Peer Review Report Phase 1 Legal and Regulatory Framework - India

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES
Peer Review Report

Phase 1
Legal and Regulatory Framework
INDIA
Global Forum
on Transparency
and Exchange
of Information for Tax
Purposes Peer Reviews:
India 2010
PHASE 1
September 2010
(reflecting the legal and regulatory framework
as at May 2010)
This work is published on the responsibility of the Secretary-General of the OECD.
The opinions expressed and arguments employed herein do not necessarily reflect
the official views of the OECD or of the governments of its member countries or
those of the Global Forum on Transparency and Exchange of Information for Tax
Purposes.
Please cite this publication as:

OECD (2010), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
Reviews: India 2010: Phase 1, OECD Publishing.
http://dx.doi.org/10.1787/9789264095533-en
ISBN 978-92-64-09552-6 (print)

ISBN 978-92-64-09553-3 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)
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TABLE OF CONTENTS – 3
Table of Contents
About the Global Forum ................................................................................................. 5
Executive Summary ......................................................................................................... 7
Introduction...................................................................................................................... 9
Information and methodology used for the peer review of India ................................... 9
Overview of India ........................................................................................................ 10
Recent developments ................................................................................................... 13
Compliance with the Standards .................................................................................... 15
A. Availability of Information ................................................................................ 15

Overview ...................................................................................................................... 15
A.1. Ownership and identity information ................................................................... 17
A.2. Accounting records............................................................................................. 35
A.3. Banking information........................................................................................... 47
B. Access to Information ......................................................................................... 49
Overview ...................................................................................................................... 49
B.1. Competent Authority’s ability to obtain and provide information .................... 50
B.2. Notification requirements and rights and safeguards ........................................ 55
C. Exchanging Information .................................................................................... 57
Overview ...................................................................................................................... 57
C.1. Exchange-of-information mechanisms ............................................................. 58
C.2. Exchange-of-information mechanisms with all relevant partners..................... 63
C.3. Confidentiality .................................................................................................. 65
C.4. Rights and safeguards of taxpayers and third parties ........................................ 67
C.5. Timeliness of responses to requests for information......................................... 68
Summary of Determinations and Factors Underlying Recommendations ............... 71
Annex 1: Jurisdiction’s Response to the Review Report ............................................ 73
Annex 2: List of All Exchange-of-Information Mechanisms in Force ...................... 75
PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – INDIA © OECD 2010
4 – TABLE OF CONTENTS
Annex 3: List of All Laws, Regulations and Other Material Received ..................... 79
Annex 4: Overview of Commercial Laws and Other Relevant Factors for

Exchange of Information ............................................................................................... 81
ABOUT THE GLOBAL FORUM – 5
About the Global Forum
The Global Forum on Transparency and Exchange of Information for Tax

Purposes is the multilateral framework within which work in the area of tax
transparency and exchange of information is carried out by over 90
jurisdictions which participate in the work of the Global Forum on an equal
footing.
The Global Forum is charged with in-depth monitoring and peer review of
the implementation of the standards of transparency and exchange of
information for tax purposes. These standards are primarily reflected in the
2002 OECD Model Agreement on Exchange of Information on Tax Matters
and its commentary, and in Article 26 of the OECD Model Tax Convention on
Income and on Capital and its commentary as updated in 2004, which has been
incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably
relevant information for the administration or enforcement of the domestic tax
laws of a requesting party. Fishing expeditions are not authorised but all
foreseeably relevant information must be provided, including bank information
and information held by fiduciaries, regardless of the existence of a domestic
tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by the
Global Forum as relevant to its work, are being reviewed. This process is
undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s
legal and regulatory framework for the exchange of information, while Phase 2
reviews look at the practical implementation of that framework. Some Global
Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews.
The ultimate goal is to help jurisdictions to effectively implement the
international standards of transparency and exchange of information for tax
purposes.
All review reports are published once approved by the Global Forum and
they thus represent agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency
and Exchange of Information for Tax Purposes, and for copies of the published
review reports, please refer to www.oecd.org/tax/transparency.
EXECUTIVE SUMMARY – 7
Executive Summary
1. This report summarises the legal and regulatory framework for

transparency and exchange of information in India.
2. India is Asia's second-largest country by size and the second most
populous country in the world. It is the world’s 11th largest economy, by
nominal GDP, and is engaged with many trading partners. India has an
extensive network of treaties which allow for exchange of information for tax
purposes and has been actively engaged in exchanging information for more
than 40 years. As a member of the G20, in 2009 India committed to
implement the agreed international standard for tax transparency and exchange
of information and became a member of the restructured Global Forum on
Transparency and Exchange of Information for Tax Purposes.
3. It is India’s policy to exchange information to the standards as
reflected in its Double Tax Conventions (DTCs) which provide for effective
exchange of information, with the exception of a limited number of old DTCs.
4. Exchange of information articles in India’s DTCs have
confidentiality provisions in line with the international standards and India’s
domestic legislation also contains confidentiality provisions. In addition, each
of India’s DTCs ensures that information would not be shared which would
disclose trade, business, industrial, commercial or professional secrets; be
subject to attorney client privilege; or be contrary to public policy.
5. India’s treaty policy is complemented by wide-ranging powers to
request information, search premises and seize documents. There are no
limitations - e.g. domestic tax interest, limited to criminal tax matters, limited
by de minimis threshold, limited to taxpayers currently under examination - on
the competent authority’s ability to use these information gathering powers.
These powers may be used to respond to an international exchange of
information request. They provide the ability to obtain information held by
banks, other financial institutions, and any person acting in an agency or
fiduciary capacity including nominees and trustees, as well as information
regarding the ownership of companies, partnerships, trusts, and other relevant
entities. Further, these powers include the ability to obtain accounting records
from all natural and legal persons.
8 – EXECUTIVE SUMMARY
6. No bank secrecy or corporate secrecy provisions in India’s laws
would limit the ability of the competent authority to respond to an
international exchange of information request. Similarly, the rights and
safeguards that apply to persons in India should not unduly prevent or delay
the effective exchange of information.
7. Information is available that identifies the owners of companies -
domestic and foreign - and members of bodies corporate. Various declaration
requirements pertaining to nominee owners of shares are in place. Registered
companies are required to keep accounts which explain all transactions, enable
the company’s financial position to be determined and which allow for
financial statements to be prepared. Companies and co-operative societies are
also obliged to keep related underlying documentation.
8. Information is available identifying the partners in general and
limited liability partnerships in India and the partners in foreign partnerships
which operate in India. The obligations for partnerships ensure that partners
and persons in certain professions deriving income from the partnership keep
accounts which explain transactions, enable the firm’s financial position to be
determined and allow for preparation of financial statements. Partnerships are
also obliged to keep underlying documentation for the accounting records.
9. India allows for the creation of trusts and some registration
requirements exist for these types of legal arrangements. Information is
available that identifies the settlors, trustees and beneficiaries of express trusts
and accounting records which must be kept for trusts. Persons assessed for the
income of a trust are obliged to keep underlying documentation for the
accounting records.
10. The accounting records and underlying documentation kept by
companies, partnerships and trusts are required to be kept for at least five
years and banks, financial institutions and financial intermediaries are obliged
to maintain transaction records for ten years from the date of the transaction.
11. India’s response to the determinations, factors and recommendations
in this report, as well as the application of the legal framework to the practices
of its competent authority, will be considered in detail in the Phase 2 Peer
Review, which is scheduled for the second half of 2012.
INTRODUCTION – 9
Introduction
Information and methodology used for the peer review of India
12. The assessment of the legal and regulatory framework of India was
based on the international standards for transparency and exchange of
information as described in the Global Forum’s Terms of Reference, and was
prepared using the Global Forum’s Methodology for Peer Reviews and Non-
Member Reviews. The assessment was based on the laws, regulations, and
exchange-of-information mechanisms in force or effect as at May 2010, other
materials supplied by India, and information supplied by partner jurisdictions.
13. The Terms of Reference break down the standards of transparency
and exchange of information into 10 essential elements and 31 enumerated
aspects under three broad categories: (A) availability of information; (B)
access to information; and (C) exchanging information. This review assesses
India’s legal and regulatory framework against these elements and each of the
enumerated aspects. In respect of each essential element, a determination is
made that either: (i) the element is in place; (ii) the element is in place but
certain aspects of the legal implementation of the element need improvement;
or (iii) the element is not in place. These determinations are accompanied by
recommendations on how certain aspects of the system could be strengthened
(see Summary of Determinations and Factors Underlying Recommendations
on page 71).
14. The assessment was conducted by a team which consisted of two
assessors and a representative of the Global Forum Secretariat: Ms. Yanga
Mputa of the South Africa Revenue Service; Mr. Günter Dauben of the
German Federal Central Tax Office; and Ms Rachelle Boyle from the Global
Forum Secretariat. The assessment team examined the legal and regulatory
framework for transparency and exchange of information and relevant
exchange of information mechanisms in India.
10 – INTRODUCTION
Overview of India
15. The Republic of India (hereinafter referred to as India) is Asia's

second largest country by size and has a population of 1 186 billion,1 making
it the second most populous country in the world. It is a multilingual society
with 22 principal languages. Hindi is the national language and primary
tongue of a large percentage of people, while English is the preferred business
language. India shares borders with Pakistan and Afghanistan in the west;
Bangladesh and Myanmar in the east; and Nepal, China and Bhutan in the
north.
16. India’s 2009 Gross Domestic Product was USD 1 209 billion.2 A
balance of payments crisis in 1991 was the catalyst for a program of
significant economic reforms including: liberalisation of foreign investment
and exchange regimes; significant reductions in tariffs and other trade barriers;
financial sector reforms; and significant adjustments in monetary and fiscal
policies. Since that time, India has become an attractive destination for
foreign capital, with net capital inflows increasing to 9.2% in 2007-2008.3
The services sector has become a major part of the economy, representing
more than 50% of GDP. Please see Annex 4 for an overview of India’s
financial sector and relevant professions.
17. Exchange controls have been reduced over the past decade,
particularly since enactment of the Foreign Exchange Management Act 1999.
This act and the remaining exchange controls are oversighted by the Reserve
Bank of India (RBI).
General information on legal system and the taxation system

18. After a period of colonial rule India achieved independence from
Britain in 1947. The 1950 Constitution provides for a parliamentary system
1
IFS - International Financial Statistics, International Monetary Fund, accessed
19 April 2010:
http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/weorept.aspx?sy=20
07&ey=2014&scsm=1&ssd=1&sort=country&ds=.&br=1&c=534&s=LP&grp=
0&a=&pr1.x=73&pr1.y=5.
2
World Economic Outlook Database April 2010, International Monetary Fund,
Accessed 19 April 2010:
http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=20
08&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=534&s=NGDPD
&grp=0&a=&pr1.x=70&pr1.y=11#cs1.
3
The External Economy, the Reserve Bank of India, 28 January 2010, accessed
19 April 2010: http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=12073.
INTRODUCTION – 11
with a bicameral parliament and three branches: the executive, legislative and
judiciary. It has a federal system consisting of the Central Government and
the State Governments. The Government exercises broad administrative
powers in the name of the President, whose duties are largely ceremonial. The
Parliament, the supreme legislative body of India, comprises the President and
the two Houses: Lok Sabha (the lower house of the Parliament) and Rajya
Sabha (the Council of States). All legislation requires the consent of both
Houses of Parliament. For financial and related legislation, the will of the Lok
Sabha prevails. The national executive power is centred in the Council of
Ministers (the Cabinet), led by the Prime Minister.
19. There are also elected governments in the 28 States and in the 7
Union Territories. The States' Chief Ministers are responsible to the
legislatures in the same way as the Prime Minister is responsible to
Parliament. Each State also has a Governor appointed by the President, who
may assume certain broad powers when directed by the Central Government.
The Central Government exerts greater control over the Union Territories than
over the States, although some Territories have gained power to administer
their own affairs.
20. The Indian legal system is based on common law. The division of
powers into Union powers, State powers and concurrent powers can be found
in a Schedule to the Constitution. If a power is listed as concurrent, the States
are prevented from enacting laws that are inconsistent with Union laws. Any
residual powers rest with the Union. Rules, Regulations, Orders, Declarations,
Notifications, and Guidelines are issued under the authority of the relevant act
and provide detail with regard to the statutory obligations. Rules, Regulations
and Orders, published in the Government Gazette, have the force of law.
Laws issued by the Parliament extend throughout the territory of India and
those made by State legislatures generally apply only within the territory of
the State concerned. Please see Annex 4 for an overview of relevant laws.
21. India has a well-developed tax structure with demarcated authority
between Central and State Governments and local bodies. In accordance with
Schedule 7 to the Constitution, the majority of laws relating to civil, criminal
and tax jurisprudence are federal in nature. The Central Government levies
taxes on income (except tax on agricultural income, which the State
Governments can levy), customs duties, central excise and service tax. Value
Added Tax (VAT),4 stamp duty, State excise, land revenue and tax on
professions are levied by the State Governments. Local bodies are
empowered to levy tax on properties, octroi and for utilities (e.g. water
supply).
4
Since 1 April 2005, most of the State Governments in India have replaced
sales tax with VAT.
12 – INTRODUCTION
22. Exchange of Information for tax purposes is solely a power of the
Central Government, which is empowered under the Income-tax Act 1961
(ITA) s.90 to enter into agreements for the exchange of information with other
countries or specified territories. In India, two Joint Secretaries (FT&TR-I
and FT&TR-II) in the Department of Revenue, Ministry of Finance, head the
competent authority of India for all matters relating to international tax
matters. The Joint Secretaries are responsible for treaty negotiations and for
exchange of information in accordance with such agreements. The competent
authority may request information from the state tax authorities (s.131,
s.133(6), s.138).
23. India established its first DTC in 1965. In 2009, India committed to
implement the agreed international standard for tax transparency and exchange
of information and became a member of the restructured Global Forum on
Transparency and Exchange of Information for Tax Purposes.
24. India has a sliding scale for taxes on individuals and co-operative
societies. For individuals, no tax is payable on annual income up to INR
160 000 (EUR 2 811),5 or INR 190 000 (EUR 3 338) for women or INR
240 000 (EUR 4 217) for senior citizens. Income of between INR 160 000 to
INR 500 000 (EUR 8 785) is taxed at 10%. Income from INR 500 000 to
INR 800 000 (EUR 14 056) is taxed at 20%, and income beyond that threshold
is taxed at 30%. For co-operative societies, a tax rate of 10% is applied to
income up to INR 10 000 (EUR 176), 20% for income between INR 10 000
and INR 20 000 (EUR 351) and a rate of 30% is applied to income over
INR 20 000.
25. A flat tax rate of 30% is payable by firms, domestic companies and
local authorities. Domestic companies must also pay a 7.5% surcharge if their
total income for the year exceeds INR 10 000 000 (EUR 175 700).
5
According to the foreign exchange rate of 31 May 2010, INR 1 = EUR
0.01757 and EUR 1 = INR 56.91168, rounded off to the nearest whole
number in EUR (source: http://www.xe.com/).
INTRODUCTION – 13
Recent developments
26. In last ten to 15 years, the Indian taxation system has undergone
tremendous reforms. The tax rates have been rationalised and tax laws have
been simplified.6 The process of rationalisation of tax administration is
ongoing in India.
27. The Government is currently considering revisions to the
Companies Act 1956. The Companies Bill 2009 which seeks to replace the
existing act seeks inter alia to revise the provisions related to sanctions for
companies which do not comply with obligations under that act. The bill
proposes both minimum and maximum fines/imprisonment in relevant penal
clauses, in addition to enhancing the quantum of level of fine/imprisonment
from their current levels. Further, the bill proposes stricter penalties for repeat
offences and for offences involving fraud.
6
Taxation System in India, the Indian Embassy in Washington D.C., accessed 19
April 2010.
http://www.indianembassy.org/newsite//doing_business_in_india/fiscal_taxatio
n_system_in_india.asp.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 15
Compliance with the Standards
A. Availability of Information
Overview
28. Effective exchange of information requires the availability of

reliable information. In particular, it requires information on the identity of
owners and other stakeholders as well as information on the transactions
carried out by entities and other organisational structures. Such information
may be kept for tax, regulatory, commercial or other reasons. If the
information is not kept or it is not maintained for a reasonable period of time,
a jurisdiction’s competent authority may not be able to obtain and provide it
when requested. This section of the report assesses the adequacy of India’s
legal and regulatory framework on availability of information.
29. Information is available that identifies the owners of companies -
domestic and foreign - and members of any bodies corporate. In addition, in
accordance with anti-money laundering (AML) provisions, banks, financial
institutions and financial intermediaries are obliged to verify and maintain the
records of the identity of their clients. Directors and officers are not
statutorily required to hold any ownership information in respect of the
company or co-operative society, nor are other persons. Various declaration
requirements pertaining to beneficial owners of shares are in place.
30. Registered companies are required to keep books of account which
correctly explain all transactions, enable the company’s financial position to
be determined with reasonable accuracy at any time and which allow for
financial statements to be prepared. Companies are also obliged to keep
related underlying documentation.
16 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
31. Information is available that identifies the partners in general and
limited liability partnerships in India, as well as foreign limited liability
partnerships operating in India, both through information submitted in tax
returns and in accordance with AML provisions that oblige banks, financial
institutions and financial intermediaries to verify and maintain records of the
identity of their clients – including partnerships. Partners of limited liability
partnerships are required to submit information to the partnership whenever
they alter their names or permanent addresses. There are no other persons
required to hold any ownership information with respect to partnerships.
32. All types of partnerships are required to submit accounting records
to India’s Income Tax Department (ITD) each year. In addition, the
obligations for limited liability partnerships ensure that partners and persons in
certain professions deriving income from limited liability partnerships keep
accounts which correctly explain transactions, enable the company’s financial
position to be accurately determined and allow for financial statements to be
prepared. Limited liability partnerships are also obliged to keep underlying
documentation for the accounting records.
33. Information is available that identifies the settlers, trustees and
beneficiaries of express trusts. India allows for the creation of trusts and some
limited registration requirements exist for these types of legal arrangements.
As for companies and partnerships, AML provisions oblige banks, financial
institutions and financial intermediaries to verify and maintain records of the
identity of their clients – including trusts. There are no requirements that
trustees hold information on settlers, trustees or beneficiaries. Accountants
who are trustees or in any way manage trusts are obliged to keep accounts
which correctly explain all transactions, enable the trust’s financial position to
be accurately determined at any time and which allow for financial statements
to be prepared. Persons being assessed for the income of a trust are obliged to
keep underlying documentation for the accounting records.
34. The ITD has wide-ranging powers to request information, search
premises and seize documents. There are no limitations - e.g. domestic tax
interest, limited to criminal tax matters, limited by de minimis threshold,
limited to taxpayers currently under examination - on the competent
authority’s ability to use these information gathering powers. There are no
special procedures required to be invoked in order to exercise such powers.
The competent authority also has the power to obtain, for tax purposes,
ownership, identity and accounting information which is required to be held
by anyone for AML purposes.
35. The accounting records and underlying documentation kept by
companies, partnerships and trusts are required to be kept for at least five
years. Documents must be retained by companies, limited liability
partnerships and trusts for six or seven years (depending on the nature of the
document). For companies and limited liability partnerships it is eight years.

Underlying documentation is covered by all of these provisions. These
records do not necessarily have to be kept in India, but they must be presented
if requested by the relevant government authority. Banks, financial
institutions and financial intermediaries are obliged to maintain customer
identification records and transaction records for ten years from the date of the
transaction.
A.1. Ownership and identity information
Jurisdictions should ensure that ownership and identity information for all
relevant entities and arrangements is available to their competent
authorities.
Companies (ToR A.1.1)

36. In Indian law, the term ‘company’ is used to refer to any company
formed and registered under the Companies Act 1956 or formed and
registered under any of the previous companies laws of India. The Companies
Act 1956 s.3 provides for creation of private and public companies. Private
companies which are subsidiaries of public companies are considered to be
public companies. In addition, India has: companies with unlimited liability
(s.12(2)(c)); bodies corporate (s.2); producer companies (s.581C); companies
limited by guarantee and not for profit associations (s.25); and foreign
companies (s.591):
Details Number (30 April 2010)
Public limited companies 80 552
Private limited companies 731 471
Companies with unlimited liability 615
Companies limited by guarantees 6 623
and NPOs
Producer companies 327
Foreign companies 2 333
Ownership information on domestic companies

37. Companies formed under the Companies Act 1956 are required to be
registered with the relevant Registrar of Companies, and, under the ITA, they
are required to lodge tax returns.
38. Section 33 of the Companies Act 1956 provides that the company
must present the following documents to the Companies Registrar in the State
in which its primary office is situated:
• the memorandum of the company;
• its articles, if any;
• the agreement, if any, which the company proposes to enter into with any
individual for appointment as its managing or whole-time director or
manager; and
• a declaration by a person who is engaged in the formation of the company7

or by a director, manager or secretary of the company, that all the
requirements of the Companies Act 1956, including registration
requirements, have been complied with.
39. If the Companies Registrar is satisfied, s/he will retain and register
these documents. Commonly, the articles of association covers the rules and
procedures for the routine conduct of the proposed company, the authorised
share capital of the proposed company and also the names of its first or
permanent directors. In addition, the company must submit to the registrar a
list showing the names, addresses and occupations of the company directors
and the manager, if any, of the company (s.568). For listed companies there is
an additional requirement that they submit details showing the shareholding of
each of the members (i.e. shareholders and any other persons listed in the
company memorandum) of the company (s.567, read with s.41).
40. Thereafter, all types of companies are required to maintain a register
of members (s.150) containing:
• the name and address, and the occupation, if any, of each member;
• for a company having a share capital, details of the shares held by each
member;
• the date at which each person became and, if relevant, ceased to be, a
member.
41. While the Companies Act 1956 does not specifically provide a
process for or the timeframe within which changes to the company’s members
7
This may be an advocate of the Supreme Court or of a High Court/an attorney
or a pleader entitled to appear before a High Court, a company secretary, or a
chartered accountant.
must be incorporated in the register, s.113(1) obliges companies to issue

certificates of shares, debentures or debenture stock within two months of
receipt of application for registration of a transfer of shares. It could
reasonably be expected that issuance of the certificates would involve
including the new owner information in the share register.
42. Subsequent changes in ownership/shareholding pattern are required
to be informed to the registrar through: return of allotments within 30 days of
an allotment of shares (s.75); and the annual return. The annual return must
be submitted to the registrar within 60 days of its Annual General Meeting,
detailing (s.159 and s.160) inter alia:
• the register of its members;
• the register of its debenture holders (listed companies only);
• its shares and debentures (listed companies only);
• its members and debenture holders, past and present (listed companies
only); and
• its directors, managing directors, managers and secretaries, past and

present.
43. Companies with more than 50 members must also, unless the
register is in such a form as to satisfy this requirement, maintain an index of
members (s.151), the purpose of which is to allow for identification of all
entries on the register which relate to a particular member. Within 14 days
after the date on which any alteration is made in the register of members,
corresponding alterations must be made to the index.
44. For listed companies, s.187C also requires that shareholders who are
not the beneficial owners of those shares submit a declaration to the company
specifying the name and other particulars of the person who holds the
beneficial interest in the shares. Similarly, persons who are beneficial owners
of the shares must, within 30 days of becoming a beneficial owner, submit a
declaration to the company specifying the nature of his interest, particulars of
the person in whose name the shares stand registered in the books of the
company and such other particulars as may be prescribed. Whenever there is a
change in the beneficial interest in such shares, the beneficial owner shall,
within 30 days of the change, make a declaration to the company in such form
and containing such particulars as may be prescribed. The company is
required to make a note of such declarations in its register of members and is
required to file, within 30 days from the date of receipt of the declaration, a
return in the prescribed form with theRegistrar of Companies. Neither the
Companies Act 1956 nor the Companies (Declaration of Beneficial Interest in
Shares) Rules 1975 define ‘beneficial interest’ though Indian authorities have
stated that this term is interpreted broadly to mean ultimate beneficial owners
where there are layers in an ownership chain.
45. Under ITA s.139(1), all companies in India must submit an annual
tax return. Companies are required to lodge their tax returns using form ITR6
(for companies not claiming exemption for charitable activity) or ITR7 (for
companies claiming exemption for charitable activities). ITR6 requires
information on the managing director, directors, secretary and principal
officer(s) who have held the office during the previous year, and also requires
information on persons who were beneficial owners of shares holding not less
than 10% of the voting power at any time of the previous year. ITR7 requires
information on: the author(s), founder(s) and address(es), if alive; the
person(s) who was/were trustee(s)/manager(s) during the previous year(s); the
person(s) who has/have made substantial contribution to the trust/institution in
terms of s.13(3)(b); relative(s) of author(s), founder(s), trustee(s), manager(s),
and substantial contributor(s); and where any such author, founder, trustee,
manager or substantial contributor is a Hindu undivided family, the names of
the members of the family and their relatives.
46. Companies incorporated in India may, if they have no local
operations, not be obliged to submit a tax return. While in such cases
ownership and identity information might not be submitted directly to the
ITD, all companies incorporated in India must register with the Companies
Registrar and provide updated information to that Registrar regardless of the
level of income earnt in India.
Ownership information on co-operatives
47. India also has co-operatives, which are associations of persons
formed with the object of promotion of the economic interests of its members
in accordance with co-operative principles (Co-operative Societies Act 1912).
The liability of a society is limited unless the object of the society is the
creation of funds to be lent to its members, and of which the majority of the
members are agriculturists, and of which no member is a registered society.
Where the liability of the members of a society is limited by shares, no
member other than a registered society may: (i) hold more than 1/5 of the
share capital of the society; or (ii) have or claim any interest in the shares of
the society exceeding INR 1 000 (EUR 17.57).
48. Co-operatives must be registered with the Registrar of Co-operative
Societies (s.4). The registration application must attach inter alia a list of
persons who have contributed to the share capital, together with the amount
contributed by each of them, and the admission fee paid by them. Registration
renders the co-operative a body corporate.
49. Under the ITA, societies which meet specified economic criteria are
required to submit tax returns and in those returns disclose the names and
addresses of the members of the co-operative.
Ownership information on foreign companies

50. Foreign companies are required to file documents with the
Companies Registrar within 30 days of establishing their place of business
(Companies Act 1956, s.592) which include:
• the charter, statutes, or memorandum and articles of the company or other
instrument constituting or defining the constitution of the company;
• a list of the directors and secretary of the company; and
• the name and address or the names and addresses of some one or more
persons resident in India, authorised to accept on behalf of the company
service of process and any notices or other documents required to be
served on the company.
51. The Companies (Central Government’s) General Rules and Forms

1956 provisions, with respect to documents, include requirements in terms of
certification and translation. Subsequent changes in any of this information
must be informed to the registrar on or before 31 January of the year following
the year in which the alteration was made or occurred (s.593, read in
conjunction with the Companies (Central Government’s) General Rules and
Forms 1956).
52. In addition, as with the domestic companies, foreign companies are
required to maintain a register of members (s.150), and those with more than
50 members must also maintain in index of members (s.151). A foreign
company with control and management in India is required to fulfil all of its
tax obligations in the same manner as an Indian company. The same
information is required by the ITD, using the same forms, for domestic and
foreign companies.
Ownership information held by service providers
53. While most forms of service providers, e.g. lawyers, accountants
and company formation agents, are not required to keep information on the
owners of companies they provide services to, every banking company,
financial institution and intermediary is obliged under s.12(c) of the
Prevention of Money Laundering Act 2002 (PMLA) and the PMLA Rules8 to
verify and maintain the records of the identity of all its clients in hard and soft
copy for at least ten years from the date of cessation of the transactions
between the client and the banking company or financial institution or
intermediary. For the purposes of that act, an “intermediary” is a stock-
broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust
deed, registrar to an issue, merchant banker, underwriter, portfolio manager,
investment adviser and any other intermediary associated with securities
market and registered under s.12 of the Securities and Exchange Board of
India Act 1992.
54. The PMLA Rules include more detailed know-your-customer
obligations. Under Rule 9, as amended in November 2009, every banking
company, financial institution and intermediary, must at the time of opening
an account or executing any transaction with it verify and maintain the record
of identity and current address or addresses including permanent address or
addresses of the client, the nature of business of the client and his financial
status. In addition, these financial institutions are obliged under Rule 9(1A) to
“identify the beneficial owner and take all reasonable steps to verify his
identity”. A February 2010 amendment to the PMLA Rules defines
“beneficial owner” broadly, as being “the natural person who ultimately owns
or controls a client and or the person on whose behalf a transaction is being
conducted, and includes a person who exercise[sic] ultimate effective control
over a juridical person”.
55. Similarly, s2.4(a) of the Reserve Bank of India Master Circular
(Master Circular) requires banks, in the case of customers that are legal
persons or entities, to “understand the ownership and control structure of the
customer and determine who are the natural persons who ultimately control
the legal person”. This section also references the need to take reasonable
measures to verify the identity of the beneficial owner, and to establish the
purpose and the intended nature of the banking relationship. Section 2.5(ii)
states that “banks should examine the control structure of the entity, determine
the source of funds and identify the natural persons who have a controlling
interest and who comprise the management”.
56. The Master Circular also addresses the issue of client accounts
opened by professional intermediaries. It establishes that in the case of
accounts held on behalf of a single client and “pooled” accounts, the financial
8
Prevention of Money-laundering (Maintenance of Records of the Nature and
Value of Transactions, the Procedure and Manner of Maintaining and Time for
Furnishing Information and Verification and Maintenance of Records of the
Identity of the Clients of the Banking Companies, Financial Institutions and
Intermediaries) Rules 2005.
institution must look through to the beneficial owners of the funds. Further, in
June 2010, the Reserve Bank of India issued three circulars9 clarifying this
requirement and noting inter alia that this requirement applies with respect to
accounts opened by professionals who are subject to secrecy provisions.
Ownership Information held by directors and officers
57. Directors and officers are not statutorily required to hold any
ownership information in respect of the company. There is no requirement
that an Indian company must have a resident director or officer.
Ownership information held by other persons

58. In India, practicing chartered accountants, company secretaries and
lawyers undertake the work of company formation agents. None of these
professions, when acting as company formation agents, are required to obtain
or maintain information pertaining to the companies they have formed.
Documentation retention requirements

59. The document retention requirements under the Companies Act
1956 are primarily found in s.209(4A), which requires all companies to retain
books of account, together with vouchers related to entries in the books of
account, for at least eight years. In addition, s.163(1A) empowers the central
Government to make rules for the preservation and disposal of records.
Accordingly, the Companies (Preservation and Disposal of Records) Rules
1966 were established and these provide that all companies must preserve:
• the register and index of members – permanently;
• the register and index of debenture holders – 15 years after redemption;
• annual returns and certifications (under sections 159, 160 and 161) – eight
years from the date of filing with the Registrar.
60. Under the ITA, documents must be retained for a period of seven
years from the end of the relevant year which may get extended until
completion of assessment if a notice for reopening of assessment is issued
within this period. The retention period is not affected by possible subsequent
events.
9
These circulars contain mandatory language and, in accordance with s.45L and
s.45M of the Reserve Bank of India Act 1934, circulars issued by the Reserve
Bank of India are mandatory and enforceable.
61. Under s.12(c) of the PMLA,10 documents related to the conduct of
customer due diligence are to be maintained for a period of ten years from the
date of the cessation of the transaction between the clients and the banking
company or financial institution or intermediary, as the case may be. As the
period of time is determined by the date at which the transaction occurred, the
retention period is not affected by possible subsequent events.
62. The Companies Registrars keep information filed by companies
within India. The registers themselves must be preserved permanently
(Disposal of Records (in the Offices of the Registrars of Companies) Rules
2003, Rule 3). Particulars of company Directors and the Register of Directors
must be kept for five years (Rule 5 and Schedule II). Registered documents of
companies which have been fully wound up and finally dissolved together
with correspondence relating to such companies are also kept for five years
(Rule 4). For foreign companies which cease to have any place of business in
India, the documents may be destroyed after three years from the date such
company ceases to have any place of business in India (Rule 6).
63. Other information required to be kept under the PMLA or the ITA
need not necessarily be kept within India, but must be available to the
authorities when requested .
Bearer shares (ToR A.1.2)

64. India does not allow for the issuance of bearer shares. Registration
requirements and obligations with respect to disclosures to the ITD have been
discussed previously in this report.
Partnerships (ToR A.1.3)

65. General partnerships are regulated through the Partnership Act
1932, which is administered by the States. In this context, "partnership" is the
relation between persons who have agreed to share the profits of a business
carried on by all or any of them acting for all. The relation of partnership
arises from contract and not from status (s.4). General partnerships are
registered with State registrars and the number of such partnerships is not
known.
66. Limited liability partnerships are regulated through the Limited
Liability Partnership Act 2008, which is centrally administered by the
Ministry of Corporate Affairs. A limited liability partnership (LLP) is a body
corporate formed and incorporated under the Limited Liability Partnership Act
10
Read in conjunction with s.10 of the PMLA Rules.
2008. It possesses a separate legal entity from that of its partners (s.3). As at
30 April 2010, there were 1 266 LLPs in India.
Ownership information on partnerships

67. General partnerships, LLPs and foreign LLPs operating in India
have to register and lodge tax returns. While requirements under the
Partnership Act 1932 and Limited Liability Partnership Act 2008 are different,
under the ITA, the taxation requirements are the same for all types of
partnerships.
68. The Partnership Act 1932, s.58 provides that partnerships must
register with the relevant Companies Registrar. A copy of the partnership
deed must be provided and that deed must, among other things, include the
names, in full, and the permanent addresses of the partners. In addition, when
there are important changes in the partnership, the details must be submitted to
the Companies Registrar. Section 62 provides that when any partner in a
registered firm alters his name or permanent address, an notification of the
alteration must be sent, within 90 days of the date of making such alteration,
by the partner or by an agent of the firm to the Companies Registrar, who will
then make a note of this in the entry relating to the firm in the Register of
Firms. Further, s.63 provides that when a change occurs in the constitution of
a registered partnership and where a partnership is dissolved, every incoming,
continuing or outgoing partner, or the agent of every such partner or person
specially authorised in this behalf must, within 90 days of the change or
dissolution, given notify the Companies Registrar and the registrar will record
this in the entry relating to the firm.
69. Section 11 of the Limited Liability Partnership Act 2008 requires
LLPs to register with the Companies Registrar in their State. The names and
addresses of each of the partners must be contained in the incorporation
document which is submitted to the registrar. In practice these registrations
now commonly occur online and are managed centrally by the Ministry of
Corporate Affairs.11 Section 25 provides that when any partner alters his
name or permanent address, a notification of the alteration is to be sent within
15 days to the LLP and it in turn is to file a notice of the change with the
Companies Registrar in their state within 30 days. A similar notice is to be
filed for cessation of a partner or entry of a new partner.
70. Foreign LLPs must, within 30 days of establishment of place of
business in India, file details with the Companies Registrar along with a copy
of the certificate of incorporation, full address of the partnership, full address
of its place(s) of business in India and a list of partners and designated
11
http://www.llp.gov.in.
partners (Limited Liability Partnerships Rules 2009, s.34). Any alterations to
the constitution of the foreign LLP, its principal office outside India, or to the
partners or designated partner must be submitted to the Companies Registrar
within 60 days of the close of the financial year in which the change occurred.
Changes to the incorporation document, the details of the person authorised to
accept service on behalf of the partnership or its principal place of business in
India should be submitted to the Companies Registrar within 30 days of the
change.
71. All partnerships are required to disclose the names and addresses of
the partners, including changes, in their tax returns (form ITR5). Not
furnishing a tax returns or providing false information in a return are subject to
penalty and prosecution under the ITA.
72. Under ITA s.44AB, an audited report is required to be filed by the
taxpayer if his turnover during the year exceeds INR 6 million (EUR 105 420)
from business or INR 1.5 million (EUR 26 355) from profession.12 This
report, using form 3CD, is required to be signed by an accountant. In the case
of partnerships, the names of partners and details of changes in partners are
required to be given under item 7(a) and 7(b).
Information held by service providers

73. Every banking company, financial institution and intermediary is
obliged under PMLA s.12(c), to verify and maintain the records of the identity
of all its clients. The PMLA Rules include more detailed know-your-customer
rules. Under Rule 9, as amended in November 2009, every banking company,
financial institution and intermediary must at the time of opening an account
or executing any transaction with it, verify and maintain the record of identity
and current address or addresses including permanent address or addresses of
the client, the nature of business of the client and his financial status.
74. Where the client is a partnership firm, under that rule it must submit
certain documents to the banking company or financial institution or
intermediary which include the registration certificate (if one exists) and the
partnership deed (if one exists). In addition, Rule 9(1A) requires all banks,
financial institutions and intermediaries to “identify the beneficial owner and
take all reasonable steps to verify his identity.”
12
The thresholds were raised to this level by Finance Act 2010, which was passed
on 8 May 2010.
Information held by the partnership or partners

75. While there are no specific requirements that each partner hold
information on all of the partners, partners in general partnerships are likely to
know the names and addresses of the other partners. Section 58 of the
Partnership Act 1932 makes it clear that all the partners must sign the
partnership deed, which contains the names in full and permanent addresses of
all partners. Further, according to s.31, no person may be introduced as a
partner without the consent of all existing partners and under s.32, a partner
may only retire with the consent of all the other partners, in accordance with
an express agreement by the partners, or where the partnership is at will by
giving notice in writing to all the other partners of his intention to retire.
76. As noted previously, partners of LLPs are required under s.25 to
submit information to the partnership whenever they alter their names or
permanent addresses. Annex C to the Limited Liability Partnership Rules
2009 requires that such documents be retained by the partnership for at least
five years. There are no requirements that each of the partners in a LLP hold
information on all of the partners.
Information held by others

77. In India charted accountants, company secretaries, cost accountants
and advocates undertake the work of LLP formation. However there are no
requirements that persons in these professions or other persons have
ownership information on relevant partnerships.
Document retention requirements

78. Under Limited Liability Partnership Rules 2009, Annexures B and
C, the incorporation documents, notice of situation of registered office,
information with regard to LLP agreement or any changes made therein and
information regarding notice of other address of any LLP at which documents
to be served, are to be kept permanently. Other documents are to be
maintained for periods ranging from five to eight years.
years from the end of the relevant year which may get extended till completion
of assessment if a notice for reopening of assessment is issued in this period.
The retention period is not affected by possible subsequent events.
80. Under PMLA s.12(c),13 documents related to the conduct of
customer due diligence are to be maintained for a period of ten years from the
13
date of the cessation of the transaction between the clients and the banking
company or financial institution or intermediary, as the case may be. As the
period of time is determined by the date at which the transaction occurred, the
retention period is not affected by possible subsequent events.
81. Partnerships are not required to keep information on their partners
within the country though, in order to meet the various registration
requirements it can be expected that in practice partnerships that (i) have
income, deductions or credits for tax purposes in India; (ii) carry on business
in India; or (iii) are formed under Indian laws, do keep such records in India.
Trusts (ToR A.1.4)

82. India allows for the creation and operation of trusts. There are
thousands of trusts operating in India, though the exact number is not known.
Commonly, these are established with the assistance of a lawyer or an
accountant. Trusts fall into one of four categories:
• private trusts: to benefit selected persons;
• charitable or public trusts (including religious trusts): to benefit the public

at large;
• wakfs: for performing certain Islamic religious activities;
• those trusts established under foreign laws which have some activity in
India.
83. The Trusts Act 1882 defines and governs the law relating to private
trusts and their trustees. A variety of forms of private trusts, including express
trusts, are recognised. An Indian trust must have one or more settlor, trustee
and identified beneficiary. The same person may act in all three capacities in
relation to the trust. A trust in relation to immovable property is valid only if
declared by a non-testamentary instrument in writing signed by the author of
the trust or the trustee (a trust deed) or by the will of the author of the trust. If
however the trust property does not involve immovable property, it may be
constituted by word of mouth (Trusts Act 1882, s.5). Section 6 of the Trusts
Act 1882 indicates that a trust is created when the author of the trust indicates
orally or in writing with reasonable certainty, inter alia, the trustee and
beneficiary. Read with s.5, this requires that for trusts with underpinning
deeds or wills, information on the beneficiary be included in that deed.
84. Public charitable trusts (which do not strictly require a written
instrument to be formed) can be established for a number of purposes,
including the relief of poverty, education, medical relief, provision of facilities
for recreation, and any other object of general public utility. Indian public
trusts are generally irrevocable. No national law (except the broad principles
of the Trusts Act 1882, which governs private trusts) governs public charitable
trusts in India, although many States (particularly Maharashtra, Gujarat,
Rajasthan, and Madhya Pradesh) have public trusts acts, e.g. the Bombay
Public Trust Act 1950 which is applicable in the States of Maharashtra and
Gujarat. These acts provide for inspection and supervision of the property
belonging to public trusts registered under the act, as well as the proceedings
of the trustees and books of accounts.
85. A “wakf” is a charitable Islamic trust that involves “the permanent
dedication by a person professing Islam of any moveable or immoveable
property for any purpose recognised by the Muslim law as pious, religious or
charitable” and is governed by the Wakf Act 1995. Through a written deed,
the settler appoints a manager for the administration of the wakf for certain
property and once dedicated the trust is permanent, irrevocable and
inalienable.
86. Article 1 of the Societies Registration Act 1860 provides that any
seven or more persons associated for any literary, scientific, or charitable
purpose, may, by subscribing their names to a memorandum of association,
and filing the same with the Registrar of Joint-stock Companies 2, form
themselves into a society under the act.
Information held by Government authorities
87. There is no registration requirement for private trusts. It is possible,
but not mandatory, to register a trust deed for a private trust with the Sub-
Registrar of Assurances (Registration Act 1908).
88. Registration requirements apply to charitable trusts and wakfs, as
detailed below.
Statute Registration requirement
State Public Trust Acts Public trusts to which the act applies (public health
education relief of poverty) must register under s.18.
e.g. Bombay Public Trust Act 1950
Wakfs Act 1954 Every wakf must register at the Board.
When a trust is constituted as a society, it is required

Societies Registration Act 1860
to be registered.
Charitable or religious trusts, societies and

Income Tax Act 1961 companies claiming exemptions under the s.11 and
s.12AA are required to register.
Any charitable trust, society, company, desirous o

Foreign Contribution (Regulation)
receiving any foreign contributions from foreign
Act 1976
sources, is required to register under s.6(1).
89. For public and charitable trusts that are required to register (as
shown above), the applicable statutes have requirements relating to the
information that must be provided and filed annually with the various statutory
authorities. The registration application form must be accompanied by the
original trust deed (or a certified copy of the trust deed) when the trust is
created under an instrument; or documents evidencing the creation of the trust
where it is created otherwise than under an instrument. For example, every
wakf has to be registered at the office of the Board of Wakf (s.36) and an
application for registration must be accompanied by a copy of the wakf deed.
If there is no deed, the application may instead be accompanied by full
particulars, as far as they are known to the applicant, of the origin, nature and
objects of the wakf. The register of wakfs contains inter alia: the wakf deed;
the name of the mutawalli,14 and, the rule of succession to the office of
mutawalli under the wakf deed or by custom or by usage.
90. For the purposes of assessment under the ITA, trusts may be
classified as either: (i) public charitable or religious trusts entitled to
exemption from tax; or (ii) private trusts. ITA s.139(1) requires all persons in
India who have income over a certain threshold to submit an annual tax return.
Trusts are considered to be associations of persons under the ITA and are
assessed for tax on any income above a threshold of INR 160 000
(EUR 2 811). The relevant tax assessment form requires information on the
names and addresses of author/founder/trustee/manager and the person who
has made substantial contribution to the trust. It does not require identification
of the beneficiaries.
91. A trustee is liable to be taxed under ITA s.160 as a “representative
assessee” in respect of income of the trust. Section 161 of ITA provides
procedure for representative assessees. Every representative assessee, as
regards the income in respect of which he is a representative assessee, is
subject to the same duties, responsibilities and liabilities as if the income were
income received by or accruing to or in favour of him beneficially, and shall
be liable to assessment in his own name in respect of that income; but any
such assessment shall be deemed to be made upon him in his representative
capacity only, and the tax is levied upon and recovered from him to the same
extent as it would be leviable upon and recoverable from the person
represented by him.
14
As per section 3(i), ‘mutawalli’ includes any person who is a mutawalli of a
wakf by virtue of any custom or who is appointed by a mutawalli to perform the
duties of a mutawalli and any person, committee or corporation managing or
administering any wakf or wakf property.
92. For charitable trusts, ITA s.139(4A) requires every person in receipt
of income derived from property held under trust or other legal obligation
wholly or in part for charitable or religious purposes to submit an annual tax
return. All charitable trusts and wakfs are required to disclose in their income
tax returns (form ITR7 Schedule L) the names and addresses of
author/founder/trustee/manager and the person who has made substantial
contribution to the trust. These returns do not need to identify the
beneficiaries.
93. The ITD also holds information on charitable trusts due to the
process these trusts observe when applying for tax exemptions. Income
received by public charitable or religious trusts from property or by way of
voluntary donations may be exempt from income tax if the income is applied
to charitable or religious purposes (ITA s.11-s.13). The exemptions are
subject to a number of conditions, including the requirement that the trust is
registered for these purposes, and are granted by the tax authorities on
application with information about the trustees and administration
requirements of the trust.
94. The tax return requirements are the same for trusts created under the
laws of other jurisdictions that are administered in India or have a trustee
resident in India, Section 6(4) of the ITA defines residency of “persons”
(which includes trusts) for the purposes of the ITA very broadly as
incorporating every person except where during that year the control and
management of his affairs is situated wholly outside India. information is
submitted to the ITD in the annual tax returns of the trustees and others who
derive income from the trust. All persons in India, including settlers, trustees
and beneficiaries of trusts, who have a total annual income of more than
INR 160 000 (EUR 2 811) for men, INR 190 000 (EUR 3 338) for women or
INR 240 000 (EUR 4 217) for persons of 65 years or more are required to
submit ITR6 tax return form to the ITD.
95. While not an absolute requirement, commonly the beneficiaries are
also identified on the income tax return as income related to trusts where the
shares of the beneficiaries are unknown or indeterminate (and income of oral
trusts) are taxed at the maximum marginal rate (s.164 and s.164A).
Information held by trustees and service providers

96. For private trusts (including oral trusts), s.19 of the Trusts Act 1882
requires trustees to “keep clear and accurate accounts of the trust-property, and at all
reasonable times, at the request of the beneficiary, to furnish him with full and
accurate information as to the amount and state of the trust-property” and to make
those records available to a beneficiary for inspection (s.57). A trustee of a private
trust which has a trust deed or will is also entitled (though not required) to have in
his possession that instrument and all the documents of title (if any) relating solely
to the trust-property.
97. As private trusts are required to file tax returns, they are as a
corollary required under the ITA to maintain records for tax purposes. It
appears that these requirements relate to financial information only and not to
information on the settlors, trustees or beneficiaries. There are no such
requirements that trustees or service providers of charitable or public trusts or
wakfs or trustees of foreign trusts hold information on the settlors, trustees and
beneficiaries.
98. The Charitable and Religious Trusts Act 1920 permits members of
the public who have an interest in any charitable or religious trust to apply to a
court to obtain an order directing its trustees to furnish information about the
trust, including income and assets, and directing that the accounts of the trusts
to be examined and audited. It appears such orders cannot be used to obtain
information on the trust’s settlors, trustees and beneficiaries.
obliged under PMLA s.12(c), to verify and maintain the records of the identity
of all its clients. The PMLA Rules include more detailed know-your-customer
rules. Banking companies, financial institutions and financial intermediaries
must, at the time of opening an account or executing any transaction with it,
verify and maintain the record of identity and current address or addresses
including permanent address or addresses of the client, the nature of business
of the client and his financial status (Rule 9).
100. Where the client is a trust, it is required to submit to the banking
company or financial institution or intermediary, as the case may be, a
certified copy of: the registration certificate; trust deed; and an officially valid
document in respect of the person holding an attorney to transact on its behalf.
In addition, Rule 9(1A) requires all banks, financial institutions and
intermediaries to “identify the beneficial owner and take all reasonable steps
to verify his identity.”
Information held by other persons

101. Normally lawyers and accountants assist in creation of trusts in India.
However there are no requirements that people in these professions, or others in
India, hold information pertaining to the trust.
Documentation retention requirements

102. There are no document retention requirements contained in the
Trusts Act 1882, the Charitable and Religious Trusts Act 1920, the Societies
Registration Act 1860 or the Wakfs Act 1995.
103. Under the ITA (see in particular sections 44AA, 44AB and 271A),
documents must be retained for a period of seven years from the end of the
relevant year which may get extended till completion of assessment if a notice
for reopening of assessment is issued within this period. The retention period
is not affected by possible subsequent events.
104. Under PMLA s.12(c),15 documents related to customer due
diligence are to be maintained by banking companies, financial institutions
and financial intermediaries for ten years from the date of the cessation of the
transaction between the clients and the banking company or financial
institution or intermediary, as the case may be. As the period of time is
determined by the date at which the transaction occurred, the retention period
is not affected by possible subsequent events.
105. Information pertaining to trusts is not required to be kept within
India, but must be available when so requested by the ITD or by India’s
Financial Intelligence Unit (FIU-IND).
Foundations (ToR A.1.5)

106. India does not have a separate category of foundations, however
described. Non-profit organisations, which are called “foundations” from time
to time, are created as companies or as trusts. The requirements pertaining to
ownership information for these entities have been outlined earlier in this
report. It is not known what requirements apply to foreign foundations
operating in India.
Enforcement provisions to ensure availability of information (ToR

A.1.6)
107. India’s provisions to ensure the availability of information have
been described previously in this section. They can primarily be found in the
Companies Act 1956, the Limited Liability Partnership Act 2008, the Income-
tax Act 1961, the Prevention of Money Laundering Act 2002 and the rules
underpinning these acts.
15
108. Non-compliance with the provisions of the Companies Act 1956 is
viewed seriously. Fines may be levied and penal action may in some
instances be taken in accordance with Part XIII of the Companies Act 1956.
Penalties are available for a wide range of forms of non-compliance by
relevant individuals, Indian and foreign companies with provisions of the act
(e.g. s.598, s.628, s.629, s.631). Relatively low penalties are available for a
foreign companies which fail to comply with any obligations contained in the
act; fines of INR 10 000 (EUR 176) plus INR 1 000 (EUR 17.57) per day.
Indian companies which provide false or incomplete information when
fulfilling their obligations under the act are subject to fines of INR 5 000
(EUR 88) plus INR 500 (EUR 8.79) per day plus imprisonment for up to two
years. In 2009, the government proposed amendments to the Companies Act
1956 which, inter alia, establish both minimum and maximum fines and
imprisonment and generally raise the quantum of the fines/imprisonment
available for non-compliance with the act.
109. Where false documentation is filed as part of registration of a LLP,
in accordance with the Limited Liability Partnership Act 2008, fines ranging
from INR 10 000 to INR 500 000 (EUR 176 to EUR 8 785) may be levied and
prosecutions may be launched. A good range of penalties is thus available to
authorities in these circumstances. However, non-compliance with the
requirements to notify the Companies Registrar of changes in partners’ details
may be subject to fines from INR 2 000 to INR 25 000 (EUR 35 to EUR 439).
110. Under PMLA s.13, the Director of the FIU-IND may call for records
and may make such inquiry or cause such inquiry to be made, as he thinks fit.
If the Director, in the course of any inquiry, finds that a banking company,
financial institution or an intermediary or any of its officers has failed to
comply with the provisions under the act, then s/he may, by an order, levy a
fine on such banking company or financial institution or intermediary which
shall not be less than INR 10 000 (EUR 176) but may extend to INR 100 000
(EUR 1 757) for each failure.
111. Under the ITA, administrative penalties of small amounts apply to
natural and legal persons who do not comply with requests for information.
Any person who fails to furnish information in due time may be subject to a
fine of INR 100 (EUR 1.75) per day for every day the failure to provide
information continues (ITA s.272A). Any person who fails to give evidence
or produce books of account or other documents as required under summons
under s.131 or who omits to attend or produce books of account or documents
as required under summons under s.131, may be subject to a fine of
INR 10 000 (EUR 176). In practice, such fines are rarely levied and non-
compliance with a summons issued under s.131 will lead to exercise of search
and seizure powers under s.132(1)(a). As taxpayers are aware of the
possibility that a summons will be issued, this has dissuasive value.
112. If a person makes a statement in any verification under the ITA or

the Income-Tax Rules 1962, or delivers an account or statement which is false,
and which s/he either knows or believes to be false, or does not believe to be
true, under ITA s.277 s/he may be prosecuted. Similarly, wilful failure to
submit a tax return which relates to payment of less than INR 100 000
(EUR 1 757) in tax is punishable by imprisonment of between three months
and three years plus a fine. If the wilful failure relates to a tax liability above
that threshold, it is punishable by imprisonment of between six months and
seven years plus a fine.
113. The effectiveness of the enforcement provisions which are in place
in India will be considered as part of the Phase 2 review.
114. ITD officers also have wide-ranging powers, including compulsory
powers, to obtain information from natural and legal persons, which are
detailed below in section B of this report.
Determination and factors underlying recommendations

Determination
The element is in place.
A.2. Accounting records
Jurisdictions should ensure that reliable accounting records are kept for al
relevant entities and arrangements.
General requirements (ToR A.2.1)
Companies
115. Companies are required to keep at their registered offices - or
elsewhere in India if the Companies Registrar is so advised - books of account
detailing (Companies Act 1956, s.209):
• all sums of money received and expended by the company and the matters
in respect of which the receipt and expenditure take place;
• all sales and purchases of goods by the company;
• the assets and liabilities of the company; and
• the costs of labour and materials (for companies engaged in production,
processing, manufacturing or mining activities).
116. These books of account must give a true and fair view of the state of
the affairs of the company or branch office, as the case may be, and to explain
its transactions (s.209(3)).
117. The books of account pertaining to branch offices, regardless of
whether the office is within or outside India, are to be kept at that branch
office, with the registered office holding quarterly summarised returns relating
to the branch office (s.209(2)).
118. These requirements under the Companies Act 1956 to keep
accounting records are applicable to all companies registered under that act.
Section 600(3)(a) provides that s.209 of the act (which concerns the obligation
to maintain books of accounts) applies to foreign companies. For foreign
companies, such books of account must be kept at the principal place of
business in India and must cover monies received and expended, sales and
purchases made, and assets and liabilities related to the business in India
119. The Companies Act 1956 goes on to provide that these books of
account, and other books and papers, must be available for inspection by the
relevant Companies Registrar, the Securities and Exchange Board of India or
other officer as authorised by the Central Government (s.209A(1)). Every
director, officer and employee of the company is required to provide all
assistance to such inspectors and to produce to the inspectors all books of
account and other books and papers of the company in his/her custody or
control and to provide any statement, information or explanation asked of
him/her (s.209A(2)-s.209A(3)). The inspectors have broad powers to
summons people, require production of documents, inspect documents
pertaining to the company at any location. Penalties exists for non-
compliance with an inspection; fines of at least INR 50 000 (EUR 878),
imprisonment for up to one year and disqualification from holding office in
any company for up to five years.
120. In addition to the requirements detailed in the Companies Act 1956,
all companies are obliged to submit an income tax return in a prescribed for to
the ITD (ITA s.139), regardless of whether they have made a profit or not in
the given year. Rule 12 of the Income-Tax Rules 1962 and tax return form
ITR6 (for companies) require that the annual tax return include a balance sheet
and profit and loss account. The required details are such that they enable the
financial position of the company to be determined and they allow financial
statements to be prepared. The information required for this form is not such
that it would correctly explain the company’s transactions, though this
information would exist with service providers in accordance with anti-money
laundering provisions.
121. ITA s.44AA requires that persons carrying on legal, medical,

engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or any other profession as notified
by the Board in the Official Gazette, keep and maintain sufficient books of
account and other documents to enable the assessing officer to calculate
his/her total income. This obligation applies when the total income the person
derives from the business exceeds INR 120 000 (EUR 2 108) or his/her total
sales/turnover/gross receipts exceeds INR 10 000 (EUR 176) in any one of the
last three years.
122. With respect to these specified professions, and also to any
authorised representatives or film artists, the types of records to be maintained
at the principal place of business are specified in Rule 6F of the Income-Tax
Rules 1962. These are:
• a cash book;
• a journal, if the accounts are maintained according to the mercantile

system of accounting;
• a ledger;
• carbon copies of bills, whether machine numbered or otherwise serially

numbered, wherever such bills are issued by the person, and carbon copies
or counterfoils of machine numbered or otherwise serially numbered
receipts issued by him (for sums of over INR 25 (EUR 0.44));
• original bills wherever issued to the person and receipts in respect of

expenditure incurred by the person or, where such bills and receipts are
not issued and the expenditure incurred does not exceed INR 50
(EUR 0.88), payment vouchers prepared and signed by the person; and
• a daily case register and a stock inventory (medical professionals only).
123. It is clear that all companies registered under the Companies Act
1956 are required to keep books of account which correctly explain all
transactions, enable the company’s financial position to be determined with
reasonable accuracy at any time and which allow for financial statements to be
prepared. In addition, the requirements of the ITA ensure that annual tax
returns are filed which enable the financial position of the company to be
determined and they allow financial statements to be prepared. Also, certain
professional persons (who may also have their professional activities
registered as companies) keep accounts which correctly explain all
prepared.
124. Section 594 provides that every foreign company is required to
make out a balance sheet and profit and loss account and file with the
concerned Registrar of Companies annually. Further, s.600(3)(a) states that
provisions of s.209 (i.e. for maintenance of books of accounts) apply to a
foreign company to the extent of requiring it to keep at its principal place of
business in India the books of account, with respect to moneys received and
expended, sales and purchases made, and assets and liabilities, in the relation
to its business in India.
Co-operative societies
125. Co-operative societies which are engaged in specified economic
activities are considered to be associations of persons under the ITA and are
assessed for tax on a sliding scale (see paragraph 24). The ITA and the
Income-Tax Rules 1962 (ITA Rules)provide that co-operative societies must
submit detailed accounts as part of their annual tax returns. In addition,
persons who gain income from a co-operative society are obliged to report this
income in their annual tax returns.
Partnerships
126. As mentioned previously in this report, general partnerships are
required to register as such, in accordance with the Partnership Act 1932.
That act does not establish obligations with respect to maintaining accounting
records. Section 9 does, however, require that partners render true accounts
and full information of all things affecting the firm to any partner, his heir or
legal representative.
127. Under s.34 of Limited Liability Partnership Act 2008, books of
accounts are required to be maintained at the registered office of the LLP. In
addition, every year a statement of accounts and solvency is required to be
filed with the Companies Registrar. This act also grants broad powers to the
registrar to request information and conduct inspections.
128. Further, Rule 24 of the Limited Liability Partnership Rules 2009
provides that a LLP must keep books of accounts which show and explain the
LLP’s transactions, which disclose with reasonable accuracy, at any time, the
financial position of the LLP at that time; and which enable the designated
partners to ensure that any statement of account and solvency prepared
complies with the requirements of the act. These books of account must
contain:
• particulars of all sums of money received and expended by the LLP and
the matters in respect of which the receipt and expenditure takes place;
• a record of the assets and liabilities of the LLP;
• statements of cost of goods purchased, inventories, work in progress,

finished goods and cost of goods sold; and
• any other particulars which the partners may decide.
129. Foreign LLPs are required to file statements of account and

solvency within 30 days of expiry of six months from the close of financial
year.
130. Partnerships, including general partnerships and foreign
partnerships, are considered to be “firms” for the purpose of the ITA and must
therefore submit an annual return to the ITD (ITA s.139(1)(a)). The required
tax return form - ITR5 - requires submission of the balance sheet and also
profit and loss account information.
131. Individual partners must also submit annual returns as every natural
person in India whose total annual income exceeds INR 160 000 (EUR 2 811),
or INR 190 000 (EUR 3 338) for women or INR 240 000 (EUR 4 217) for
persons of 65 years or more, is obliged to submit an income tax return in a
prescribed form to the ITD (ITA s.139). Rule 12 of the Income-Tax Rules
1962 and tax return form ITR3 (for partners in a firm) require that the annual
tax return includes a balance sheet and profit and loss account. The required
details are such that they enable the financial position of the partner, but not
the partnership, to be determined. The information required for this form is
not such that it would allow the financial statements to be prepared, or
correctly explain the company’s transactions.
132. In addition, ITA s.44AA requires that persons carrying on legal,
medical, engineering or architectural profession or accountancy or technical
consultancy or interior decoration or any other profession as notified by the
Board in the Official Gazette, keep and maintain sufficient books of account
and other documents to enable the assessing officer to calculate his/her total
income. This obligation applies when the total income the person derives
from the business exceeds INR 120 000 (EUR 2 108) or his/her total
last three years. This is further elaborated in Rule 6F of the Income-Tax Rules
1962, which requires these professionals, and also authorised representatives
or film artists, to maintain inter alia:
• copies of bills wherever such bills are issued by the person, and copies or
counterfoils of receipts issued by him (for sums of over INR 25
(EUR 0.44));
• original bills issued to the person and receipts in respect of expenditure
incurred by the person or, where such bills and receipts are not issued and
the expenditure incurred does not exceed INR 50 (EUR 0.88), payment
vouchers prepared and signed by the person; and
133. Similarly, s.44AB requires persons carrying on a business or a

profession with turnover above a specified threshold to have their accounts
audited annually by an accountant and to provide a copy of the audit report to
the ITD.
134. The obligations for LLPs under the Limited Liability Partnership
Act 2008 and the requirements for all types of partnerships under the ITA
ensure that firms and partners in firms or persons in certain professions
deriving income from LLPs keep accounts in India which correctly explain all
prepared.
Trusts
135. According to s.19 of the Trusts Act 1882, a trustee is bound: (i) to
keep clear and accurate accounts of the trust-property; and (ii) at all reasonable
times, at the request of the beneficiary, to furnish him with full and accurate
information as to the amount and state of the trust-property. In addition, the
beneficiary has, under s.57 of the Trusts Act 1882, a right, as against the
trustee and all persons claiming under him with notice of the trust, to inspect
and take copies of the instrument of trust, the documents of title relating solely
to the trust-property, the accounts of the trust-property and the vouchers (if
any) by which they are supported and the cases submitted and opinions taken
by the trustee for his guidance in the discharge of his duty. Thus, it could be
expected that trustees keep reliable accounting records in order to fulfil their
role and their obligations to beneficiaries.
136. Trusts are considered to be associations of persons under the ITA
and are assessed for tax on any income above a threshold of INR 160 000
(EUR 2 811). In addition, each natural person in India who has earnt money
related to the trust is obliged to file an income tax return in a prescribed for to
the ITD if their annual income exceeds INR 160 000, or INR 190 000
(EUR 3 338) for women and INR 240 000 (EUR 4 217) for persons of 65
years or more, is obliged to submit an income tax return (ITA s.139). Rule 12
of the Income-Tax Rules 1962 and tax return forms ITR1 and ITR2 (for
individuals) require that the annual tax return include information on all
income, which should include income gained from a trust.
137. The return is required even where the person expects to receive a tax
exemption on the grounds that the income is applied to charitable or religious
purposes (ITA s.11-s.13). Under s.12A, income of a charitable trust (having
income above the exempt threshold limit) is not exempt unless the accounts of
the trust are audited and the audit report is submitted along with the annual tax
return.
138. Also, ITA s.44AA requires that persons carrying on legal, medical,
engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or any other profession as notified
in the Official Gazette, keep and maintain sufficient books of account and
other documents to enable the assessing officer to calculate his/her total
income. This obligation applies when the total income the person derives
from the business exceeds INR 120 000 (EUR 2 108) or his/her total
last three years. This is further elaborated in Rule 6F of the Income-Tax Rules
1962, which requires these professionals, and also authorised representatives
or film artists, to maintain inter alia:
• copies of bills wherever such bills are issued by the person, and copies or
counterfoils of receipts issued by him (for sums of over INR 25
(EUR 0.44));
• original bills issued to the person and receipts in respect of expenditure

incurred by the person or, where such bills and receipts are not issued and
the expenditure incurred does not exceed INR 50 (EUR 0.88), payment
vouchers prepared and signed by the person; and
139. ITA s.44AB further requires persons carrying on a business or a

profession with turnover above a specified threshold to have their accounts
audited annually by an accountant and to provide a copy of the audit report to
the ITD.
140. The ITA and the ITA Rules provide that trusts must submit detailed
accounts as part of their annual tax returns. The requirements of the ITA
ensure that trustees who are accountants (or one of the other types of specified
professionals) keep accounts which correctly explain all transactions, enable
the company’s financial position to be determined with reasonable accuracy at
any time and which allow for financial statements to be prepared. This
obligation is somewhat limited in that it only applies to certain professionals
and only when that professional derives income above a certain threshold
(s.44AA and s.44AB). Persons who gain income from a trust are obliged to
report this income in some detail in their annual tax returns, though such
information would not be sufficient to explain all transactions, the financial
position and the financial statements for the trust itself. The Indian authorities
indicate that although it appears there could be a gap in the coverage of
s.44AA and s.44AB, because they apply to a list of types of professionals, in
fact these provisions are interpreted broadly and all persons comply with these
requirements to keep and submit accounting records.
Foundations
described. Non-profit organisations, which are called ‘foundations’ from time
report.
Underlying documentation (ToR A.2.2)
Companies
142. The Companies Act 1956 provides that the books of account which
companies are obliged to keep must be accompanied by other ‘books and
papers’. Section 2(2) of the act defines ‘book and paper’ as a broad category
including ‘accounts, deeds, vouchers, writings and documents’. As a result,
companies are obliged to keep underlying documentation reflecting details of
(i) all sums of money received and expended and the matters in respect to
which the receipt and expenditure takes place; and (ii) all sales, purchases and
other transactions; and (iii) the assets and liabilities of the company.
143. Further, ITA s.44AA, obliges persons carrying on certain
professions - legal, medical, engineering or architectural profession or the
profession of accountancy or technical consultancy or interior decoration or
any other profession as notified by the Board in the Official Gazette - to keep
and maintain sufficient books of account. ‘Other documents’ must also be
kept to enable the assessing officer to compute his total income in accordance
with the provisions of the ITA. For other professions, similar requirements
arise when the person’s income from the business or profession exceeds
INR 120 000 (EUR 2 108). Rule 6F of the Income-Tax Rules 1962 goes on to
explain that these documents must include:
• a cash book;
• a journal, if the accounts are maintained according to the mercantile

system of accounting;
• a ledger;
• carbon copies of bills, whether machine numbered or otherwise serially

numbered, wherever such bills are issued by the person, and carbon copies
or counterfoils of machine numbered or otherwise serially numbered
receipts issued by him (for sums of over INR 25 (EUR 0.44));
• original bills wherever issued to the person and receipts in respect of

expenditure incurred by the person or, where such bills and receipts are
not issued and the expenditure incurred does not exceed INR 50
(EUR 0.88), payment vouchers prepared and signed by the person; and
144. The ITA provisions ensure that persons, companies and firms
(which includes trusts) involved in these sectors keep underlying
documentation for the accounting records, such as invoices, contracts etc.
detailing: (i) all sums of money received and expended and the matters in
respect to which the receipt and expenditure takes place; and (ii) all sales,
purchases and other transactions. While it is not clear that the ITA requires
companies in these sectors to keep underlying documentation reflecting details
of the assets and liabilities of the company, such an obligation is clearly in
place under s.2(2) of the Companies Act 1956, described above.
Co-operative societies
145. Co-operative societies are required under the ITA and Rule 6F of
the Income-Tax Rules 1962 to keep underlying documentation for the
accounting records, such as invoices, contracts etc. detailing: (i) all sums of
money received and expended and the matters in respect to which the receipt
and expenditure takes place; and (ii) all sales and purchases and other
transactions. Co-operative societies are obliged to use the form ITR7 when
filing their income tax returns and this form seeks details of the assets and
liabilities of the trust.
years from the end of the relevant year which may get extended till completion
of assessment if a notice for reopening of assessment is issued within this
period. The retention period is not affected by possible subsequent events.
There is no requirement that these records be kept within India. However, if
asked by the ITD, documents must be produced in due time (ITA s.272A).
Partnerships
147. The Partnership Act 1932 does not establish obligations for general
partnerships with respect to maintaining underlying documents.
148. With respect to LLPs, Rule 24(1) of the Limited Liability
Partnership Rules 2009 provides:
Every limited liability partnership shall keep books of accounts which are
sufficient to show and explain the limited liability partnership’s transactions
and are such as to:
(a) disclose with reasonable accuracy, at any time, the financial position of
the limited liability partnership at that time; and
(b) enable the designated partners to ensure that any Statement of Account
and Solvency prepared under this rule complies with the requirements of the
Act.
149. These rules do not clearly require that underlying documentation be

kept, nor do they define “books of accounts”. The rules note that terms which
are not defined take the same meaning as indicated in the Limited Liability
Partnership Act 2008. That act does not define “books of accounts” but notes
that terms which are not defined in the act take the same meaning as indicated
in the Companies Act 1956. The Companies Act 1956 does not define “books
of accounts”, but does define “book and paper” as a broad category including
“accounts, deeds, vouchers, writings and documents”. Indian authorities rely
on this definition as indicating that underlying documentation must be kept for
LLPs.
150. In addition, as noted previously, the ITA and Rule 6F of the Income-
Tax Rules 1962, oblige partnerships to keep underlying documentation for the
accounting records, such as invoices, contracts etc. detailing: (i) all sums of
money received and expended and the matters in respect to which the receipt
and expenditure takes place; and (ii) all sales and purchases and other
transactions.
Trusts
151. There are no requirements under the Trusts Act 1882 that trustees or
others associated with a trust keep underlying documentation related to the
assets and liabilities of the trusts such as invoices and contracts.
152. As for companies, co-operative societies and partnerships, the ITA
and Rule 6F of the Income-Tax Rules 1962 oblige firms (including trusts) and
persons being assessed for the income of a trust to keep underlying
documentation for the accounting records, such as invoices, contracts etc.
detailing: (i) all sums of money received and expended and the matters in
respect to which the receipt and expenditure takes place; and (ii) all sales and
purchases and other transactions. Trusts are obliged to use the form ITR7
when filing their income tax returns and this form seeks details of the assets
and liabilities of the trust.
153. Under the ITA (see in particular sections 44AA, 44AB and 271A),
documents must be retained for a period of seven years from the end of the
relevant year which may get extended till completion of assessment if a notice
for reopening of assessment is issued within this period. The retention period
is not affected by possible subsequent events. There is no requirement that
these records be kept within India. However, if asked by the ITD, documents
must be produced in due time (ITA s.272A).
Foundations
described. Non-profit organisations, which are called ‘foundations’ from time
report.
Document retention (ToR A.2.3 and A.2.4)
Companies
155. The accounting records specified in Companies Act 1956 must be
retained in India for a period of eight years (s.209(4)(a)). The retention period
is not affected by the liquidation of the company or termination of a business
relationship (see in particular s.550).
156. For certain legal persons involved in specified professions - legal,
medical, engineering, architecture, accountancy, technical consultancy,
interior decoration, authorised representative or film artist - ITA s.44AA and
Rule 6F of the Income-Tax Rules 1962 require that books of account and other
specified documents be kept and maintained for six years from the end of the
relevant assessment year. As these requirements apply to persons “carrying
on” these types of business, it could be argued that they do not apply to
persons no longer carrying on the business. As such, the retention period is
likely affected by possible subsequent events. Rule 6F specifically requires
that these books of account and other documents be kept by the person “at the
place where he is carrying on the profession or, where the profession is carried
on in more places than one, at the principal place of his profession”. As such,
they are in most cases kept within India (see s.209 and s.600(3)(a)).
157. Where accounting information is required to be kept in respect of a
company by a person other than a government authority, it is required to be
kept within India.
Partnerships
158. Rule 24(3) of the Limited Liability Partnership Rules 2009, which is
further detailed in Annexures ‘B’ and ‘C’ to the Rules, provides that LLPs
must keep their books of account for eight years from the date on which they
are made. As noted above, these rules do not clearly require that underlying
documentation be kept, nor do they define ‘books of accounts’. The rules
point to a definition of ‘book and paper’ in the Companies Act 1956 ‘which
covers ‘accounts, deeds, vouchers, writings and documents’. Indian
authorities rely on this definition as indicating that underlying documentation
must be kept for LLPs for eight years from the date on which they are made.
159. Section 34 of the Limited Liability Partnership Act 2008, read with the
Limited Liability Partnership Rules 2009, provides for preservation of statement of
account and solvency at the registered office in India.
160. Under the ITA, the accounting books and underlying records must
be retained. The books of account and other documents specified in Rule 6F
of the Income-Tax Rules 1962 must be kept and maintained for six years from
the end of the relevant assessment year. It is not specified whether this
information must be kept within India.
Trusts
161. As for companies and partnerships, the ITA and Rule 6F of the
Income-Tax Rules 1962 oblige trusts and persons being assessed for the
income of a trust to keep accounting records and underlying documentation
for the accounting records for a period of six years from the end of the
relevant year, which may get extended till completion of assessment if a notice
for reopening of assessment is issued within this period. These accounts
would have to be maintained by the person assessed for the income.
Normally, this would be the trustee, though in some cases it could be the
beneficiary.
Foundations
described. Non-profit organisations, which are called “foundations” from time
report.

Determination
A.3. Banking information
Banking information should be available for all account-holders.
Record-keeping requirements (ToR A.3.1)

obliged under s.12(c) of the PMLA, to verify and maintain the records of the
identity of all its clients. The PMLA Rules include more detailed know-your-
customer rules. Under Rule 9, every banking company, financial institution
and intermediary must at the time of opening an account or executing any
transaction with it, verify and maintain the record of identity and current
address or addresses including permanent address or addresses of the client,
the nature of business of the client and his financial status.
164. Section 12 of the PMLA and Rules 3 and 4 of the PMLA Rules, as
amended by a Ministry of Finance Notification issued 12 February 2010,
oblige all banks, financial institutions and financial intermediaries to maintain
records of all transactions for ten years from the date of the transaction and to
furnish such information to the Director of the FIU-IND. Where these
transaction records are required, the records must contain information on:
• the nature of the transactions;
• the amount and type of currency of the transaction;
• the date of transaction; and
• the parties to the transaction.

Determination
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION – 49
B. Access to Information
Overview
165. A variety of information may be needed in a tax enquiry and

jurisdictions should have the authority to obtain all such information. This
includes information held by banks and other financial institutions as well as
information concerning the ownership of companies or the identity of interest
holders in other persons or entities, such as partnerships and trusts, as well as
accounting information in respect of all such entities. This section of the
report examines whether India’s legal and regulatory framework gives the
authorities access powers that cover the right types of persons and information
and whether rights and safeguards would be compatible with effective
exchange of information.
166. ITD officers have wide-ranging powers, including compulsory
powers, to obtain information from natural and legal persons. These powers
are contained in ITA s.131-s.134. They provide the ability to obtain
information held by banks, other financial institutions, and any person acting
in an agency or fiduciary capacity including nominees and trustees of
domestic or foreign trusts, as well as information regarding the ownership of
companies, partnerships, trusts, foundations, and other relevant entities
including, to the extent that it is held in India by these persons, ownership
information on persons in an ownership chain. Further, these powers include
the ability to obtain accounting records from all natural and legal persons.
167. The powers may be exercised in response to an EoI request. There
is no requirement that the income be related to India, nor is there a
requirement that the suspicion be of income concealed from the Indian
government.
168. No bank secrecy or corporate secrecy provisions in India’s laws
would limit the ability of the competent authority to respond to an EoI request.
The rights and safeguards that apply to persons in India are compatible with
effective exchange of information.
50 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION
B.1. Competent Authority’s ability to obtain and provide information
• Competent authorities should have the power to obtain and provide

information that is the subject of a request under an exchange of information
arrangement from any person within their territorial jurisdiction who is in
possession or control of such information (irrespective of any legal
obligation on such person to maintain the secrecy of the information).
Ownership and identity information (ToR B.1.1) and accounting

records (ToR B.1.2)
169. The competent authority, when requested by a foreign counterpart,
can seek information from the ITD, which has powers under the ITA to obtain
such information.
170. Under s.131(1) of the ITA, assessing officers - as well as the Deputy
Commissioner (Appeals), the Joint Commissioner, Chief Commissioner or
Commissioner, and the Dispute Resolution Panel - have the same powers as
vested in a Court under the Civil Code of Procedure 1908. That is, the powers
of: discovery and inspection; enforcing attendance of and examining under
oath any person (including any officer of a bank); compelling production of
books of account and other documents; and issuing commissions.16 Where
documents have been produced, these ITD officials may impound them and
retain them. In addition, additional specified senior staff of the ITD and
authorised officers may use such powers when they suspect that any income
has been concealed, or is likely to be concealed, by any person or class of
persons, within their jurisdiction (s.131(1A)).
171. The ITD also has powers under s.132 to search any building, place,
vessel, vehicle or aircraft where he has reason to suspect that such books of
account, other documents, money, bullion, jewellery or other valuable article
or thing are kept; search of persons; and seizure of documents, records and
valuable items. The search and seizure powers under s.132 may not be
directly used to satisfy an EoI requests as they may only be used when the
officers of the ITD suspect that the relevant information/items has not been or
would not be disclosed in accordance with the ITA. However, these search
and seizure powers may be exercised whenever a summons issued under s.131
has not been complied with. The s.132 powers have been applied in the past
to enforce a summons issued pursuant to an EOI request.
16
By issuing commissions, an ITD officer located at one place can authorise
another officer located at another location to exercise the powers on behalf. If
A issues commission to B, B is entitled to same power as A for the purpose of
investigation, enquiry, recording statements, etc.
172. In terms of businesses, including banks, s.133A provides that the

Assessing Officer, the Deputy Commissioner (Appeals), the Joint
Commissioner or the Commissioner (Appeals) may, for the purposes of the
act, require any person, including a banking company or any officer thereof, to
furnish information, or to furnish statements of accounts and affairs
considered useful for, or relevant to, any enquiry or proceeding under the act.
These powers may also be exercised by the Director-General, the Chief
Commissioner, the Director and the Commissioner. And s.133B gives these
senior tax officials the power to enter premises at which a profession is carried
on and require the proprietor or any employee to furnish information. Finally,
s.134 empowers this same group of senior tax officials, or anyone authorised
by them, to inspect and take copies of any register of the members, debenture
holders or mortgagees of any company or of any entry in such register.
173. Any of the officers specified in s.131 or s.133-s.134 can be
requested by the competent authority to obtain the information and the said
officer is bound by such direction. The competent authority is part of the
Central Board of Direct Taxes, which does not have power to obtain
information directly. The ITA (s.116) designates the income-tax authorities in
India which have responsibility for administration of the act, including; the
Central Board of Direct Taxes, the Directors-General of Income-tax or Chief
Commissioners of Income-tax; and the Directors of Income-tax or
Commissioners of Income-tax or Commissioners of Income-tax (Appeals).
Under ITA s.119(1), the Board may issue orders, instructions and directions to
other income tax authorities as it may deem fit for the proper administration of
the act, and such authorities and all other persons employed in the execution
of the act, must observe the orders, instructions and directions of the Board.
As a result, the Board can direct the income tax authorities who have power to
obtain information to do so in order to answer a request for information
received under a DTC as obtaining such information are for the purpose of the
act and for proper administration of the act.
174. When asking banks for information, the ITD commonly includes in
its request the name of the bank, the address of the branch, the name of the
account holder and the relevant account number(s), if available. The address
of the account holder may also be included in the request, though this is
considered not necessary if all other details are known and included. This
level of specificity is not required but has become the norm in India as case
law exists which forbids the ITD from conducting ‘roving enquiries’
(effectively fishing expeditions). For example, such a request for information
can be successfully made to and answered by the relevant financial institution
where the ITD has the details of the account number but not the name of the
account holder.
175. The above powers of the ITD are exercised by an assessing
officer/investigating officer when so requested by the competent authority.
The competent authority is part of the Central Board of Direct Taxes (the
Board) and the Board is an income-tax authority (s.116 ITA). The Board does
not have power to obtain information directly. However, under s.119(1), the
Board may, from time to time, issue such orders, instructions and directions to
other income-tax authorities as it may deem fit for the proper administration of
the act, and such authorities and all other persons employed in the execution
of the act must observe the orders, instructions and directions of the Board.
So, the Board can direct other income-tax authorities who have power to
obtain information to obtain such information for exchange of information
purpose under agreements signed in accordance with s.90, as obtaining such
information are for the purpose of the ITA and for proper administration of the
act. The competent authority, being part of the Board, thus has the power to
direct the officers of the ITD to collect information for providing to other
countries with which there is an agreement under s.90.
176. There are no limitations on these powers, other than due process and
the requirement that the ITD only exercise its powers in order to progress
matters related to its functions.
177. In India, there is no distinction drawn between civil and criminal
matters as far as taxation is concerned. Therefore, the relevant exchange of
information article in double taxation conventions signed by India may be
used to obtain information to look into both civil and criminal tax matters.
There is no need for India to have a domestic tax interest in the matter .
178. In terms of the powers themselves, the ability to gather information
from legal persons (s.133-s.134) arises whenever the information is considered
useful for, or relevant to, any enquiry or proceeding under the act. The powers
under s.131 of: discovery and inspection; enforcing attendance of and
examining under oath any person (including any officer of a bank);
compelling production of books of account and other documents; and issuing
commissions are vested in specified senior officials of the ITD, and may also
be used by another class of senior staff when they suspect that any income has
been concealed, or is likely to be concealed, by any person or class of persons,
within his jurisdiction, and is making enquiries or conducting an investigation
related to suspicion.
179. These powers can be used to obtain information from any natural or
legal person in India, including for example from persons who are trustees for
foreign trusts which are administered in India.
180. The ITD is not required to follow any special procedures in order to
exercise these powers. Reference to a court or other authority is not required.
Use of information gathering measures absent domestic tax interest

(ToR B.1.3)
181. The ability to gather information from legal persons (s.133-s.134)
arises whenever the information is considered useful for, or relevant to, any
enquiry or proceeding under the act. EOI requests may be classified as either
enquiries or proceedings under this act. The situations in which the powers
under s.131 may be exercised are not defined and thus can be expected to be
very broad.
182. There is no requirement that the income be related to India, nor is
there a requirement that the suspicion be of income concealed from the Indian
government. Similarly, assuming EoI requests are classified as enquiries or
proceedings under the act, there is no domestic tax interest limitation on the
exercise of the power to gather information from legal persons (s.133-s.134).
Compulsory powers (ToR B.1.4)

183. As described above, the ITD has wide-ranging powers to compel the
production of information from natural and legal persons. Under ITA s.131,
ITD officers have powers of discovery and inspection; enforcing attendance of
and examining under oath any person (including any officer of a bank);
compelling production of books of account and other documents; and issuing
commissions. Under s.133A ITD officers may require any person, including a
banking company or any officer thereof, to furnish information and statements
of accounts and affairs. And s.133B gives these senior tax officials the power
to enter premises at which a profession is carried on and require the proprietor
or any employee to furnish information.
Secrecy provisions (ToR B.1.5)

184. The scope of bank secrecy in India has generally followed the
common law principles, though it is also specifically laid out in s.45E of the
Reserve Bank of India Act 1934, which prohibits disclosure of credit
information held by banks except in the prescribed circumstances. Section 22
of the Credit Information Companies (Regulation) Act 2005 allows access to
credit information in the possession or control of credit information company
or credit information institution or specified user, if the access is authorised by
any law currently in force. Since s.133 of the ITA authorises income tax
authorities to access credit information from any person, the ITA overrides
s.45E of the Reserve Bank of India Act 1934.
185. In addition, through a circular issued to the banking sector on
11 February 2008, the Reserve Bank of India confirmed that the bankers'
obligation to maintain secrecy arises out of the contractual relationship
between the banker and customer, and as such no information should be
divulged to third parties except under circumstances which are well defined
such as:
• where disclosure is under compulsion of law;
• where there is a duty to the public to disclose;
• where interest of bank requires disclosure; and
• where the disclosure is made with the express or implied consent of the
customer.17
186. The Securities and Exchange Board of India (SEBI) Circular issued
on 8 November 2001 specifies that the agreement between a stock broker and
his/her client must contain a clause to the effect that “the member hereby
undertakes to maintain the details of the client, as mentioned in the client
registration form or any other information pertaining to client, in confidence
and that he shall not disclose the same to any person/entity except as required
under the law”. As disclosure is allowed as required under the law, the ITD
could use its powers to obtain this information from companies and
individuals operating in the securities sector.
187. The Insurance Act 1938 does not specifically refer to obligations of
secrecy concerning clients. Further, s.33 of that act imposes an obligation on
insurers to produce all such books of accounts, registers and other
documentation when requested by an inspector from the Insurance Regulatory
and Development Authority (IRDA). Thus, it appears the ITD could use its
powers to obtain this information from companies and individuals operating in
the insurance sector.

Determination
17
Tournier v National Provincial and Union Bank of England [1924] 1 KB 461,
sets out four areas where a bank can legally disclose information about its
customer. These principles still hold good in many common law jurisdictions,
including India, and are: (i) where the bank is compelled by law to disclose the
information; (ii) if the bank has a public duty to disclose the information; (iii) if
the bank’s own interests require disclosure; and (iv) where the customer has
agreed to the information being disclosed.
B.2. Notification requirements and rights and safeguards
The rights and safeguards (e.g. notification, appeal rights) that apply to persons
in the requested jurisdiction should be compatible with effective exchange of
information.
Not unduly prevent or delay exchange of information (ToR B.2.1)

188. Under India’s law, there is no obligation to notify the subject of a
request for information.
189. The limits on information which can be exchanged that are provided
for in the 2002 OECD Model Agreement on Exchange of Information on Tax
Matters and its commentary, and in Article 26 of the OECD Model Tax
Convention on Income and on Capital and its commentary are included in all
of the DTCs concluded by India. That is, information which is subject to legal
privilege; which would disclose any trade, business, industrial, commercial or
professional secret or trade process; or would be contrary to public policy, is
not required to be exchanged. In addition, the Evidence Act 1872 (see below)
specifically allows the competent authority to decline to exchange information
where the information is covered by attorney client privilege
190. In India, practicing chartered accountants, practicing company
secretaries and lawyers undertake the work of company formation agents.
Ownership and identity information, and also accounting records, may
therefore be held in India by such intermediaries and professional advisers.
191. A number of forms of professional secrecy exist in India which may
be overridden as required by law. Important amongst these are the secrecy
provisions in s.140 of the Accountants’ Code of Conduct and Schedule 2 of
the Company Secretaries Act 1980. As these may be overridden by law, the
ITD can exercise its powers under ITA s.131 and s.133-s.134 to gain
information from such professionals when so requested by the competent
authority in order to satisfy an EoI request.
192. Unlike the professional secrecy in place for other professions in
India, the secrecy provisions in place with respect to barristers, attorneys,
pleaders, vakils and legal advisers are absolute and cannot be overridden by
other laws (s.126 of the Evidence Act 1872).
s.126. Professional communications - No barrister, attorney, pleader or
vakil, shall at any time be permitted, unless with his client's express consent
to disclose any communication made to him in the course and for thee [sic]
purpose of his employment as such barrister, pleader, attorney or vakil, by or
on behalf of his client, or to state the contents or condition of any document
with which he has become acquainted in the course and for the purpose of his
professional employment or to disclose any advice given by him to his client
in the course and for the purpose of such employment.
Provided that nothing in this section shall protect from disclosure -
1. Any communication made in furtherance of any illegal purpose,
2. Any fact observed by any barrister, pleader, attorney or vakil, in the course
of his employment as such showing that any crime or fraud has been
committed since the commencement of his employment.
It is immaterial whether the attention of such barrister, pleader, attorney or
vakil was or was not directed to such fact by or on behalf of his client.
193. Indian authorities indicate that this provision applies only to legal
advice provided by a barrister, attorney, pleader or vakil and not to other
activities they conduct, such as company formation or any kind of financial
activities. Where s.126 refers to “in the course and for the purpose of his
professional employment” it is interpreted by the Indian authorities to refer
solely to advice given as a legal professional, not other professional activities.
Further, this privilege would not, for example, attach to documents or records
delivered to a legal professional in an attempt to protect such documents or
records from disclosure required by law. As a result, India’s ITD can exercise
its powers under the ITA to gain information from these legal professionals, as
long as that information does not relate to legal advice provided to clients.

Determination
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 57
C. Exchanging Information
Overview
194. Jurisdictions generally cannot exchange information for tax purposes

unless they have a legal basis or mechanism for doing so. In India, the legal
authority to exchange information derives from bilateral mechanisms (double
tax conventions) as well as from domestic law. This section of the report
examines whether India has a network of information exchange that would
allow it to achieve effective exchange of information in practice.
195. India has an extensive treaty network allowing for exchange of
information for tax purposes, and is currently engaged in additional treaty
negotiations as well as renegotiations of its older treaties. India currently has
78 double-taxation conventions (DTCs), all of which are in force and in effect.
Almost all of these meet the standards. India is encouraged to continue this
work and successfully conclude agreements as part of the current round of
treaty negotiations and to progress negotiations with additional partners.
196. India’s DTCs provides for the exchange of information that is
‘necessary’ for carrying out the domestic laws of the Contracting States
concerning taxes covered by the agreements. All of India’s DTCs provide for
exchange of information with respect to all persons. India is obliged to provide
information under its EoI arrangements even when the information is held by a
financial institution, nominee or person acting in an agency or a fiduciary
capacity and when it relates to ownership interests in a person. India must
exchange information without regard to whether the requested it needs the
information for its own tax purposes. There are no dual criminality provisions
in India’s DTCs. There is no distinction drawn in India’s DTCs between civil
and criminal matters as far as taxation is concerned. There are no restrictions
in the exchange of information provisions in India’s DTCs that would prevent
India from providing information in a specific form, as long as this is consistent
with its own administrative practices.
197. All exchange of information articles in India’s DTCs have
confidentiality provisions and India’s domestic legislation also contains
relevant confidentiality provisions. These provisions do not draw a distinction
between information received in response to requests or information forming
58 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION
part of the requests themselves. As such, they apply equally to all information
and documentation forming the requests received by India as well as to
responses received from counterparties.
198. Each of India’s DTCs ensures that the parties are not obliged to
provide information which would disclose trade, business, industrial,
commercial or professional secrets or information which is the subject of
attorney client privilege or to make disclosures which would be contrary to
public policy.
199. There appear to be no legal restrictions on the ability of India’s
competent authority to respond to requests within 90 days of receipt by
providing the information requested or by providing an update on the status of
the request. The assessment team is not currently in a position to evaluate this,
as it involves issues of practice that will be dealt with in the Phase 2 review.
200. India’s competent authority is part of the Central Board of Direct
Taxes. The Board does not have power to obtain information directly but can
direct the income tax authorities to obtain information in order to answer an
international request for information.
C.1. Exchange-of-information mechanisms
Exchange of information mechanisms should allow for effective exchange

of information.
201. ITA s.90 provides the power to establish agreements with foreign
countries or specified territories with respect to taxation. Section 90(1)(c)
specifically allows for establishment of agreements for exchange of
information.
(1) The Central Government may enter into an agreement with the
Government of any country outside India or specified territory outside India,—
…
(c) for exchange of information for the prevention of evasion or
avoidance of income-tax chargeable under this Act or under the
corresponding law in force in that country or specified territory, as the
case may be, or investigation of cases of such evasion or avoidance, or
(d) for recovery of income-tax under this Act and under the
corresponding law in force in that country or specified territory, as the
case may be,
and may, by notification in the Official Gazette, make such provisions as may
be necessary for implementing the agreement. …
202. India has been actively establishing exchange of information

mechanisms and exchanging information for 40 years. The first of its 78
double-taxation conventions (DTCs) was signed with Greece in 1965. The
most recent was a renegotiated DTC with Finland, which was signed on 15
January 2010 and came into effect on 19 April 2010. Each of India’s DTCs
have entered into force around one year after signature, after necessary
implementing measures are taken by the treaty partners.
Foreseeably relevant standard (ToR C.1.1)

203. All but 4 of India’s DTCs provide for the exchange of information
that is ‘necessary’ for carrying out the provisions of the agreement or of the
domestic laws of the Contracting States concerning taxes covered by the
agreement. As such, these agreements meet the ‘foreseeably relevant’
standard, as the term ‘necessary’ is recognised in the commentary to Article 26
(Exchange of Information) of the OECD Model Tax Convention to allow for
the same scope of exchange as does the term ‘foreseeably relevant’.
204. The wording of this paragraph in the agreements with Bangladesh,
Mauritius, Tanzania, Thailand, the United Arab Emirates and Zambia is
different to that of Article 26 of the OECD Model Tax Convention in that there
is also specific reference to exchange of information for the prevention of
evasion of taxes. This wording does not go below the international standard.
205. Three of the DTCs - with Austria, Germany and Greece - provide for
the exchange of information that is ‘necessary’ for carrying out the provisions
of the agreement, but do not specifically provide for the exchange of
information in aid of the administration and enforcement of domestic laws.
206. The treaty with Switzerland incorporates additional language, noting
that it applies to “… such information (being information which is at their
disposal under their respective taxation laws in the normal course of
administration) as is necessary …”. The bracketed text is not in line with the
standard as it limits the exchange of information (EoI) article to information at
the parties’ disposal under taxation laws, not information at their disposal under
other laws, and it limits the EoI to information which is at their disposal in the
normal course of administration. Thus, if it is not ‘normal’ for one of the
parties to obtain certain information, the information cannot be provided to the
other Contracting State.
In respect of all persons (ToR C.1.2)

207. All of India’s DTCs provide for exchange of information with respect
to all persons. None of these treaties restricts the applicability of the exchange
of information provision to certain persons, for example those considered
resident in one of the States.
Obligation to exchange all types of information (ToR C.1.3)

208. Only India’s recent DTCs with Myanmar and Tajikistan includes the
provision contained in paragraph 26(5) of the OECD Model Tax Convention,
which states that a contracting state may not decline to supply information
solely because the information is held by a bank, other financial institution,
nominee or person acting in an agency or a fiduciary capacity or because it
relates to ownership interests in a person.
209. Article 27 of the treaty with Luxembourg does not contain this
provision. However, the protocol to the treaty contains a most favoured nation
clause which obliges Luxembourg to apply in its relations with India any
exchange of information arrangement agreed in a tax treaty or protocol
concluded by Luxembourg with an EU Member State that is more favourable
or effective than the one agreed in the Luxembourg-India tax treaty.
210. The other 75 DTCs do not contain such a provision. While there are
no limitations in India’s laws with respect to access to bank information, there
may be such limitations in place in the domestic laws of some of its treaty
partners: Austria, Belgium, Singapore and Switzerland. In these cases, the
absence of a specific provision requiring exchange of bank information
unlimited by bank secrecy will serve as a limitation on the exchange of
information which can occur under the relevant DTC. India has written to all
of these 74 partners seeking renegotiation of the treaties, including to
incorporate the language of paragraphs 4 and 5 of the OECD Model Tax
Convention. Indian authorities advise that the renegotiation of the agreement
with Switzerland has recently concluded and this now incorporates language
specifying that the parties may not decline to supply information solely because
the information is held by a bank, other financial institution, nominee or person
acting in an agency or a fiduciary capacity or because it relates to ownership
interests in a person, however the exact text of the new agreement has not been
seen by the assessment team.
Absence of domestic tax interest (ToR C.1.4)

211. India’s recent DTCs with Luxembourg, Myanmar and Tajikistan
include paragraph 26(4) of the OECD Model Tax Convention. Its DTC with
Canada includes a version of the provision contained in paragraph 26(4) of the
OECD Model Tax Convention. This provides that India and Canada may not
decline to supply information solely because it does not, at that time, need such
information:
If information is requested by a Contracting State in accordance with the

provisions of this Article, the other Contracting State shall endeavour to
obtain the information to which the request relates in the same way as if its
own taxation was involved notwithstanding the fact that the other State does
not, at that time, need such information.
212. India’s 74 other agreements do not contain such a provision. There
are no domestic tax interest restrictions on India’s powers to access
information, which require that the information be relevant to the determination
of a tax liability in India (see section B.1 of this report). India is able to
exchange information, including in cases where the information was not
publicly available or already in the possession of the governmental authorities.
213. A domestic tax interest requirement may however exist for some of
India’s treaty partners. In such cases, the absence of a specific provision
requiring exchange of information unlimited by domestic tax interest will serve
as a limitation on the exchange of information which can occur under the
relevant DTC. As noted above, India is currently seeking to renegotiate many
of its treaties to ensure they incorporate the language of paragraphs 4 and 5 of
the OECD Model Tax Convention.
Absence of dual criminality principles (ToR C.1.5)

214. There are no dual criminality provisions in 77 of India’s 78 double
taxation conventions. Paragraph 2 of the DTC with Switzerland does however
contain a dual criminality clause as it states that (emphasis added):
In no case shall the provisions of this Article be construed as imposing upon
either of the Contracting States the obligation to carry out administrative
measures at variance with the regulations and practice of either Contracting
State or which would be contrary to its sovereignty, security or public policy
or to supply particulars which are not procurable under its own legislation or
that of the State making application.
215. Indian authorities advise that this agreement has recently been
renegotiated, however the exact text of the new agreement has not been seen by
the assessment team.
Exchange of information in both civil and criminal tax matters (ToR

C.1.6)
216. There is no distinction drawn in most of India’s DTCs between civil
and criminal matters as far as taxation is concerned. Most of the DTCs are
entitled “Agreement for avoidance of double taxation and prevention of fiscal
evasion with [name of counterparty]”. In addition, the first paragraph of the
exchange of information article in many of India’s DTCs specifically mentions
that the information exchange will occur inter alia “for the prevention of
evasion or avoidance of, or fraud in relation to, such taxes”. The relevant
exchange of information article in double taxation conventions signed by India
may be used to obtain information to look into both civil and criminal tax
matters.
217. The exception to this is the DTC with Switzerland, which notes that
the information “…shall not be disclosed to any persons other than those
concerned with the assessment and collection of the taxes which are the subject
of this Agreement.” No mention is made of the ability to provide information
for the “enforcement of domestic laws” or to those concerning with the
enforcement or prosecution or determination of appeals. Indian authorities
advise that this agreement has recently been renegotiated and no longer
contains this wording, however the exact text of the new agreement has not
been seen by the assessment team.
Provide information in specific form requested (ToR C.1.7)

218. There are no restrictions in the exchange of information provisions in
India’s DTCs that would prevent India from providing information in a specific
form, as long as this is consistent with its own administrative practices. Indeed,
two of India’s DTCs include specific clauses to reinforce the need to provide
information in the form requested:
DTC with Canada, Article 26(3): If specifically requested by the competent
authority of a Contracting State, the competent authority of the other
Contracting State shall endeavour to provide information under this Article in
the form requested, such as depositions of witnesses and copies of unedited
original documents (including books, papers, statements, records, accounts or
writings), to the same extent such depositions and documents can be obtained
under the laws and administrative practices of that other State with respect to
its own taxes.
DTC with the United States, Article 28(4): If specifically requested by the
competent authority of a Contracting State, the competent authority of the
other Contracting State shall provide information under this Article in the
form of depositions of witnesses and authenticated copies of unedited original
documents (including books, papers, statements, records accounts and
writings), to the same extent such depositions and documents can be obtained
under the laws and administrative practices of that other State with respect to
its own taxes.
In force (ToR C.1.8)

219. All 78 of India’s DTCs are in force. The most recent new tax treaty
is that with Tajikistan, which was signed on 20 November 2008 and entered
into force on 10 April 2009. Further, a renegotiated DTC with Finland was
signed on 15 January 2010 and came into effect on 19 April 2010
In effect (ToR C.1.9)

220. All 78 of India’s DTCs are in effect. Under ITA s.90, it is the
Central Government which may enter into agreements with the Government of
any country outside India or specified territory outside India, for exchange of
information for the prevention of evasion or avoidance of income tax. After
negotiations have been successfully concluded, the agreement is sent to Cabinet
for approval. Once this approval is obtained, India is ready to sign the
agreement. On signing, the agreement is ready to immediately enter into force
in India; no further steps are required to bring it into force. Commonly, it has
taken in the order of 1 year for India’s DTCs to come into effect, due to
procedures required by the other party to the agreement to being the agreement
into effect.

Determination
C.2. Exchange-of-information mechanisms with all relevant partners
The jurisdictions’ network of information exchange mechanisms

should cover all relevant partners.
221. India’s 78 DTCs are with a wide range of counterparties, including:

• 4 of its 6 neighbouring countries (Bangladesh, Burma, China and Nepal;
but not Bhutan or Pakistan);
• 9 of its 10 primary trading partners18 (Belgium, China, Germany, Saudi
Arabia, Singapore, United Arab Emirates, United Kingdom, United States,
Netherlands; but not Hong Kong);
• 25 of the 30 countries which are home to the largest non-resident Indian

populations (not including Fiji, Guyana, Bahrain, Suriname and Jamaica);
• 44 of the 92 Global Forum member jurisdictions;
• 28 of the 31 OECD member economies (DTCs have not been established

with Chile, Mexico and the Slovak Republic);
• 17 of the other 19 G20 members (not including Argentina and Mexico);
• 30 counterparties in Asia, 30 in Europe, 12 in Africa, 3 in North America, 2

in Oceania and 1 in South America.19
222. The Indian government has commenced work towards establishing

TIEAs with further jurisdictions: Bahamas, Bermuda, British Virgin Islands,
Cayman Islands, Gibraltar, Guernsey, Hong Kong, Isle of Man, Jersey,
Liechtenstein, the Netherlands Antilles, Macau, the Marshall Islands, Monaco,
the Netherlands Antilles and Saint Kitts and Nevis. In addition, in August
2009, India said that it is revising its double taxation avoidance treaties,
especially those which were concluded prior to 2004. One of its stated
objectives is to renegotiate anti-abuse provisions.
223. It can be seen that India has an extensive treaty network allowing for
exchange of information for tax purposes. India is encouraged to successfully
conclude agreements with the jurisdictions it recently announced its intention to
negotiate with and with additional relevant partners, such as those in its region,
economically important jurisdictions and those with clear financial and trade
ties to India.
18
Department Of Commerce, 27 July 2009, Press Release: “India’s Trading
Partners”, http://commerce.nic.in/pressrelease/pressrelease_detail.asp?id=2444,
accessed 6 May 2010.
19
Using the 7-continent model.

Determination
Factors underlying Recommendations
recommendations
In addition to the current round of
negotiations, it is recommended that
the Indian government progress
agreements with additional partners.
C.3. Confidentiality
The jurisdictions’ mechanisms for exchange of information should have

adequate provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1)

224. All exchange of information articles in India’s DTCs have
confidentiality provisions. While each of the articles might vary slightly in
wording, overall, these provisions take one of two forms:
Any information received by a Contracting State shall be treated as secret in
the same manner as information obtained under the domestic laws of that State
and shall be disclosed only to persons or authorities (including courts and
administrative bodies) concerned with the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in
relation to the taxes referred in the first sentence. Such persons or authorities
shall use the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions.
Any information received by a Contracting State shall be treated as secret in
the same manner as information obtained under the domestic laws of that
State. However, if the information is originally regarded as secret in the
transmitting State, it shall be disclosed only to persons or authorities
(including Courts and administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the
Agreement. Such persons or authorities shall use the information only for such
purposes but may disclose the information in public court proceedings or in
judicial decisions.
225. Both forms of the confidentiality article contain all of the essential
aspects of paragraph 2 of Article 26 of the OECD Model Convention.
226. One of the EOI provisions includes a variation which is of interest in
terms of confidentiality. The first paragraph of the provision in the DTC with
Mauritius, signed in 1982, allows that the person(s) to whom the request relates
may be provided information or documents exchanged under the agreement
(emphasis added):
The competent authorities of the Contracting States shall exchange such
information or document as is necessary for carrying out the provisions of this
Convention or for prevention of evasion of taxes which are the subject of this
Convention. Any information or document so exchanged shall be treated as
secret but may be disclosed to persons (including courts or other authorities)
concerned with the assessment, collection, enforcement, investigation or
prosecution in respect of the taxes which are the subject of this Convention, or
to persons with respect to whom the information or document relates.
227. The scope of the exceptions to confidentiality in this EOI provision is

broader than that provided for in Article 26 of the OECD Model Convention
and may not therefore adequately ensure the confidentiality of information
received. The DTC does not contain any further details on the circumstances in
which this may occur, nor is there information on the criteria or procedures
involved in such a decision to share information with persons with respect to
whom the EOI relates. Nor does it indicate that such disclosure would only
occur if agreed by the jurisdiction concerned. Indian authorities have indicated
that the provisions of the ITA, which allow the taxpayer or other persons
concerned to access information related to them, would apply here.
228. India’s domestic legislation contains relevant confidentiality
provisions. Importantly, ITA s.138 provides that ITD officers may provide
information gained in the course of their duties to other civil servants
performing functions under the tax or foreign exchange legislation, or if it is
deemed to be in accordance with the public interest. This is detailed further in
Notification SO2048 of 23 June 1965 which allows exceptions to the general
confidentiality requirements, including where there the information is needed
under court order or as part of a prosecution, where the information is needed
by authorised officers for tax matters, where it is needed for foreign exchange
or balance of payments work, and, importantly, where the information is to be
shared with “an authorised officer of the Government of any country outside
India for the granting of relief in respect of, or for the avoidance of double
taxation as may be necessary for the purposes of section 90 of the Act”.
All other information exchanged (ToR C.3.2)

229. The confidentiality provisions in the DTCs and in India’s domestic
law do not draw a distinction between information received in response to
requests or information forming part of the requests themselves. As such, these
provisions apply equally to all requests for such information, background

documents to such requests, and any other document reflecting such
information, including communications between the requesting and requested
jurisdictions and communications within the tax authorities of either
jurisdiction.

Determination
C.4. Rights and safeguards of taxpayers and third parties
The exchange of information mechanisms should respect the rights and

safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)

230. Each of India’s DTCs ensures that the parties are not obliged to
provide information which would disclose any trade, business, industrial,
commercial or professional secret or information which is the subject of
attorney client privilege or information the disclosure of which would be
contrary to public policy. This is supported by provisions in the Evidence Act
1872 which allow the competent authority to decline to exchange information
where the information is covered by attorney client privilege.

Determination
C.5. Timeliness of responses to requests for information
The jurisdiction should provide information under its network of agreements

in a timely manner.
Responses within 90 days (ToR C.5.1)

231. There are no provisions in India’s laws or in its DTCs pertaining to
the timeliness of responses or the timeframe within which responses should be
provided. As such there appear to be no legal restrictions on the ability of
India’s competent authority to respond to requests within 90 days of receipt by
providing the information requested or by providing an update on the status of
the request.
Organisational process and resources (ToR C.5.2)

232. India’s competent authority is the Joint Secretary (FT&TR). This
functional role has been split into 2 positions: JS(FT&TR-I) and JS(FT&TR-II)
which are part of the Central Board of Direct Taxes, which is the statutory body
with functional responsibilities for the administration of the ITA. JS(FT&TR-
I) and JS(FT&TR-II) are located at New Delhi. Each of these Joint Secretaries
is assisted by 1 Director and 2 Under Secretaries, along with support staff. All
these officers are members of the Indian Revenue Service. In specific cases,
officers of the ITD who are posted in the field, provide assistance to the
competent authority.
233. ITA s.90 provides the Central Government with the power to
establish agreements with foreign countries or specified territories with respect
to taxation. Section 90(1)(c) specifically allows for establishment of
agreements for exchange of information and it provides that the Central
Government may, by notification in the Official Gazette, make such provisions
as may be necessary for implementing the agreement. This power to establish
agreements for EOI is delegated to the competent authority by way of an
Administrative Office Order issued by the Finance Minister.
234. Under the ITA various powers to obtain information are granted to
‘income tax authorities’. The Board does not have power to obtain information
directly. However, under ITA s.119(1), the Board may, from time to time,
issue such orders, instructions and directions to other income tax authorities as
it may deem fit for the proper administration of the act, and such authorities
and all other persons employed in the execution of the act, must observe the
orders, instructions and directions of the Board. As a result, the Board can
direct the income tax authorities who have power to obtain information to do so
in order to answer a request for information received under a DTC as obtaining
such information are for the purpose of the act and for proper administration of
the act.
Absence of restrictive conditions on exchange of information (ToR

C.5.3)
235. There are no provisions in India’s laws or in its DTCs which apply
conditions to the exchange of information above those in accordance with
Article 26 of the OECD Model Tax Convention.

Determination
The assessment team is not in a position to evaluate whether this
element is in place, as it involves issues of practice that are dealt
with in the Phase 2 review.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 71
Summary of Determinations and Factors

Underlying Recommendations
Factors underlying
Determination Recommendations
recommendations
Jurisdictions should ensure that ownership and identity information for all relevant
entities and arrangements is available to their competent authorities
The element is in place
Jurisdictions should ensure that reliable accounting records are kept for all relevant
entities and arrangements
Banking information should be available for all account-holders
Competent authorities should have the power to obtain and provide information that
is the subject of a request under an exchange of information arrangement from any
person within their territorial jurisdiction who is in possession or control of such
information (irrespective of any legal obligation on such person to maintain the
secrecy of the information)
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in
the requested jurisdiction should be compatible with effective exchange of
information
Exchange of information mechanisms should allow for effective exchange of
information
The jurisdictions’ network of information exchange mechanisms should cover all
relevant partners
In addition to the current round of
The element is in place negotiations, it is recommended
that the Indian government
progress agreements with
72 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Factors underlying
Determination Recommendations
recommendations
additional partners.
The jurisdictions’ mechanisms for exchange of information should have adequate
provisions to ensure the confidentiality of information received
The exchange of information mechanisms should respect the rights and safeguards
of taxpayers and third parties
The jurisdiction should provide information under its network of agreements in a
timely manner
The assessment team
is not in a position to
evaluate whether this
element is in place, as
it involves issues of
practice that are dealt
with in the Phase 2
review
ANNEXES – 73
Annex 1: Jurisdiction’s Response to the Review Report*
India will like to place on record the deep appreciation for the hard work
done by the assessment team in evaluating India for the Phase I of the Peer
Review process. It was a pleasure working with the team and India is pleased
with the outcome.
India will like to clarify on only one issue regarding the observation of the
assessors in the report that there are no requirements that trustees hold
information on settlers, trustees or beneficiaries. We have noted that this has
not influenced the outcome of determination of any of the element as assessors
have correctly reported that the information on beneficiaries of trusts is
available within India, even otherwise.
However, just for the proper understanding of the Indian legislation we will
like to submit that the beneficiary information of trust is available with the
trustee. In this regard section 6 of the Indian Trust Act is reproduced below:
6. Creation of trust - Subject to the provisions of Section 5, a trust is
created when the author of the trust indicates with reasonable certainty by any
words or acts (a) an intention on his part to create thereby a trust, (b) the
purpose of the trust, (c) the beneficiary, and (d) the trust-property, and (unless
the trust is declared by will or the author of the trust is himself to be the
trustee) transfers the trust-property to the trustee.
Illustrations
A bequeaths certain property to B, "having the fullest confidence that he
will dispose of it for the benefit of C." This creates a trust so far as regards A
and C.
A bequeaths certain property to B "hoping he will continue it in the
family". This does not create a trust, as the beneficiary is not indicated with
reasonable certainty.
* This Annex presents the Jurisdiction’s response to the review

report and shall not be deemed to represent the Global
Forum’s views.
74 – ANNEXES
A bequeaths certain property to B, requesting him to distribute it among

such members of C's family as B should think most deserving. This does not
create a trust, for the beneficiaries are not indicated with reasonable certainty.
A bequeaths certain property to B, desiring him to divide the bulk of it
among C's children. This does not create a trust, for the trust-property is not
indicated with sufficient certainty.
A bequeaths a shop and stock-in-trade to B, on condition that he pays A's
debts and a legacy to C. This is a condition, not a trust for A's creditors and C.
The above clearly shows that under the Indian Trust Act, a trust can not be
created unless trustee knows the name of the settler as well as beneficiaries.
Once again it is clarified that the above is only for the proper understanding
of Indian legislation and this does not influence the outcome on any of the
determination.
ANNEXES – 75
Annex 2: List of all Exchange-of-Information Mechanisms

in Force
Type of EoI Date Entered

Jurisdiction Date Signed
Arrangement Into Force
1 Armenia Double Taxation 31.10.2003 09.09.1904

Convention (DTC)
2 Australia DTC 25.07.1991 30.12.1991
3 Austria DTC 08.11.1999 05.09.2001
4 Bangladesh DTC 27.08.1991 27.05.1992
5 Belarus DTC 27.09.1997 17.07.1998
6 Belgium DTC 26.04.1993 01.10.1997
7 Botswana DTC 08.12.2006 30.01.2008
8 Brazil DTC 26.04.1988 11.03.1992
9 Bulgaria DTC 26.05.1994 23.06.1995
10 Canada DTC 11.01.1996 06.05.1997
11 China DTC 18.07.1994 21.11.1994
12 Cyprus DTC 13.06.1994 21.12.1994
13 Czech Republic DTC 01.10.1998 27.09.1999
20
14 Denmark DTC 08.03.1989 13.06.1989
15 Egypt (United Arab DTC 20.02.1969 30.09.1969
Republic)
16 Finland DTC 10.06.1983 20.11.1984
17 France DTC 29.09.1992 01.08.1994
18 Germany DTC 19.06.1995 26.10.1996
19 Greece DTC 11.02.1965 01.04.1964
20
Under a protocol, the DTC with Denmark is extended to apply in its entirety to the territory of the Faroe Islands.
76 – ANNEXES

20 Hungary DTC 03.11.2003 04.03.2005

21 Iceland DTC 23.11.2007 21.12.2007
22 Indonesia DTC 07.08.1987 19.12.1987
23 Ireland DTC 06.11.2000 26.12.2001
24 Israel DTC 29.01.1996 15.05.1996
25 Italy DTC 19.02.1993 23.11.1995
26 Japan DTC 07.03.1989 29.12.1989
27 Jordan DTC 20.04.1999 16.10.1999
28 Kazakhstan DTC 09.12.1996 02.10.1997
29 Kenya DTC 12.04.1985 20.08.1985
30 Korea (South) DTC 19.07.1985 01.08.1986
31 Kuwait DTC 15.06.2006 17.10.2007
32 Kyrgyz Republic DTC 13.04.1999 10.01.2001
33 Libya DTC 02.03.1981 01.07.1982
34 Luxembourg DTC 02.06.2008 09.07.2009
35 Malaysia DTC 14.05.2001 14.08.2003
36 Malta DTC 28.09.1994 08.02.1995
37 Mauritius DTC 24.08.1982 11.06.1985
38 Mongolia DTC 22.02.1994 29.03.1996
39 Montenegro DTC 08.02.2006 23.09.2008
40 Morocco DTC 30.10.1998 20.02.2000
41 Myanmar DTC 02.04.2008 30.01.2009
42 Namibia DTC 15.02.1997 22.01.1999
43 Nepal DTC 18.01.1987 01.11.1988
44 Netherlands DTC 30.07.1988 21.01.1989
45 New Zealand DTC 17.10.1986 03.12.1986
46 Norway DTC 31.12.1986 1986
47 Oman DTC 02.04.1997 03.06.1997
ANNEXES – 77

48 Philippines DTC 12.02.1996 21.03.1994

49 Poland DTC 21.06.1989 26.10.1989
50 Portugal DTC 11.09.1998 30.04.2000
51 Qatar DTC 07.04.1999 15.01.2000
52 Romania DTC 10.03.1987 14.11.1987
53 Russia DTC 25.03.1997 11.04.1998
54 Saudi Arabia DTC 25.01.2006 01.11.2006
55 Serbia DTC 08.02.2006 23.09.2008
56 Singapore DTC 24.01.1994 27.05.1994
57 Slovenia DTC 13.01.2003 17.02.2005
58 South Africa DTC 04.12.1996 28.11.1997
59 Spain DTC 08.02.1993 12.01.1995
60 Sri Lanka DTC 27.01.1982 24.03.1983
61 Sudan DTC 22.10.2003 15.04.2004
62 Sweden DTC 24.06.1997 25.12.1997
63 Switzerland DTC 02.11.1994 29.12.1994
64 Syria DTC 10.11.2008 18.06.2008
65 Tanzania DTC 05.09.1979 16.10.1981
66 Tajikistan DTC 20.11.2008 10.04.2009
67 Thailand DTC 22.03.1985 13.03.1986
68 Trinidad and Tobago DTC 08.02.1999 13.10.1999
69 Turkey DTC 31.01.1995 01.02.1997
70 Turkmenistan DTC 25.02.1997 07.07.1997
71 Uganda DTC 30.04.2004 27.08.2004
72 Ukraine DTC 07.04.1999 31.10.2001
73 United Arab DTC 29.04.1992 22.09.1993
Emirates
74 United Kingdom DTC 25.01.1993 26.10.1993
78 – ANNEXES

75 Uzbekistan DTC 29.07.1993 25.01.1994

76 Vietnam DTC 07.09.1994 02.02.1995
77 Zambia DTC 05.06.1981 18.01.1984
78 USA DTC 12.09.1989 18.12.1990
ANNEXES – 79
Annex 3: List of All Laws, Regulations

and Other Material Received
Commercial Laws
Companies Act 1956
Companies Central Government Rules and Forms 1956
Companies (Donations to National Funds) Act 1951
Company Secretaries Act 1980
Co-operative Societies Act 1912
Disposal of Records Rules 2003
Insurance Act 1938
Limited Liability Partnership Act 2008
Limited Liability Partnership Rules 2009
Partnership Act 1932
Societies Registration Act 1860
Trusts Act 1882
Taxation Laws
Central Board of Revenue Act 1963
Gift Tax Act 1958
Income-tax Act 1961
Income Tax Rules
Wealth Tax Act 1957
80 – ANNEXES
Banking Laws
Banking Regulation Act 1949
Finance Act 2010
Foreign Exchange Regulation Act 1973
Reserve Bank of India Act 1934
Reserve Bank of India Circular RBI/2009-10/490, 10 June 2010
Special Economic Zones Act 2005
Anti-Money Laundering Act/Regulations

Notification 9, amending the AML Rules November 2009
Prevention of Money Laundering Act 2002
Prevention of Money Laundering Amendment Act 2009
Prevention of Money Laundering Rules 2005
Other
Constitution of India 1950
Official copies of tax treaties
Wakf Act 1995
ANNEXES – 81
Annex 4: Overview of Commercial Laws and Other

Relevant Factors for Exchange of Information
Primary legislation
The Income-Tax Act 1961 (the ITA) is a central government act which
consolidates the Indian law relating to income tax and super tax
(superannuation tax). It governs the taxation of natural and legal persons,
including companies, partnerships, and trusts and is administered by the ITD,
within the Department of Revenue, which falls under the portfolio of the
Ministry of Finance. The ITA, as amended by Finance (No.2) Act 2009, is the
primary piece of legislation of import for the exchange of tax information (see
s.90). International exchange of tax information is conducted in accordance
with double taxation conventions (DTCs). Corresponding to s.90, the Wealth
Tax Act 1957 s.44A and the Gift Tax Act 1958 s.44, contain provisions to
empower the Central Government to enter into agreements for avoidance of
double taxation in regard to the levy of wealth tax or gift tax or for exchange of
information for the prevention of evasion or avoidance or for the recovery of
tax.
The Companies Act 1956 empowers the central government to regulate the
formation, financing, functioning and winding up of companies. Companies
are created, registered and regulated under this act, which is administered by
the Ministry of Corporate Affairs and the Company Law Board. Company
registration is managed by the registrars which exist in each State and
Territory.
India’s Partnership Act 1932 governs the law relating to partnerships, i.e.
relations between persons who have agreed to share the profits of a business
carried on by all or any of them acting for all. It is a Central Government act
which is administered by the States, in consultation with the Ministry of
82 – ANNEXES
Corporate Affairs, and many of the activities outlined in the act are conducted
by registrars based in each state.
Unless otherwise provided, the Partnership Act 1932 does not apply to
limited liability partnerships, i.e. those where a body corporate is formed and
incorporated under the Limited Liability Partnership Act 2008 and which is a
legal entity separate from that of its partners. The Limited Liability Partnership
Act 2008 is administered by the Central Government Registrar of Companies,
in consultation with the Ministry of Corporate Affairs.
The Indian Trusts Act 1882 is the central government law relating to
private trusts and trustees. Both the Central Government and the States have
powers to legislate with respect to trusts and trustees (List III of Seventh
Schedule to Constitution). Thus, the act applies all over India except when
specifically amended / altered by any State Government. Trusts are defined as
obligations annexed to the ownership of property, and arising out of a
confidence reposed in and accepted by the owner, or declared and accepted by
him, for the benefit of another, or of another and the owner. This act does not
deal with wakf. The Courts in each State are granted adjudicatory jurisdiction
in trust matters pursuant to the Trusts Act 1882.
The Prevention of Money Laundering Act 2002 (PMLA), as amended in
2005 and 2009, forms the core of the legal framework put in place by India to
prevent money laundering and to provide for confiscation of property derived
from or involved in money laundering. The PMLA and its Rules impose
obligations on banking companies, financial institutions and financial
intermediaries to verify the identity of clients, maintain records and furnish
information to FIU-IND. The PMLA defines the money laundering offence
and provides for the freezing, seizure and confiscation of the proceeds of crime.
Tax crimes are not predicates for money laundering.
The 2005 Mutual Evaluation of India’s implementation of the international
anti-money laundering and counter-terrorist financing standards, conducted by
the Asia/Pacific Group on Money Laundering (APG), found inter alia that21:
the (then) new PMLA had not yet been supported by the necessary Rules
and the FIU had not been established;
some form of customer identification requirements applied to most of the
key financial institutions, but the obligations imposed varied enormously;
21
See http://www.apgml.org/documents/docs/8/India%20ME1%20-%20Final.pdf.
India is currently undergoing a joint Financial Action Task Force/APG mutual
evaluation, with the final report due to be adopted by the FATF in June and then
by the APG in July 2010.
ANNEXES – 83
a passive company registration system was in place, with annual updates

provided by all companies, and a similar registry was in place for non-profit
organisations;
India’s mutual legal assistance and extradition powers were not available
for most types of money laundering.
The primary legislation for charities and societies are the Societies
Registration Act 1860, the Wakf Act 1954 and the Companies (Donations to
National Funds) Act 1951.
Primary government authorities

The Ministry of Finance (MOF)22 is the central Ministry responsible for
India’s fiscal policies, including revenue and tax collection, budgeting and
Central Government expenditure. The MOF consists of the Department of
Economic Affairs, the Department of Revenue, the Department of Expenditure,
the Department of Financial Services, and the Department of Disinvestments.
The MOF is also the central Ministry for the Directorate of Enforcement, the
Central Board of Direct Taxes, the Central Board of Excise and Customs, the
Central Economic Intelligence Bureau, and the Central Bureau of Narcotics.
The Central Board of Direct Taxes (CBDT) is a part of Department of
Revenue in the Ministry of Finance. The CBDT provides essential inputs for
policy and planning of direct taxes in India, and, at the same time, it is also
responsible for administration of direct tax laws through the Income Tax
Department.23 The Central Board of Direct Taxes is a statutory authority
functioning under the Central Board of Revenue Act 1963. The officials of the
Board in their ex-officio capacity also function as a Division of the Ministry
dealing with matters relating to levy and collection of direct taxes. India has
also has a similar body for excise and customs issues; the Central Board of
Excise and Customs.
In India, two Joint Secretaries within the Department of Revenue, Ministry
of Finance, are officially charged with the work of the competent authority of
India for international tax matters. They are located in New Delhi and are
entrusted with treaty negotiations and with exchange of information in
accordance with such agreements Information sharing between national and
state tax authorities is governed by ITA s.138. The competent authority may
request information from the state tax authorities (s.131 and s.133(6)).
22
www.finmin.nic.in.
23
www.incometaxindia.gov.in.
84 – ANNEXES
The Reserve Bank of India (RBI)24 was established by the Reserve Bank of
India Act 1934, which describes its basic functions as "...to regulate the issue of
Bank Notes and keeping of reserves with a view to securing monetary stability
in India and generally to operate the currency and credit system of the country
to its advantage." In addition to issuance of currency and management of
monetary policy, the RBI is the financial sector regulator and supervisor.
The Ministry of Corporate Affairs (MCA)25 is concerned with
administration of the Companies Act 1956, and related acts, rules and
regulations, in order to regulate the corporate sector. It supervises three
professional bodies; the Institute of Chartered Accountants of India, the
Institute of Company Secretaries of India and the Institute of Cost and Works
Accountants of India. The MCA is also responsible for the Partnership Act
1932, the Companies (Donations to National Funds) Act 1951 and the Societies
Registration Act 1860.
The Registrars of Companies (ROC) manage registries of companies and
limited liability firms in each State, under the MCA. The information on these
registries is updated when companies notify the changes, which may be an
annual requirement or may be required when a specified event occurs (e.g.
changes in ownership/shareholding patterns). The Registrars of Societies
(ROS) sits within State Governments’ purview and most of the States have a
ROS office. Each State has enacted separate legislation on the subject. Most
non-profit organisations are incorporated as societies and registered with the
ROS in the primary state in which they operate.
The Enforcement Directorate26 is responsible for implementation of the
Foreign Exchange Management Act 1999 and the Prevention of the Money
Laundering Act 2002. It falls under the administrative control of the
Department of Revenue, Ministry of Finance. The Financial Intelligence
Unit-India (FIU-IND)27 was established by an Official Government
Memorandum in November 2004 and became operational in March 2006. It is
the central national agency for receiving, processing, analysing and
disseminating information relating to suspect financial transactions and large
cash transactions. In addition, the FIU-IND is responsible for co-ordinating
national and international intelligence and investigations to combat money
laundering, terrorist financing and related crimes.
24
www.rbi.org.in.
25
www.mca.gov.in.
26
www.directorateofenforcement.gov.in.
27
www.fiuindia.gov.in.
ANNEXES – 85
Overview of the financial sector and relevant professions

India has six free trade zones namely: Kandla free trade zone; Santa Cruz
Electronics Export processing zone; Falta Export processing Zone; Madras
export processing zone; Cochin Export Processing zone; and Noida Export
Processing zone. Section 10A of the Income-Tax Act 1961 (the ITA) provides
complete tax exemption in respect of profits and gains derived from industrial
undertakings set up in these zones for a period of five years. Section 10B
provides a complete tax exemption for any newly established 100% export
oriented undertaking. Companies operating in the free trade zones must submit
an annual tax return (ITA s.139).
In addition, Special Economic Zones (SEZs) are being established to
promote export-oriented commercial businesses under the Special Economic
Zones Act 2005. More than 300 such zones exist throughout India, providing
both multi-sector and specialist access. The scope of activities includes
manufacturing, trading and services (mostly information technology). The
SEZs have defined physical boundaries, to which access is controlled by
Customs officers. These zones are oversighted by the Ministry of Commerce
and Industry.28 While wide-ranging tax and customs incentives are offered to
attract investment in the SEZs (ITA s.10AA), companies operating in the SEZs
must submit annual tax returns (s.139).
The financial sector

While the Indian financial markets can be divided into three main sectors -
banking and allied financial services, securities and insurance - the Indian
financial sector is dominated by bank intermediation. Financial institutions in
India can be categorised as commercial banks (public and private), co-operative
banks, regional rural banks and development banks. Non-bank financial
institutions include finance companies, insurance companies, leasing
companies and other institutions. Private sector banks fall under the purview of
the Companies Act 1956.
Number of financial
Type of institution
institutions (31 March 2009)
Public sector banks 27
Private sector banks 22
Foreign banks 31
Regional rural banks 86
28
www.sezindia.nic.in.
86 – ANNEXES
Number of financial
Type of institution
institutions (31 March 2009)
Local area banks 4
Urban co-operative banks 1 721
Non-bank finance companies 12 403
(NBFCs) (not deposit taking)
Deposit-taking NBFCs 336
Primary dealers 19
Development financial institutions 4
India does not have Islamic banking institutions.

Although the foreign exchange markets have been liberalised in recent
years, foreign currency transactions may only be undertaken through banks,
primary dealers and money changers so authorised by the RBI under the
Foreign Exchange Management Act 1999. This act partly liberalised the
foreign exchange markets in 1999, and replaced the criminal framework for
breaches of the controls with administrative provisions and sanctions.
The securities sector in India comprises various intermediaries as
registered under s.12 of the Securities and Exchange Board of India Act 1992.
In India, ‘securities’ includes shares, stocks, debentures, bonds, pass-through
certificates, and government securities and mutual fund units. India has a
system whereby depositories function as the central accounting and record-
keeping offices for securities admitted by issuer companies.
While stocks are traded on 19 exchanges across the country, the Bombay
Stock Exchange and the National Stock Exchange account for nearly all equity
and derivative transactions. Apart from investments by natural and legal
persons based in India, money from abroad enters the capital markets through
foreign institutional investors who are registered by the Securities Exchange
Board of India (SEBI).
Number
Regulated
(31 March Regulated entities Number
entities
2009)
Registrar to an Registered stock brokers
issue and share 71 9 622
transfer agent
Banker to an issue 51 Registered sub-brokers 62 761
Debenture trustee 30 Stock exchange 19
ANNEXES – 87
Number
Regulated
(31 March Regulated entities Number
entities
2009)
Merchant banker 137 Foreign institutional investors 1635
Portfolio manager 232 Custodians 16
Underwriter Collective investment
17 schemes, including mutual 45
funds
Depositories 2 Venture capital funds 133
Depositories Foreign venture capital
718 129
participants investors
Credit rating
5
agency
The insurance sector was opened for private participation in 1999 with the
enactment of the Insurance Regulatory and Development Authority Act 1999
(the IRDA Act). The legislative framework for this sector is contained in the
Insurance Act 1938 and the IRDA Act. Since 2000, the number of participants
in the industry has increased from six public-owned insurers to 46
insurers/reinsurers providing life, general and re-insurance products.29
Type of business Public sector Private sector Total
Life insurance 1 22 23
General insurance 6 16 22
Re-insurance 1 0 1
Total 8 38 46
Although India does not host offshore financial services in the traditional
sense, it has made provision for offshore banking units (OBUs) to operate in
the Special Economic Zones (SEZs). Nine OBUs have been set up in specific
SEZs, although they can also provide services across all such zones. These
units are prohibited from engaging in cash transactions and are restricted to
lending to the SEZ wholesale commercial sector. They virtually function as
foreign branches of Indian banks, but are located in India. OBUs are licensed
and regulated prudentially by the RBI on the same lines as the domestic
commercial banks.
29
As at 31 March 2009.
88 – ANNEXES
Relevant professions
There is no universal requirement that real estate agents or brokers be
registered or licensed. Real estate deals are negotiated directly between sellers
and buyers, but may be facilitated by agents or brokers. All real estate
transactions are registered with the State Government in whose jurisdiction the
transaction falls.
The Bar Council of India is a self-regulatory organisation which oversees
the enrolment, interests and discipline of lawyers, who are governed by the
Advocates Act 1961. Lawyers are prohibited from facilitating financial
transactions for their clients. Lawyers often undertake company formation
work for clients. Notaries are lawyers who also perform notarial services,
regulated by the Notaries Act 1955. Their role is limited to attesting documents
and affidavits; verifying documents and transactions; and endorsing bills of
exchange.
Chartered accountants are regulated by the Institute of Chartered
Accounts of India, established under the Chartered Accountants Act 1949.
Practicing without being a member of the institute is an offence. Chartered
accountants are legally permitted to render a wide range of services, including:
auditing or verifying financial transactions, books, accounts or records; the
preparing, verifying or certifying financial accounting and related statements;
management consultancy; and company formation services.
Company secretaries are regulated by the Institute of Company Secretaries
of India, under the Company Secretaries Act 1980, though people may operate
as company secretaries without being members of the institute. Company
secretaries are authorised to:
• promote, form, incorporate, amalgamate, reorganise or wind up companies;
• file, register, present, attest or verify documents by or on behalf of the

company;
• render services and advice related to shares and stocks of a company; and
• issue certificates on behalf of, or for the purpose of, a company.
Trust and company service providers do not exist as a discrete business

sector in India. These activities are typically provided by accountants and
company secretaries. Institutions can, however, act as debenture trustees and
provide other types of fiduciary/trust services in the securities sector. These
types of trust companies also act as trustees under the Reconstruction of
Financial Assets and Enforcement of Security Interest Act 2002 and provide
ANNEXES – 89
services for establishing and administering trusts. They are required to be

licensed by the SEBI.
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AND DEVELOPMENT
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(23 2010 26 1 P) ISBN 978-92-64-09552-6 – No. 57651 2010
Global Forum on Transparency and Exchange of Information
for Tax Purposes
PEER REVIEWS, PHASE 1: INDIA

The Global Forum on Transparency and Exchange of Information for Tax Purposes is
the multilateral framework within which work in the area of tax transparency and exchange
of information is carried out by over 90 jurisdictions which participate in the work of the
Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the
implementation of the standards of transparency and exchange of information for tax
purposes. These standards are primarily reflected in the 2002 OECD Model Agreement
on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the
OECD Model Tax Convention on Income and on Capital and its commentary as updated
in 2004, which has been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant
information for the administration or enforcement of the domestic tax laws of a requesting
party. “Fishing expeditions” are not authorised, but all foreseeably relevant information
must be provided, including bank information and information held by fiduciaries,
regardless of the existence of a domestic tax interest or the application of a dual
criminality standard.
All members of the Global Forum, as well as jurisdictions identified by the Global Forum
as relevant to its work, are being reviewed. This process is undertaken in two phases.
Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for
the exchange of information, while Phase 2 reviews look at the practical implementation
of that framework. Some Global Forum members are undergoing combined – Phase 1
plus Phase 2 – reviews. The ultimate goal is to help jurisdictions to effectively implement
the international standards of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus
represent agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, and for copies of the published review reports, please visit
www.oecd.org/tax/transparency.
Please cite this publication as:

OECD (2010), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
Reviews: India 2010: Phase 1, Global Forum on Transparency and Exchange of Information
for Tax Purposes: Peer Reviews, OECD Publishing.
http://dx.doi.org/10.1787/9789264095533-en
This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical
databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.
ISBN 978-92-64-09552-6
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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE

OF INFORMATION FOR TAX PURPOSES

Peer Review Report

Please cite this publication as:

ISBN 978-92-64-09552-6 (print)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

About the Global Forum ................................................................................................. 5

Executive Summary ......................................................................................................... 7

A. Availability of Information ................................................................................ 15

Annex 1: Jurisdiction’s Response to the Review Report ............................................ 73

Annex 2: List of All Exchange-of-Information Mechanisms in Force ...................... 75

Annex 4: Overview of Commercial Laws and Other Relevant Factors for

About the Global Forum

The Global Forum on Transparency and Exchange of Information for Tax

1. This report summarises the legal and regulatory framework for

Information and methodology used for the peer review of India

15. The Republic of India (hereinafter referred to as India) is Asia's

General information on legal system and the taxation system

Compliance with the Standards

28. Effective exchange of information requires the availability of

document). For companies and limited liability partnerships it is eight years.

A.1. Ownership and identity information

Companies (ToR A.1.1)

Ownership information on domestic companies

• its articles, if any;

• a declaration by a person who is engaged in the formation of the company7

must be incorporated in the register, s.113(1) obliges companies to issue

• the register of its debenture holders (listed companies only);

• its shares and debentures (listed companies only);

• its directors, managing directors, managers and secretaries, past and

Ownership information on foreign companies

• a list of the directors and secretary of the company; and

51. The Companies (Central Government’s) General Rules and Forms

Ownership information held by other persons

Documentation retention requirements

• the register and index of debenture holders – 15 years after redemption;

Bearer shares (ToR A.1.2)

Partnerships (ToR A.1.3)

Ownership information on partnerships

Information held by service providers

Information held by the partnership or partners

Information held by others

Document retention requirements

Trusts (ToR A.1.4)

• charitable or public trusts (including religious trusts): to benefit the public

• wakfs: for performing certain Islamic religious activities;

Wakfs Act 1954 Every wakf must register at the Board.

When a trust is constituted as a society, it is required

Charitable or religious trusts, societies and

Any charitable trust, society, company, desirous o

Information held by trustees and service providers

Information held by other persons

Documentation retention requirements

Foundations (ToR A.1.5)

Enforcement provisions to ensure availability of information (ToR

112. If a person makes a statement in any verification under the ITA or

Determination and factors underlying recommendations

A.2. Accounting records

General requirements (ToR A.2.1)

• all sales and purchases of goods by the company;

• the assets and liabilities of the company; and

121. ITA s.44AA requires that persons carrying on legal, medical,

• a journal, if the accounts are maintained according to the mercantile

• carbon copies of bills, whether machine numbered or otherwise serially