Skip to main content

Start ups, NBFCs seek exemption from debt norms

By
As the Finance Bill came up for debate in the Lok Sabha on Tuesday, startups and some nonbanking financial companies (NBFCs) demanded an exemption fromaprovision of the draft legislation.
According to the provision, income tax deduction is denied to those companies whose interest payment on overseas debt to associated enterprises exceeded 30 per cent of their earnings before interest, taxes, depreciation and amortisation (Ebitda).

Banks and insurance companies have already been exempted from the Budget proposal, technically calledaprovision on thin capital incorporated in the Bill following an action plan by the Organisation for Economic Cooperation and Development (OECD) on Base Erosion and Profit Shifting (BEPS).

Eric Mehta, partnertransfer pricing, Price Waterhouse, said startups should be given exemption from this proposal as they have very low Ebitda in the initial years.

Also, NBFCs should be out of this, in line with banking and insurance companies, he said.

Sanjay Agarwal, managing director, Au Financiers India Limited,aJaipurbased NBFC, said financing companies should be looked at differently, including all NBFCs, as for them getting debt is raw material for their business requirements and interest would always be substantially higher than 30 per cent of their Ebitda.

At the same time, he said, these transactions by Indian units with their nonresident associates through branches or subsidiaries or in any other capacities must be on an arm´s length basis with prevailing market conditions and positions.

Manish Sinha, founder of Skrilo, said: “India isafertile ground for startups and innovation over the long term and it is imperative that the government supports them with tax benefits.” Earlystage capital was much needed for growing businesses than meeting financial burdens, he said.

Vaibhav Dabhade, cofounder& CEO, Anchanto, anecommerce logistics and selling platform, said: “While Anchanto India is not an entity serviced through an overseas debt, we do understand the implications of this clause.

Every business chases the dream of getting profitable, which takes time— more so for startups —wherein they are trying to disrupt the current scheme of things."

The provision on thin capital denies the ITdeduction to firms whose interest payments on overseas debt to associated firms exceeds 30% of Ebitda
Business Standard New Delhi,22th March 2017

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more