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Time of India
3 days ago
- Business
- Time of India
Delhi HC rules in favour of Amazon, says earnings from cloud services not taxable: ‘Customers do not acquire any right…'
Amazon has won a major tax battle as the Delhi High Court has ruled that cloud payments made by Indian companies are not taxable. The court said that payments made by Indian companies to foreign cloud service providers for standard cloud computing services do not constitute royalty or fees for technical services (FTS) under the Income Tax Act, 1961, or the India-United States Double Taxation Avoidance Agreement (DTAA). This decision is set to have significant implications for the taxation of cloud services in India. A Division Bench comprising Justices Vibhu Bakhru and Tejas Karia delivered the verdict in a series of appeals filed by the Commissioner of Income Tax (International Taxation) against US-based cloud giant Amazon Web Services (AWS). According to a report by Live Law, the Court rejected the IT department's argument that receipts from Indian clients by AWS should be taxed as royalty or FTS simply because the services involve access to servers, APIs, or data infrastructure. The ruling clarifies the tax treatment of payments for standardised cloud offerings. What the Delhi High Court judges said in the ruling Agreeing with the Income Tax Appellate Tribunal (ITAT) that ruled in favour of Amazon, the judges said (as reported by Live Law): 'The customers do not acquire any right or title or any IPR that would entitle them to exploit or commercially monetise the said assets on their own. There is no material to establish that a grant of such service entails transfer of any technical know-how, skill, knowledge or process… The customers of the assessee do not acquire any right to commercially exploit any of the assessee's IPRs. The fact that the assessee lends certain support and assistance to its customers… does not in any manner support the view that the assessee makes available technology or technical skills. The issue involved in the present appeal is also covered in favour of the assessee…We find no merit in the contention that the amount received by the assessee for providing services would be taxable as equipment royalty.' The dispute stemmed from reassessment proceedings against AWS for assessment years 2014–15 and 2016–17, where the Indian tax authorities claimed that AWS' earnings from Indian clients were taxable as royalty or fees for technical services (FTS). The Department argued that AWS' cloud services involved the use of scientific equipment and software, making the payments liable under Section 9 of the Income Tax Act and Article 12 of the India-US DTAA. AWS maintained that it provided standardised, automated cloud services through pre-set contracts and interfaces, without transferring technical knowledge, intellectual property, or usage rights. The Court upheld the ITAT's view, stating that AWS' services were automated, offered remotely without human input or transfer of proprietary rights. It found no transfer of technical know-how, no access to infrastructure by customers, and no sharing of source code. The Court also dismissed the claim that AWS' support services constituted technical or consultancy services that made technology available to customers. iPhone 16e: 5 Reasons to buy the most affordable iPhone 16 series model! AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Mint
7 days ago
- Business
- Mint
Can an OCI holder lend to their Indian company?
I'm a German citizen and an OCI (Overseas Citizen of India) cardholder. I co-promoted an Indian private limited company in 2010 with an Indian business family in a 50:50 shareholding ratio, and all FDI compliance was completed at the time. The company manufactures automobile spare parts and is currently in expansion mode. We plan to lend funds to the company in the same 50:50 ratio. Am I allowed to do this under Indian law, and what would the implications be? —Name withheld on request Yes, under Indian regulations, you may lend to the company, but there are specific conditions you must comply with as a non-resident shareholder. Indian company law permits loans from shareholders, directors, or their relatives, subject to certain conditions. In your case, as a shareholder, you can lend to the company, provided the loan amount does not exceed 100% of the company's net worth. Since you are a non-resident, any loan you extend will be treated as an External Commercial Borrowing (ECB) under India's foreign exchange laws. As you own more than 25% equity in the company, you qualify as an eligible lender. However, ECBs must adhere to specific conditions such as: Minimum average maturity period Caps on interest rates End-use restrictions Reporting and compliance with the Reserve Bank of India (RBI) You'll need to ensure the loan terms align with these RBI regulations before proceeding. If the loan is interest-bearing, the interest you earn is taxable in India at 20% plus applicable surcharge and cess under domestic law. However, as a German tax resident, you can opt to be taxed under the India-Germany Double Taxation Avoidance Agreement (DTAA). Under Article 11 of the DTAA, interest income is taxed in India at a reduced rate of 10%. This is likely more favourable than the standard Indian tax rate. To claim DTAA benefits, the Indian company must obtain from you: A valid Tax Residency Certificate (TRC) from Germany A self-declaration and other relevant documentation If interest income is your only source of income from India and tax has been correctly deducted at source, you are not required to file a tax return in India. However, if you choose to avail the DTAA benefit and your interest income exceeds the basic exemption limit, filing a return becomes mandatory, even if TDS has been deducted. Since the loan is between a resident and a non-resident related party, transfer pricing regulations under Indian tax law may apply. This means the interest rate must be benchmarked against arm's length pricing, and documentation must be maintained to substantiate this. Harshal Bhuta, Partner, P. R. Bhuta & Co. CAs
Economic Times
13-05-2025
- Business
- Economic Times
NRI Talk: Why NRIs in Dubai and Singapore pay zero tax on mutual fund gains, Nitin Aggarwal explains
In this edition of NRI Talk, Nitin Aggarwal, Director of Investment Research and Advisory at Client Associates, breaks down why NRIs residing in countries like Dubai and Singapore pay zero tax on their mutual fund gains in also shares valuable insights on why India continues to be a top investment destination for NRIs, common pitfalls to avoid, and the sectors they're most bullish on. From tax advantages under DTAA to the long-term wealth mindset of global investors, this conversation offers a deep dive into how NRIs are approaching India's growth story. Edited Excerpts - ADVERTISEMENT Q) Thanks for taking the time out. How are NRIs looking at India as a long-term investment destination? And, what are the other hot countries which they invest in?A) India is one of the most preferred markets for the long-term investments for NRIs. Several clients have increased exposure to India in recent years as there is no country other than India with strong and stable economic growth prospects. Q) There is big debate on social media about taxation. Help us understand why NRIs In Dubai, Singapore & Mauritius have to pay zero tax on mutual fund gains? A) The debate stems from a recent ruling by Income Tax Appellate Tribunal (ITAT) where it ruled that under the Double Taxation Avoidance Agreement (DTAA), NRIs are not required to pay long-term taxed on mutual funds gains and these should be taxed in the residing countries. And since some of the countries, such as UAE, that India has DTAA do not charge capital gains, the NRIs in those countries will effectively pay Zero tax on gains from mutual fund investments in India. Q) What are the big mistakes which NRIs should avoid when making investment in India? ADVERTISEMENT A) We always advise to understand the risk associated with the investments. We advise using a balanced approach instead of just chasing returns.Q) What is the money mindset which NRIs follow. Are there any common attributes? ADVERTISEMENT A) Most of the NRIs that we engage with have a long-term investment horizon. They are looking to build wealth through compounding over the long-term. Q) Which investment options or asset classes are hot favourites of NRIs and why? ADVERTISEMENT A) Most of the NRIs are looking to diversify their exposure by building positions in high growth, stable economies. Q) Which sectors are more preferred when NRIs look to invest in India? A) Currently we are favouring financial services and consumption driven sectors, and that is what we are advising out clients to allocate money too. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
13-05-2025
- Business
- Time of India
NRI Talk: Why NRIs in Dubai and Singapore pay zero tax on mutual fund gains, Nitin Aggarwal explains
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel In this edition of NRI Talk, Nitin Aggarwal, Director of Investment Research and Advisory at Client Associates, breaks down why NRIs residing in countries like Dubai and Singapore pay zero tax on their mutual fund gains in also shares valuable insights on why India continues to be a top investment destination for NRIs, common pitfalls to avoid, and the sectors they're most bullish tax advantages under DTAA to the long-term wealth mindset of global investors, this conversation offers a deep dive into how NRIs are approaching India's growth story. Edited Excerpts -A) India is one of the most preferred markets for the long-term investments for NRIs. Several clients have increased exposure to India in recent years as there is no country other than India with strong and stable economic growth prospects.A) The debate stems from a recent ruling by Income Tax Appellate Tribunal (ITAT) where it ruled that under the Double Taxation Avoidance Agreement (DTAA), NRIs are not required to pay long-term taxed on mutual funds gains and these should be taxed in the residing countries. And since some of the countries, such as UAE, that India has DTAA do not charge capital gains, the NRIs in those countries will effectively pay Zero tax on gains from mutual fund investments in India.A) We always advise to understand the risk associated with the investments. We advise using a balanced approach instead of just chasing returns.A) Most of the NRIs that we engage with have a long-term investment horizon. They are looking to build wealth through compounding over the long-term.A) Most of the NRIs are looking to diversify their exposure by building positions in high growth, stable economies.A) Currently we are favouring financial services and consumption driven sectors, and that is what we are advising out clients to allocate money too.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
10-05-2025
- Business
- Time of India
NRI Talk: Tax-free gains? How NRIs in UAE, Singapore & Mauritius legally avoid MF taxes
Q) Thanks for taking the time out. How are NRIs looking at India as a long term investment destination? And, what are the other hot countries which they invest in? Live Events Other Popular Investment Destinations for NRIs 1. Residence-based taxation principles: Dubai (UAE), Singapore, and Mauritius operate on tax systems where: 2. DTAA provisions: India's agreements with these countries include specific clauses that determine which country has the taxation right on capital gains. The agreements with these particular countries have historically been structured to avoid double taxation by allowing taxation primarily in the country of residence. Country-Specific Advantages For example – Explanation – Q) How much money is moving in real estate/REIT/fractional investment? Is this the right way? Q) What are the big mistakes which NRIs should avoid when making investment in India? Q) What is the money mindset which NRIs follow. Are there any common attributes? Q) Which investment options or asset classes are hot favourites of NRIs and why? Q) Which sectors are more preferred when NRIs look to invest in India? (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel As India cements its place as one of the world's fastest-growing economies, global investors are taking notice — none more so than the Non-Resident Indian (NRI) community. From real estate to equities and alternative assets, NRIs are increasingly aligning their portfolios with India's long-term growth story. But what's driving this renewed interest, how do different jurisdictions impact taxation, and what common mistakes should global Indians avoid when investing back home?In this wide-ranging interview, Tanvi Kachan, Head – NRI Business & Strategy at Anand Rathi Shares and Stock Brokers, shares her deep insights on how NRIs are navigating the Indian investment landscape, their evolving money mindset, and the rise of new platforms like GIFT City and fractional real estate. She also decodes the tax advantages enjoyed by NRIs in hubs like Dubai and Singapore, highlights the sectors and asset classes drawing the most attention, and explains why real estate-heavy portfolios could be hurting long-term wealth you're an NRI investor or a financial advisor working with global clients, this conversation is packed with practical perspectives and data-backed trends shaping the future of cross-border wealth management Tanvi Kachan, Head - NRI Business & Strategy, Anand Rathi Shares and Stock increasingly view India as a compelling long-term investment destination due to several fundamental factors. The country's robust economic growth trajectory (projected to remain among the world's fastest-growing major economies) creates substantial wealth-building opportunities across multiple sectors. Many NRIs recognize that India's demographic dividend—with a large young working population—will continue driving consumption and economic expansion for significant improvements in regulatory frameworks, digital infrastructure, and ease of doing business have strengthened investor confidence. The introduction of investor-friendly policies like RERA in real estate and streamlined KYC processes for financial investments has made the investment landscape more transparent and accessible for those residing financial returns, emotional and cultural connections play a meaningful role, with many NRIs viewing investments in their homeland as maintaining ties while potentially planning for eventual return or India, NRIs commonly diversify their portfolios across:- Attracts investment for its stable political environment, robust financial markets, and diverse investment options including REITs and ETFs- Popular for its tax advantages, strategic location, and growing real estate sector, particularly in Dubai and Abu Dhabi- Valued for its economic stability, strong regulatory framework, and position as Asia's financial hub- Offers stable real estate markets, particularly in London, and established financial infrastructure- Gaining attention for its resource-based economy, transparent property market, and quality education sectorThe investment strategy of most sophisticated NRIs involves geographical diversification across these markets, balancing growth opportunities in India with stability and different risk profiles in developed you look at the trade-off between risk and returns, the Indian markets have delivered an alpha with a far lower standard deviation on a long term zero taxation on mutual fund gains for NRIs in Dubai, Singapore, and Mauritius stems from a combination of these countries' tax regimes and their Double Taxation Avoidance Agreements (DTAAs) with India. In India's tax structure, capital gains from mutual funds are typically taxable for residents. However, for NRIs from certain jurisdictions, these gains can effectively become tax-free due to:o UAE imposes no personal income tax whatsoevero Singapore doesn't tax foreign-sourced income not remitted to Singaporeo Mauritius offers very favourable tax treatment on investment incomeAs a zero-tax jurisdiction with no personal income tax, capital gains tax, or wealth tax, NRIs residing in the UAE automatically benefit from not having to pay taxes on their worldwide income, including Indian mutual fund gains*.While Singapore taxes income generated within its borders, it generally doesn't tax foreign-sourced investment income if certain conditions are met. The India-Singapore DTAA further clarifies taxation considered a preferred investment gateway to India, Mauritius offers a generous tax regime with effective tax rates that can be near zero on certain investment ABC is an NRI resident in UAE and investing in MFs in IndiaTotal Investment Value - Rs. 1 croreTotal Current Value - Rs. 2 croreCapital Gains - Rs. 1 croreCapital Gains Tax for NRI in UAE** - Rs. ZERO1. India – UAE DTAA has residual clause that allows MFs to be taxed in resident country.2. UAE doesn't tax capital gains on MFs.3. NRI must be eligible for applying for residency in UAE.4. Tax Residency Certificate (TRC) of UAE must be submitted**India's real estate market has increasingly attracted Non-Resident Indians (NRIs), establishing itself as a reliable and rewarding investment destination. Amid global economic uncertainties, India has proven to be a beacon of stability and growth for real estate at the data points, NRI investment in Indian real estate continues its robust trajectory, reaching $14.9 billion in 2024 with projections of $16.3 billion for 2025, growing at 9.2% annually. This capital primarily flows into Mumbai (31%), Bangalore (23%), and Delhi-NCR (19%), with traditional direct property investments capturing the largest share at $9.7 billion (65% of total investment). Commercial properties have emerged as the preferred asset class, delivering superior returns of 7.9-10.2% in rental yields versus 3.8-5.2% for residential properties. The investment landscape has diversified significantly with REITs gaining substantial notably, fractional ownership platforms have experienced explosive growth of 71% in 2024, with NRIs contributing $2.5 billion (52% of this segment) and generating projected returns of 8.9-13.2%.Regulatory developments, including RERA implementation and new SEBI guidelines for fractional ownership established in March 2024, have bolstered investor confidence, creating a more transparent and accessible market for global Indian investing in the Indian market, NRIs frequently encounter several pitfalls that can significantly impact returns. Here are the most critical mistakes to avoid:- Regulatory and Compliance Blind Spots: Many NRIs overlook crucial regulatory requirements, leading to complications. Nearly 38% of NRI investments face compliance challenges due to insufficient understanding of FEMA regulations, tax treaties, and repatriation rules. The RBI's annual repatriation limit and DTAA provisions between India and resident countries require careful estate attracts substantial NRI investment but comes with specific challenges:property disputes involving NRIs stem from mismanagement by relatives given power of attorneyResearch shows properties purchased based solely on emotional attachment underperform market averagesVacant properties face higher depreciation rates due to inadequate maintenanceImproper tenant screening leads to higher eviction rates in NRI-owned propertiesNRIs pay excess taxes due to insufficient coordination between Indian and overseas tax strategiesNRI investments lack proper nomination and succession planning, creating potential inheritance complicationsPortfolio construction errors commonly include:NRI portfolios are overly weighted in physical real estate, limiting liquidityNRIs who diversify into Indian equities have outperformed real estate-only portfolios annually over the past decadeNRI investment complaints involve unauthorized transactions or misrepresentation by financial advisorsCurrency timing and conversion strategies significantly impact NRI investment returns. Rather than reactive approaches, implementing structured conversion plans that align with market conditions can enhance overall portfolio City framework offers NRIs a compelling investment channel with distinct benefits:GIFT City's regulatory structure enables direct investment in international equities, bonds, and alternative assets through specialized fundsInvestments through GIFT City vehicles benefit from preferential capital gains treatment and TDS exemptions, improving net returns by approximately 7-12% compared to traditional channelsThe unified regulatory framework eliminates many of the procedural complexities typically associated with cross-border investments, reducing transaction costs by an average of 2.3%The ecosystem accommodates various investment vehicles including Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) customized for global investorsThese structural advantages position GIFT City as an increasingly central hub for NRIs seeking efficient management of their international investment these common mistakes can significantly improve investment outcomes for NRIs engaging with Indian of the attributes are as stated above – over diversification in Real estate, most of the NRI's have a Real Estate heavy portfolio which impact the return generating capabilities by a huge margin. There is also a huge biases towards investing in safer asset classes like FD's which may not yield the best return for them in terms of alpha typically gravitate toward specific investments for their unique advantages. Real estate in growing Indian metros remains popular due to long-term appreciation potential and rental income opportunities. Many NRIs maintain strong emotional connections to their homeland through property equities attract significant NRI capital through PIS accounts, offering growth potential in one of the world's fastest-developing economies. The relatively high returns compared to developed markets make this appealing for those with higher risk safety-conscious investors, NRE/FCNR deposits stand out with their complete tax exemption and repatriation benefits. The attractive interest rates (often 6-8%) significantly outperform typical rates in Western securities and RBI bonds provide stable returns with sovereign backing, while mutual funds offer professionally managed diversification across various market planning remains crucial, with DTAAs helping NRIs avoid double taxation between India and their country of residence. Those seeking expert assistance often engage wealth advisors specializing in cross-border investment like fintech, artificial intelligence, and biotechnology are emerging as key investment areas, bolstered by government incentives. Additionally, high-growth opportunities in IT, BFSI, and healthcare continue to attract has gained traction as an alternative investment, particularly among UHNIs. However, it's still at a nascent stage in India in comparison to the developed nations. Several UHNIs have opted for this asset class as it offers diversification, emotional value, and potential long-term appreciation. There are certain aspects that investors need to understand and be careful with, such as authenticity, illiquidity, high entry costs, and reliance on expert art investments are niche, they are growing in popularity as part of a balanced portfolio. According to a report by Knight Frank, Indian ultra-high net worth individuals (UHNWI) allocated 11% of their investable wealth towards luxury items like art, jewellery, classic cars, watches, and handbags, compared to the global average of 16%.: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
