In secondary transactions, deferred consideration, milestone-based payments or earn-out payments are often used when the seller expects a higher valuation for the target, but the buyer believes the valuation should be justified based on future performance or achievement of specific milestones. As a result, the buyer may agree to pay an additional amount to the seller for the transfer of the asset, provided certain conditions are met, typically linked to the performance of the underlying business. 

In the evolving landscape of international taxation, the past decade has seen a consistent and widespread acceptance of tax ‘anti-avoidance rules’ globally. These rules give tax authorities wide ranging powers to deny tax benefits. Recently, both the Indian and Mauritian Government took significant strides in this direction by entering into a Protocol to introduce an anti-avoidance rule known as the ‘Principal Purpose Test’ (PPT) within the India-Mauritius tax treaty framework. The PPT aims to deny the treaty’s benefits if any one of the principal purpose of a transaction, structure or arrangement is to claim such benefits. While the applicability of PPT to past transactions or exits remain uncertain, clients holding India investments in a Mauritius entity or looking to set up a Mauritius structure must assess if their setups withstand PPT scrutiny. India-Mauritius tax treaty continues to provide Mauritian investors several tax incentives such as lower dividend tax rate of 5% (for Mauritius companies holding at least 10% in Indian company) or 15% (otherwise), interest withholding tax rate of 7.5% and capital gains tax exemption on transfer of shares in Indian company (acquired prior to 1 April 2017), debt securities and shares of companies outside India. 

Within India's dynamic financial landscape, the rise of non-banking financial companies (NBFCs) has been transformative, catering to diverse financial needs. Yet, within this thriving sector, asset-light companies encounter a maze of regulatory hurdles that may impede their growth and operational agility.

In the landscape of onshore or cross-border transactions, the no-objection certificate (NOC) from tax authorities under Section 281 of the Income Tax Act, 1961 (IT Act) plays a critical role. The complexities of negotiating NOCs can often place sellers and buyers at odds, making it imperative to understand the fundamentals and relevance of this certificate, as well as its potential ramifications.

India's Union Budget 2024 has introduced significant changes to the country's buyback tax regime, set to take effect from 1 October 2024. These changes mark a fundamental shift in how tax liability is handled for share buybacks, moving it from companies to shareholders. Here’s a simplified overview of these amendments, their potential benefits, and drawbacks.

The Inland Revenue Authority of Singapore (IRAS) has recently introduced a significant change impacting investors in the form of a capital gains tax on the transfer of 'foreign assets' – the Foreign Disposal Tax or FDT. Effective from 1 January 2024, the amendment aims to tax the disposal of foreign assets by entities resident in Singapore under certain circumstances. 

For global investors looking to participate in the attractive India growth story, navigating the complex terrain of tax regulations can be challenging. In this regard, international tax treaties offer global investors much needed certainty with respect to the cross-border tax implications for their global income. Historically, India-Mauritius and India-Singapore tax treaties have offered benefits to investors from these countries in the form of capital gains tax exemptions. While such benefits have been phased out since 2017, eligibility for benefits under these treaties remains a contested issue before Indian courts. Revenue authorities have often challenged the eligibility of entities from Mauritius and Singapore for treaty benefits. Recent developments in the Supreme Court indicate that investors may have to remain extra cautious while claiming such tax treaty benefits.

Not-for-profit (NFP) entities, established for charitable purposes, play a crucial role in reducing the burden on the government by implementing welfare and development delivery systems. In recognition of their contribution, the Income-tax Act, 1961 (IT Act), provide certain exemptions to these entities, subject to specific conditions.  However, over the years, the IT Act has undergone various amendments to make the conditions for claiming such tax exemption more stringent to prevent misuse and have checks and balances on the functioning of such NFPs.

A key decision that multi-national corporations must make while establishing a business in India is the choice of a business vehicle. While incorporating companies or limited liability partnerships are popular choices for doing business in India, several foreign corporations also choose to conduct business by setting up a ‘branch’ in India.