INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
applicable tax rate (excluding surcharge and cess) ranges up to 30%. • If the asset has a long-term holding period (ie, more than two years), then the applicable tax rate (excluding surcharge and cess) is 12.5%. Where the real estate assets are held as stock-in- trade, gains arising from disposal of such assets would be subject to tax in the hands of the taxpayer, at the applicable slab rates. Apart from tax on transfer of property, individuals are required to pay stamp duty on the instruments of transfer. The stamp duty rate can be fixed or vari - able (ad valorem), based on the value and location of the underlying property or asset forming the subject matter of the transaction. Stamp taxes on transfer of real estate are frequently significant; the rates depend on the location of the property, as this tax is levied at the state level. Several states, such as Maharashtra, Karnataka and Rajasthan, provide lower stamp rates for intra-relative transfers. 1.6 Stability of Tax Laws As previously discussed, there is no estate tax cur - rently being levied in India. 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. 1.7 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. • India has adopted the Organisation for Economic Co-operation and Development Crypto Asset Reporting Framework, pursuant to which virtual digital asset service providers will be required to report user transactions and related information. 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 that the relevant citizens
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