India Regulatory Brief: 1,500 Firms Obtain Security Clearance, Committee to Simplify Income Tax Act

November 17, 2015 Posted by India Briefing Reading Time: 5 minutes

MHA Approves Security Clearances for 1,500 firms

The Ministry of Home Affairs (MHA) has reported that it has granted 1,500 security clearances since the beginning of the year. News reports state that only a few applications are now awaiting security clearances. Earlier in June, the MHA announced that it was attempting to streamline the process of obtaining security clearances to expedite the process and aid the government’s ease of doing business and Make in India initiatives.

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IT Committee to Simplify Income Tax Act

The Income Tax (IT) department recently announced provisions to simplify the Income Tax Act, 1961. The committee will attempt to simplify the Act in order to improve the ease of doing business. The committee is also responsible for providing alternatives to complex clauses within the act to ensure predictability and certainty in tax laws, without a major impact on the tax base and revenue collection.

The establishment of the committee comes in the wake of extensive litigation caused by varied interpretations of the Income Tax Act, 1961. The IT department believed that such litigation hampered the ease of doing business in India. Many in the private sector expect any reforms that result from the committee to benefit their operations by making tax procedures less cumbersome.

Civil Aviation Policy Draft to Benefit Industry, Air Travelers

The Ministry of Civil Aviation (MoCA) recently released a new aviation policy draft. In the draft, the MoCA proposes a number of reforms designed to benefit the industry. The draft proposes increasing the Foreign Direct Investment (FDI) in airlines to more than the current 49 percent if India begins to adopt an open skies policy in 2016. The draft also proposes that amending the so called “5/20 rule”, which stipulates that domestic airlines must have operated domestic flights for five years and maintain a fleet of 20 aircraft before providing international flights.

The draft policy also aims to make flying more affordable and offer airlines incentives to fly to small towns. The MoCA aims to cap the tariff, including taxes, at Rs 2500 (US $38) per passenger, for a single hour flight on regional routes, but plans to levy a 2 percent tax on domestic and international routes to raise funds – this will likely make air travel more expensive – in the interim. The draft policy also reiterates the government’s commitment to expanding airline coverage to remote areas, and building no-frill airports at 400 unused air strips.

The draft policy will be released for review to the Union Cabinet in December. A final policy will be announced after consultations and clearance from the Cabinet.

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New Regulations Likely for Auto Industry

The Indian government plans to issue more stringent regulations for automobile manufacturers following Volkswagen’s emission scandal in the U.S. According to local media reports, the planned reforms will be designed to check for emission standards during on-road tests and laboratory trials for all car manufacturers.

The Automotive Research Association of India (ARAI) stated that significant variations in emissions were measured during on-road and laboratory tests on some Volkswagen vehicles. ARAI tests found emissions from some VW cars to be five to six times more on road when compared to results from simulated tests, according to a media report. The government has sought explanations from Volkswagen and the company will respond to the show-cause notice by the end of November.

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