The paths of these two stars have intersected on several occasions due to their association with the luxury brand Bulgari
- T.K. Mathew, Dubai
A: In the past, corporate fixed deposits were at great risk because these instruments did not require credit rating. However, under the Companies Act, 2013, companies which have raised monies through fixed deposits are now required to have a credit rating agency rate the instruments which have to be disclosed in the application form. Further, only companies having a specified minimum net worth are now permitted to raise fixed deposits. Aggrieved depositors are now permitted to form an association and file a class action suit against defaulting companies. Further, an individual depositor having a deposit of Rs100,000 or more can initiate the corporate insolvency resolution process.
Nevertheless, it is advisable to go in for companies which have a good track record of profitability and integrity. When a company offers a very high rate of interest, it should sound an alarm bell. Further, the interest on these fixed deposits is fully taxable and, therefore, the after-tax return may not be very attractive.
Q: Many people are talking about mobile banking and digital finance as being game changers. Will it really help emerging economies?
- K.C. Menon, Bahrain
A: A well-known consulting firm has suggested that digital finance will boost the gross domestic product of several developing economies. Digital finance refers to financial services which are availed of through mobile phones, the Internet or cards which are linked to a digital payment system. The increase in GDP of countries is expected to come through improved productivity of businesses and from additional investments. Governments will also gain through better tax collection when cash transactions are reduced.
The rapid spread of the use of mobile phones in all developing countries will promote economic benefits by making it possible to have access to financial services. It is expected that small businessmen and micro and small units running a business will have the greatest advantage. According to an estimate, the digital finance revolution will unleash $2.1 trillion in fresh loans to individuals and small businesses.
Q: Many foreign multinationals have in the past complained about slow dispute resolution mechanisms, especially in the field of taxation. Are these grievances being resolved by Indian authorities?
- S.K. Dipankar, Doha
A: Litigation has certainly come down in the past two years with multinationals as a result of the Central Board of Direct Taxes entering into advance pricing agreements with these corporations. Once this agreement is signed, the transfer pricing method is established in advance which provides certainty in tax computation. These agreements allow multinational companies (MNCs) to declare income in respect of transactions with their overseas parents or subsidiaries.
This avoids audit and scrutiny by the Indian tax authorities for a period of five years. Further, tax authorities in the home country of the multinational corporation readily accept taxes paid in India. Therefore, the tax litigation in India with MNCs has drastically declined, as more than 100 advance pricing agreements have already been executed.
The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policy.
The paths of these two stars have intersected on several occasions due to their association with the luxury brand Bulgari
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