government implement significant tax cuts for domestic companies (to 22 per cent) and for newly set up manufacturing companies (to 15 per cent)1 subject to their giving up available incentives and deductions. More than half the respondents plan to opt for the lower tax regime of 22 per cent by giving up available incentives from FY 2019-20. A majority of respondents also believe that the rate of tax for foreign companies should also be reduced in light of the tax cuts for domestic companies.

• A further stimulus by way of personal tax cuts is now anticipated. A large majority of respondents anticipate that the basic exemption limit of INR2.5 lakh for individuals will be increased. Respondents also expect the Finance Minister to increase the income limit at which the maximum marginal rate of 30 per cent kicks in. If implemented, these moves can help spur consumer demand by complementing the interest rate cuts delivered since last year.

• Enhancements in the deduction under section 80C, the standard deduction and other exemption limits for House Rent Allowance (HRA), children education allowance, etc. are also anticipated by the survey respondents.

• As regards corporate taxes, a little over 50 per cent of respondents believe that the existing dividend distribution tax levied on dividends declared by domestic companies should be replaced by an investor level tax on dividends.

Inheritance tax

• A majority of respondents also believe that the Finance Minister will not introduce inheritance tax. This is in line with the overall expectation that there is a need for providing a fiscal stimulus by reducing taxes on individuals.

1. The Taxation Laws (Amendment) Act, 2019



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Extending tax incentives/holidays

• Keeping in line with the government’s focus on ‘Make in India’, 70 per cent of respondents expect that the weighted deductions currently available for expenditure incurred on in-house research and development to be extended beyond the current sunset period of 31 March 2020.

• Around 50 per cent of the respondents expect the tax holiday for exports available to Special Economic Zone (SEZ) units be extended beyond 31 March 2020.

Transfer pricing

• A large majority of respondents believe that the safe-harbour regulations need a revamp from an administrative standpoint. It is expected that this will make them more acceptable from the point of view of both taxpayers as well as the tax authorities. Respondents are also divided on the readiness of India to undertake risk-based transfer pricing assessments for cases selected on the basis of master file and the country-by-country reports filed and exchanged.

Capital markets

• On the capital markets front, the survey has thrown up some interesting results. While the reintroduction of tax on long term capital gains on listed securities was controversial when it was introduced in 2018, only about 52 per cent of the respondents felt that it should be rolled back. Similarly, there was a muted response to the scrapping of Securities Transaction Tax (STT) on securities, with only 41 per cent in favour of its abolition.

Use of technology

• The use of technology in tax administration has gotten a thumbs-up from survey respondents. A significant majority believes that the faceless e-assessment scheme announced in the last budget will lead to greater transparency and efficiency in the assessment process. As a result, a majority of respondents believe that the e-assessment proposals will prove beneficial to taxpayers.

• About 71 per cent of respondents believe that the time, effort and cost involved in tax compliances has increased in the last few years, while 23 per cent think otherwise. Most respondents have however adopted technology in their tax systems with usage across GST compliance, e-invoicing, tax litigation, digitisation of records and tax computation.



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Dispute resolution

• Dispute resolution continues to be an area of concern among survey respondents. Almost half the respondents believe that the approach of revenue authorities in dealing with international taxation issues are not in line with international norms. While Dispute Resolution Panel (DRP) is indeed a fast-track mechanism intended to address international tax and transfer pricing disputes, it clearly emerges from the responses that almost half of the respondents believe that DRP mechanism is not meeting its objective of resolving disputes amicably.

• Interestingly, a majority of respondents believe that the law should provide for a mechanism for negotiated settlement of disputes in litigation.

Indirect tax

• Just under 50 per cent of respondents believe that the provisions dealing with the place of supply of R&D, testing services and other performance-based services under GST are detrimental to the export of services. Since persons in India who render such services to customers outside India also contribute foreign exchange for the country, the exclusion of such services from the ambit of export of services is seen by respondents as affecting exports.

The inf ormation contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeav or to provide accurate and timely information, there can be no guarantee that such information is accurate as of thedate it is received or

that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation

© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG

International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

This document is for ecommunications only



reserved.

Industry195Total

Responses 2192 19

Automotive Banking/NBFCConsumer

MarketsDefence

Energy and

Natural resources

Financial

ServicesHealthcare

InsuranceMedia and

entertainment Private equityReal estate and

construction

Transportation

and logisticsSocial sector Other

6% 2% 8% 0.5%

5% 8% 4% 3%

3% 2% 2%

3% 0.5% 32%

Education

2%

IT/BPO

17%

Telecom

1%

Industrial markets

1%



reserved.

Do you expect the Finance Minister to increase the basic

exemption limit (INR2.5 lakh currently) for individuals?

0 1

7 8 %Yes

1 5 %Maybe

7 %No



reserved.

Do you expect the Finance Minister to increase the

income limit at which the maximum marginal rate of 30

per cent for individuals applies from the existing limit of

INR10 lakh?

0 2

7 2 %2 2 %

6 %

Yes

Maybe

No



reserved.

Do you expect the government could consider enhancing

the following limits? (select all applicable)

0 3

Deduction under

section 80C from

INR1.5 lakh

Standard

deduction for

salaried individual

from INR50,000

Tax free allowances for

salaried individual like

HRA exemption,

children education

allowance, etc

8 2 %5 3 %

4 4 %25%

50%

75%

100%



reserved.

Do you think the Finance Minister will introduce

inheritance tax?

0 4

Yes

1 1 %

Maybe

2 9 %

No

6 0 %

Ta

x



reserved.

Do you think Dividend Distribution Tax (DDT) should be

abolished and replaced with a shareholder level tax on

dividends?

0 5

5 4 %Yes

1 1 %Maybe

3 5 %No



reserved.

Weighted deduction for expenditure incurred on in-

house R&D facility is expiring on 31 March 2020. Do you

expect an extension of this in order to support R&D

programmes and ‘Make in India’ initiative?

0 6

7 1 %Yes

1 4 %Maybe

1 5 %No



reserved.

Do you expect an extension in the sunset date of tax

holiday for Special economic zone (SEZ) units beyond

31 March 2020?

0 7

No

Yes

Maybe

5 0 %

3 5 %

1 5 %



reserved.

Do you expect the Finance Minister to provide any tax

relaxation(s) or waiver(s) to companies going through

insolvency proceedings under Insolvency and

Bankruptcy Code?

0 8

NoYes

Maybe3 1 %

3 5 %

5 0 %1 9 %



reserved.

Will exempting long term capital gains attract more

Foreign Portfolio Investment (FPI) i.e., should the tax

imposed of 10 per cent on long term capital gains by

Finance Act, 2018 be reversed?

0 9

No view5 3 %Yes

3 1 %No

1 6 %



reserved.

Should Security Transaction Tax (STT) be abolished?

1 0

Yes

4 2 %No

4 3 %

No view1 5 %



reserved.

Should the rate of tax for foreign companies also be

reduced in light of the reduction in tax rate for domestic

companies?

1 1

5 2 % 4 0 %Yes No

8 %No view



reserved.

Should Tax Deducted at Source (TDS) obligations cast

on non-resident payers under section 195 be restricted

only to those non-residents which have a tax presence

in India?

1 2

6 1 %

2 4 %

Yes No

1 5 %No view



reserved.

Do you think that the approach of revenue authorities in

dealing with international tax issues (e.g. determining the

existence of a Permanent Establishment (PE), attribution

of profits to PE, royalty classification etc.) is in line with

international norms?

1 3

Yes

No

2 3 %

4 8 %

Maybe2 9 %



reserved.

Have the measures announced in last year’s budget in

relation to the ‘angel tax’ provisions improved the

overall tax climate faced by start-ups?

1 4

3 7 %Yes

3 5 %No view

2 8 %No



reserved.

Remain at the old rates

and avail incentives

Not decided

Opt for the 22 per cent rate

Will you opt for the concessional 22 per cent rate

available under the Taxation Laws (Amendment) Act,

2019 without incentives, or choose to stay at the normal

rates and avail tax incentives?

1 5

2 0 %

2 3 %

5 7 %



reserved.

Do you think the next round of safe harbour regulations,

from AY 2020-21, need to be revamped, especially from an

administration perspective, to have a better acceptability

amongst taxpayers and Revenue authorities?

1 6

6 4 % 4 %3 2 %

Yes NoMaybe



reserved.

Do you believe India is ready for risk-based transfer

pricing assessments/audits, for cases selected on the

basis of master file filed and Country-by-Country

Reporting (CbCR) filed/exchanged?

1 7

3 5 %

Yes

3 4 %

No

3 1 %Maybe



reserved.

Do you think the mechanism of having Dispute

Resolution Panel (DRP) is meeting its objectives of

resolving disputes amicably between the taxpayers and

the tax department?

1 8

2 7 %Yes

4 9 %No

2 4 %Maybe



reserved.

Do you think that place of supply provision in case of

performance-based services viz. R&D services, testing

services (section 13 of the Integrated Goods and Services

Tax Act, 2017) are detrimental to export of services?

1 9

4 8 %Yes

3 4 %Maybe

1 8 %No



reserved.

Has the overall time, effort and cost required for tax

compliance increased in the last few years?

2 0

7 1 %Yes

2 4 %No

5 %Maybe



reserved.

6 8 %

Yes No view

1 5 % 1 7 %No

Will the new faceless e-assessment scheme lead to

greater transparency and efficiency in the assessment

process?

2 1



reserved.

Do you believe the e-assessment proposals will be

beneficial to Tax payers?

2 2

Yes No7 0 % 1 5 %

No view

1 5 %



reserved.

Do you think a negotiated settlement mechanism for

closure of issues in litigation should be introduced?

2 3

Yes

7 7 %

Maybe

1 2 % 1 1 %

No



reserved.

Do you use technology products for tax compliance in

any of the following areas?

2 4

GST

compliance

E-invoicing Managing tax

litigation

Digitalisation

of tax records

7 8 %Direct tax

computation

4 2 % 1 6 % 3 3 % 3 9 %



reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular

individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it wil l continue to be accurate in the future. No one should act on such

information without appropriate professional advice after a thorough examination of the particular situation.

© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affi liated

with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

This document is for e-communications only.

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