BPO may be taxed in DTC as no provision in DTC to extend tax exemption benefit

Business Processing Outsourcing (BPO) centers in India would be subjected to taxation under the new proposed Direct Tax Code (DTC) but some clarifications, especially on double taxation, were still needed, an expert said. The (tax) exception given to BPOs has to be withdrawn under section 10 (A) of Income Tax Act. There is no provision in DTC for any such extension of benefits.  The BPOs can be taxed on the basis of the profit they make in India and also overall profit.

There is a new provision called Advanced Price Agreement (APA) included in DTC. BPOs can approach the Government under the Advanced Price Arrangement (APA) for a clarification about the taxation process, to avoid any incident of double taxation.

No amendments or circular will carry retrospective effect in this regard and the vested rights of the tax-payer will not be taken away. Their agreement under APA will be unchangeable for a maximum of five years.

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