Union Budget and its impact on Foreign Exchange Laws of India

Following are some of the highlights of the Union Budget of India, 2012-13 which will have an impact on the foreign exchange laws of India.

1. Efforts to arrive at a broad-based consensus in consultation with the State Governments in respect of decision to allow FDI in multi-brand retail up to 51 per cent.
2. External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects.
3. ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project.
4. ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion.
5. Proposal to allow foreign airlines to participate up to 49 per cent in the equity of an air transport undertaking under active consideration of the government.
6. Various proposals to address the shortage of housing for low income groups in major cities and towns including allowing ECB for low cost housing projects and setting up of a credit guarantee trust fund etc.
7. To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors.
8. Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent up to 31.3.2013.