Definition of Investment Holding Company (SPP)
An SPP is a company primarily engaged in holding investments, with at least 80% of gross income (excluding business income) derived from investments.
Investment Holding Business
Refers to leasing property accompanied by active maintenance or support services provided directly or through third parties.
Criteria for SPP
A company qualifies as an SPP if at least 80% of its gross income is derived from investment sources like dividends, interest, or rental (non-business).
Tax Treatment for Non-Listed SPPs:
- Income derived from investments is treated as non-business income.
- Expenses allowed for deduction are determined using a specific formula and capped at 5% of taxable gross income.
Tax Treatment for Listed SPPs
- Income from investments is treated as business income.
- Adjusted income and statutory income calculations follow special provisions under Section 60FA of the Income Tax Act.
- Excess expenses or allowances cannot be carried forward.
Capital and Industrial Building Allowance
- Companies earning rental income treated as business income are eligible for these allowances.
- For non-listed SPPs, allowances are restricted unless specific conditions are met.
Updates in this Directive
Revisions include new provisions under Paragraph 12B, Schedule 6, and changes to subsections related to loss carry-forwards.
Responsibilities and Compliance
- Companies must adhere to guidelines for classifying income and expenses related to investments.
- Misclassification or failure to meet criteria may lead to changes in tax treatment.
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