India: Capital gains and insurance policies; branch office salary costs subject to GST; depreciation on goodwill

The KPMG member firm in India has prepared reports about recent tax developments

The KPMG member firm in India has prepared reports about recent tax developments

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

  • Computation of capital gains on amounts received under a unit-linked insurance policy: The Finance Act 2021 proposed to tax the maturity proceeds from unit-linked insurance policies (ULIPs) issued on or after 1 February 2021, if the aggregate annual premium exceeds INR 250,000 in any of the financial years during the term of any of the policies. Such taxable ULIPs are to be considered to be a capital asset and subject to capital gains tax. The Central Board of Direct Taxes (CBDT) issued a new rule specifying the method of computation of capital gains for these purposes. Read a January 2022 report [PDF 238 KB]

  • Allocation of salary costs to branch offices subject to goods and services tax (GST): The Maharashtra Appellate Authority for Advance Ruling (AAAR) determined that “common input services” provided to a head office by third-party suppliers and then further allocated to branch offices or units registered as distinct persons qualify as a taxable supply. The cost of the common input services allocated to branch offices/units by the head office will not be subject to GST because these costs were incurred by the head office in the capacity as a “pure agent.” However, the allocation of the cost of employees’ salary to the branch offices would be subject to GST. Read a January 2022 report [PDF 334 KB]

  • Depreciation on increased amount of goodwill due to revaluation of debts and inventory, after slump sale: The Bangalore Bench of the Income-tax Appellate Tribunal held that the increased amount of goodwill due to revaluation of debts and inventory, after a slump sale, was eligible for depreciation. The tribunal observed that a taxpayer generally can claim depreciation on goodwill only with respect to the difference between the consideration paid at the time of the slump sale and the net value of assets that the taxpayer acquired under the slump sale, and not with regard to goodwill based on an exercise conducted after the slump sale. The case is: Middleby Celfrost Innovations Pvt. Ltd. Read a January 2022 report [PDF 292 KB]

 

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