1. India Budget 2009 Challenging Agenda*

2. Direct Taxes

3. PricewaterhouseCoopers July 07, 2009 Slide 2 India Budget 2009 Corporate Tax Rates No change in tax rates Corporate tax Surcharge & Cess DDT Rate of MAT hiked from 10% to 15% of book profits. Fringe Benefit Tax withdrawn from 1 st April 2009 Commodities Transaction Tax withdrawn from 1 st April 2009 Period of MAT credit increased from 7 years to 10 years

4. PricewaterhouseCoopers July 07, 2009 Slide 3 India Budget 2009 New Tax Holiday / Deduction Commercial production of Natural Gas for NELP VIII (Sec 80IB(9)) Investment-linked tax incentive for Pipeline (Sec 35AD) Weighted deduction extended to all Manufacturing / Production of any article / thing (except Negative list) (Sec 35(2AB)) Anomaly in formula for computing tax holiday benefits for SEZ units resolved prospectively

5. PricewaterhouseCoopers July 07, 2009 Slide 4 India Budget 2009 ProjectSunset Date - Earlier Sunset Date - Now Power Generation, T&D (Sec 80IA(4)(iv)) March 31, 2010March 31, 2011 Reconstruction & revival of Power Plant (Sec 80IA(4)(v)) March 31, 2008March 31, 2011 Refining of mineral oil for private sector (Sec 80IB(9)) March 31, 2009March 31, 2012 Export units / FTZ units / 100% EOU (Sec 10A / 10B) March 31, 2010March 31, 2011 Tax Holiday – Sunsets Extended

6. PricewaterhouseCoopers July 07, 2009 Slide 5 India Budget 2009 Pipeline Tax Holiday Deduction under section 80IA for laying and operating a cross country Natural Gas distribution network discontinued 100% deduction on capital expenditure in the year of incurrence, for Companies engaged in “specified business” Capital expenditure exclude land or goodwill or financial instrument Specified BusinessCommencement Setting up and operating a cold chain facilityApril 1, 2009 Setting up and operating a warehousing facility for storage of agricultural produce April 1, 2009 Laying and operating a cross-country natural gas or crude or petroleum pipeline network for distribution April 1, 2007 Cross Country not defined Whether available to City Gas Distribution

7. PricewaterhouseCoopers July 07, 2009 Slide 6 India Budget 2009 Pipeline Tax Holiday Capital asset demolished/ transferred – Business Income Subject to higher tax rate as compared to Capital Gains Set off of loss only against specified business as defined Loss may be carried forward for unlimited period Expenditure capitalised during earlier years would be allowed in March 31, 2010

8. PricewaterhouseCoopers July 07, 2009 Slide 7 India Budget 2009 Tax impact - 80-IA vs. 35AD Assumptions - Profit before depreciation and tax (‘PBDT’) for 10 years - INR 100 per annum Capital Expenditure for year 1 - INR 600 Depreciation rate - 15% on WDV Y-1Y-2Y-3Y-4Y-5Y-6Y-7Y-8Y-9Y-10Total 80-IA1.745.957.69.0110.2111.2312.112.8313.4688.09 35AD1.745.957.69.0110.2111.23*18.29*33.99 135.97 Average tax cost for 10 years is 8.8% of PBDT in case of section 80-IA which increases to 13.6% of PBDT in case of section 35AD * tax liability after MAT credit Tax Impact

9. PricewaterhouseCoopers July 07, 2009 Slide 8 India Budget 2009 Tax holiday on Natural Gas Controversy created by memorandum explaining Finance Bill 2008, whether mineral oil includes natural gas Tax holiday now proposed to be available in respect to production of natural gas – Extended only for NELP VIII blocks Gas produced in CBM blocks ?? Gas produced in Blocks awarded other than NELP VIII ??

10. PricewaterhouseCoopers July 07, 2009 Slide 9 India Budget 2009 Tax holiday to Refineries Welcome change to extend time period till 31 March 2012 for private refineries to commence Private sector refineries now at par with notified Public sector undertaking refineries

11. PricewaterhouseCoopers July 07, 2009 Slide 10 India Budget 2009 Controversy regarding definition of undertaking Blocks licensed in a single contract to be treated as “undertaking” for the purpose of computing deduction Retrospective amendment wef April 1, 2000 Position of each well a separate undertaking – not possible

12. PricewaterhouseCoopers July 07, 2009 Slide 11 India Budget 2009 Taxation of Limited Liability Partnership (LLP) Similar to partnership firms (Not a transparent entity) No Dividend Distribution Tax (DDT) and Minimum Alternative Tax (MAT) Conversion of partnership firms to LLP – tax neutral

13. PricewaterhouseCoopers July 07, 2009 Slide 12 India Budget 2009 Change in TDS Rates Major changes to rationalise TDS rates Nature of paymentsExistingProposed Rent of plant, machinery or equipment 10%2% Rent of land & building to individual / HUF 15%10% Rent of land & building to persons other than individual / HUF 20%10% Payments to individual / HUF contractors 2%1% Payments to sub-contractors1%2% Payments for advertising contracts1%2% Payments to small transporters1% / 2%Nil Tax will be deducted at 20% (or higher) in all cases if the deductee doesn’t disclose PAN to deductor

14. PricewaterhouseCoopers July 07, 2009 Slide 13 India Budget 2009 Direct Tax - Others FBT to be abolished Employee to pay tax on ESOP gains -Taxable value would be difference between FMV as on date of exercise and price paid by employee Employee to pay tax on contribution to approved superannuation fund exceeding Rs 1 Lakh Rules to be framed for other perks

15. PricewaterhouseCoopers July 07, 2009 Slide 14 India Budget 2009 Direct Tax - Others Gifts in kind liable to tax – individuals & HUF Basic wealth tax exemption limit increased from 15 lakh to 30 lakh

16. PricewaterhouseCoopers July 07, 2009 Slide 15 India Budget 2009 Transfer Pricing CBDT empowered to formulate ‘Safe Harbour’ rules. Will facilitate smooth cross-border transactions “Safe Harbour” means circumstances in which the Revenue authorities shall accept the transfer price of the taxpayer

17. PricewaterhouseCoopers July 07, 2009 Slide 16 India Budget 2009 Transfer Pricing New Dispute Resolution mechanism introduced for persons in whose case a Transfer Pricing (‘TP’) adjustment has been made Apparently applicable to all foreign companies, whether or not there is a TP adjustment Where any objection is received from a taxpayer, a Dispute Resolution Panel shall issue directions to the Assessing Officer to enable him to complete the assessment In such cases, the Assessing Officer’s order is appealable directly to the Income Tax Appellate Tribunal

18. PricewaterhouseCoopers July 07, 2009 Slide 17 India Budget 2009 Present scenario Proposed scenario 120 x 0.95 = 114 100 x 1.05 = 105 14 20 ParticularsRevised ALP after 5% range Transfer Price 100 TP Adjustment Transfer Pricing 5% range benefit available only if the Arm’s Length Price falls within +/-5% range of transfer price. Illustration - Indian captive services provider: 120 Arm’s Length Price (Mean)

19. PricewaterhouseCoopers July 07, 2009 Slide 18 India Budget 2009 Direct Tax - Others Time limit prescribed for assessment of withholding tax returns for payments to residents - Capped at four years – whether applies to reassessment as well Mechanism for computerised processing of statements of tax deducted at source Introduction of allotment of a Document Identification Number by the assessing officer

20. PricewaterhouseCoopers July 07, 2009 Slide 19 India Budget 2009 Tax Rates - Individual Tax RatesExisting SlabsProposed Slabs NilUpto Rs. 1.5 lakhsUpto Rs. 1.6 lakhs 10%Rs. 1.5 lakhs to Rs. 3 lakhsRs. 1.6 lakhs to Rs. 3 lakhs 20%Rs. 3 lakhs to Rs. 5 lakhs 30%Above Rs. 5 lakhs Basic Exemption Limit Rs. 1.80 lakhs for womenRs. 1.90 lakhs for women Rs. 2.25 lakhs for senior citizensRs. 2.40 lakhs for senior citizens 10% Surcharge for individual tax payers removed Effective Maximum Marginal rate of tax reduced to 30.90%

21. PricewaterhouseCoopers July 07, 2009 Slide 20 India Budget 2009 Unfinished Agenda Rationalisation of DDT regime Tax reforms for outbound investments Re-engineering of tax processes New Tax Code