INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
However, fears of such potential estate tax do remain and continue to influence succession planning struc - tures and outcomes. It is because of this fear that many people are creating discretionary trusts and then holding their estate through such discretionary trust. Discretionary trusts in India are taxed at the maximum marginal rate (MMR) – ie, approximately 42.74%. While this MMR is as per the old tax regime, the Finance Act, 2023 has reduced the surcharge rates under the new tax regime, thereby reducing the highest effective rate to 39%. Therefore, there exists an ambiguity as to whether to consider 42.74% or 39% as the MMR. The Indian government has introduced the Income Tax Bill 2025 (“Bill”), which is set to come into effect on 1 April 2026. While the Bill primarily aims to simplify and consolidate provisions under the existing IT Act, there could be potential implications that could arise from the interpretation or usage of certain terms in the Bill. Currently, the Bill is under review of the select parlia - mentary committees and the impact of these changes will only become clear once the Bill is enacted. At this time, the nature of the actual changes and potential impact is not known. 1.6 Transparency and Increased Global Reporting India has, inter alia, undertaken the following initiatives to address real or perceived abuses or loopholes in the tax laws. • India entered into an Inter-Governmental Agree - ment with the USA in 2015, which provides that the Indian financial institutions will provide the neces - sary information to Indian tax authorities, which will then be transmitted to the USA automatically. • India amended the ITA to include provisions to mandate financial institutions in India to provide the tax authorities information about specified financial transactions. This was done in order to implement the Common Reporting Standards in India. • India introduced provisions for Country-by-Country Reporting (CbCR) in order to introduce transparen - cy in the reporting obligations of large multinational enterprises (MNEs). Under the CbCR, tax authori - ties gain visibility to the revenue, income, tax paid
and accrued, employment, capital, retained earn - ings, tangible assets and activities of such MNEs. In India, companies are mandated to maintain a reg - ister containing information of significant beneficial owners (SBO) – ie, shareholders being individuals, and themselves or together with other persons (including companies, limited liability partnerships (LLPs), part - nerships, trusts, and others) hold at least 10% shares, voting rights, and the right to receive dividends from the Indian company or exercise significant influence/ control in the Indian company. SBO Rules prescribe various tests to determine the SBO depending on the nature of the holding entity. This reporting is required irrespective of whether the SBO or the entity through which it holds the shares of the reporting company is in India or overseas. The SBO Rules make it mandatory for the company to keep its SBO register maintained and available for inspection for its shareholders. 2. Succession 2.1 Cultural Considerations in Succession Planning Succession in India is heavily influenced by culture and tradition. India’s succession regimes are linked to the religious communities the relevant citizens hail from. They are governed by the specific legislations or personal laws and customs. These have a huge influence on how individuals and families approach succession. In India, the possibility of a Uniform Civil Code (UCC) being made applicable to all citizens, irrespective of their religious denomination, has increased (with BJP, the governing party of India, expressing a strong desire for its nationwide introduction). The state of Uttarakhand became the first state to implement their state-specific UCC by launching the UCC online por - tal and adopting related rules in the state of Uttara - khand in January 2025, after having passed the UCC last year in February 2024. Lately, India is moving away from the general con - sideration of any discussion on succession planning
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