From Waste to Wealth – Novoloop’s Breakthrough in Plastic Upcycling: A Circular Blueprint for Indian Family Business Transformation

Novoloop’s Plastic Upcycling Breakthrough: Where Indian Legacy Meets Circular Leadership

When you learn to see waste as potential, you don't just build products—you build new futures.

India's Plastic Waste: A Hidden Resource Waiting to Be Claimed

India generates over 3.5 million tonnes of plastic waste annually, much of it low-grade polyethylene—like grocery bags, wrappers, and multilayer film. Most of it ends up in landfills or waterways, while industries continue importing virgin polymers at rising costs and emissions.

But in 2025, this imbalance is becoming a massive opportunity. With stricter ESG mandates, tax incentives, and the rise of plastic neutrality requirements, companies now have both the reason and reward to close the loop.

Enter Novoloop, a pioneering startup with a proven process to turn hard-to-recycle plastic waste into virgin-quality materials—and a pilot plant already running in India.

Novoloop: Making the Impossible, Profitable

Novoloop’s patented ATOD™ process (Accelerated Thermal Oxidative Decomposition) converts polyethylene waste into Oistre™, a high-performance thermoplastic polyurethane (TPU) that replaces petroleum-based materials used in footwear, auto parts, electronics, and packaging.

Their pilot plant in Surat, built in partnership with Aether Industries, is already operational, processing 70 tonnes of plastic per year. Every batch has been commercially sold out, confirming both technical viability and market appetite.

Key features:

• Virgin-grade polymer output with up to 91% lower carbon footprint

• Traceable supply chain aligned with India’s BRSR and EPR mandates

• Applicable across multiple industries without design or performance compromise

• Backed by $21 million in Series B funding (June 2025) for full commercial expansion

• Named among TIME Magazine’s Top 100 Greentech Companies of the year

Waste into Wealth: Global Products That Followed the Same Path

Novoloop’s model may feel radical, but history is filled with breakthrough businesses that began by rethinking what others ignored. These success stories reveal a pattern — when waste meets innovation, entire industries evolve.

1. Gore-Tex (Expanded PTFE)

Once an offshoot of Teflon, expanded PTFE became the world-renowned Gore-Tex — a waterproof, breathable fabric used in everything from rain jackets to medical implants. What was seen as technical waste is now a billion-dollar niche.

2. Nutella (Hazelnut Spread)

Born out of wartime cocoa shortages, Ferrero added hazelnuts to stretch limited chocolate supply. That blend became Nutella — now a global food empire born from creative scarcity.

3. OSB (Oriented Strand Board)

Wood industry byproducts like chips and sawdust were engineered into OSB, now a go-to construction panel globally, often replacing plywood at lower cost and higher efficiency.

4. Adidas x Parley (Ocean Plastic Sneakers)

Adidas turned marine plastic waste into high-performance footwear in partnership with Parley. Over 50 million pairs sold worldwide redefined the value of ocean-bound trash.

5. Recycled PET into Textile Yarn

Plastic bottles once destined for landfills are now reborn as yarns for jackets, uniforms, and shoes. Major brands like Patagonia and Uniqlo built entire eco-collections on this concept—now mainstream in India too.

Novoloop is poised to be the next in this legacy — combining industrial performance with environmental renewal.

Why Indian Family Businesses Should Act Now

Indian business families already have the most essential ingredients: industrial scale, generational resilience, and deep stakeholder trust. The next step is aligning with the future — not abandoning roots but extending them.

Novoloop’s model offers:

• A parallel branch for younger successors to lead circular innovation

• Opportunity to diversify packaging, materials, and export compliance

• Scope 3 carbon reductions for large groups under net-zero mandates

• Creation of green jobs and ESG narrative strength

You can set up circular manufacturing arms under existing entities, partner with upcyclers, or incubate green tech startups from within the family business ecosystem.

Policy Climate in India (2025)

The time is uniquely right:

• Plastic Waste Management Rules revised with tighter EPR enforcement

• Union Budget 2025 introduced tax rebates and lower GST for green manufacturing

• New PLI schemes now include circular economy technologies

• India debuts in UN SDG Top 100 (Rank 99), with green industry as a key contributor

• Circularity now aligned with GDP growth, global trade, and national pride

A Dharma-Aligned Industrial Future

This is more than compliance or innovation. It’s seva through science.
It’s protecting the Earth while creating livelihoods.
It’s turning legacy into leadership through the lens of sustainability.

As family businesses once pioneered India’s industrial rise, they can now lead its regenerative rise.

Circular models like Novoloop allow you to preserve tradition while enabling transition—letting the next generation earn its place not by inheritance, but through transformation.

Summary at a Glance

Factor	Novoloop Model
Input	Low-value polyethylene (bags, wrappers, MLP)
Output	Virgin-grade TPU (Oistre™)
CO₂ Reduction Potential	Up to 91% vs. fossil-based TPU
India Pilot	Surat, with Aether Industries
Business Demand	Fully sold out pilot; commercial scale-up in 2025–26
Industry Use Cases	Footwear, auto parts, electronics, packaging
Ideal Indian Partners	Family businesses in manufacturing, logistics, packaging, textiles

Final Thought

Waste only becomes a liability when you stop asking what it can become.

For Indian family businesses, Novoloop offers not just a product, but a platform — to empower the next generation, align with Dharma, and prove once again that legacy is strongest when it evolves.

From Waste to Wealth in India: The Smart Refill Revolution India Cannot Afford to Miss

 How Chile’s Algramo Is Reinventing Sustainable Packaging—and Why Indian Businesses Should Pay Attention

India’s FMCG sector serves over a billion consumers with unmatched reach—but at a cost the environment can no longer bear. Single-use plastic sachets, pouches, and bottles fill landfills, choke urban drains, and burden municipalities. Yet the poorest consumers continue paying more per gram by buying products in micro-pack sizes.

Meanwhile, in another part of the world, a quiet revolution is underway.

Algramo, a Chilean startup, is challenging the economics and environmental impact of packaging itself—using smart technology, refillable containers, and mobile dispensing systems to bring everyday essentials to consumers without waste. The impact? Lower prices, zero disposable plastic, deeper brand loyalty—and a sustainable circular model that’s scalable in developing economies.

This is not a futuristic idea. It’s a working business model with proven traction. And India, more than any other country, stands to gain the most from replicating and localizing it.

What Is Algramo?

Founded in Santiago, Algramo (Spanish for “by the gram”) partners with global brands like Unilever and Nestlé to offer refill stations for products like shampoo, detergent, and cooking oil. But this isn’t just bulk-buying—it’s powered by smart RFID-embedded containers, mobile refilling vans, and a digital loyalty platform.

Consumers get a durable container, scan it at a nearby kiosk or van, pay for only what they need, and earn rewards for each refill. The result?

• Zero-waste packaging

• Reduced costs per unit

• Increased consumer engagement

• Brand-level traceability and ESG metrics

It’s sustainability without sacrifice.

Why This Model Is a Game-Changer for India

India’s market is uniquely suited to adopt and scale Algramo-like systems.

✅ High sachet dependency in rural and low-income urban areas
✅ Cost-sensitive consumers seeking value for money
✅ Strong kirana and community retail network for last-mile delivery
✅ Rising EPR compliance pressure on FMCG brands
✅ Expanding digital payment and loyalty tech stack

In other words, India has the problem, the infrastructure, and the urgency. What’s missing is coordinated industry action.

Strategic Opportunities for Indian Businesses

Here’s how this model can be a win across verticals:

🔹 For FMCG Brands

Deploy branded refill kiosks or mobile dispensers in urban clusters and rural blocks. Reduce packaging costs, meet EPR goals, and improve price access for low-income customers.

🔹 For Retail Networks

Integrate refill models at kirana stores, SHGs, and cooperative societies—embedding circular practices into local commerce.

🔹 For ESG and Sustainability Leaders

Refill models offer traceable data—perfect for ESG reporting, carbon reduction metrics, and BRSR disclosures.

🔹 For CSR and Family-Owned Businesses

Sponsor refill systems in underserved communities. You reduce waste, enhance brand goodwill, and support inclusive livelihoods.

🔹 For Startups and Tech Innovators

Build India-specific container tracking, app-based loyalty platforms, and rural route optimization software—enabling smart delivery.

Circularity Meets Business Logic

Algramo shows us that circular packaging isn’t just about reducing waste—it’s about redesigning consumption.

In fact, the model offers triple value:

• Economic: Lowers packaging cost and distribution inefficiency

• Environmental: Removes single-use plastics from the system

• Emotional: Builds consumer loyalty via purpose-driven rewards

For Indian businesses, this is not just an idea to admire—it’s a blueprint to localize, fund, and lead.

Global Movement, Local Relevance

Algramo’s model is now being replicated in:

• Indonesia, via smart refill stations on scooters

• UK supermarkets, for home cleaning products

• New York, through partnerships with circular packaging brands

But India remains the biggest opportunity—where consumption, regulation, and waste converge.

Consultant’s Perspective

As advisors to businesses navigating ESG, EPR, and CSR mandates, we believe refill and reuse models represent a powerful next step in India’s circular transition.

Smart packaging and localized refilling infrastructure aren’t “green” extras anymore. They’re operational imperatives that deliver cost savings, compliance ease, and long-term consumer loyalty.

Whether you’re a listed conglomerate, a family-led enterprise, or a rising startup—this is a model you can adapt, invest in, or champion.

Final Word

India doesn’t just need less waste. It needs better systems.

Algramo reminds us that the future of consumption isn’t about buying more—it’s about buying better. And in doing so, we can turn plastic from a pollutant into a platform—one refill at a time.

SUNIYO 2025–26 Scheme Simplified: Your One-Time Chance to Clear Property Tax Dues and Save Big in Delhi

The Municipal Corporation of Delhi (MCD) has launched a limited-period amnesty scheme called SUMPATTIKAR NIPTAAN YOJANA (SUNIYO) 2025–26 for property owners in Delhi. Whether you are a first-time payer, someone with old tax issues, or a regular taxpayer — this scheme offers a practical and money-saving opportunity to clean your tax record without fear of fines or legal action.

1. What Is SUNIYO 2025–26?

SUNIYO is a one-time property tax settlement scheme. You are required to pay only the basic property tax (called principal) for the following 6 financial years:

• FY 2020–21 to FY 2024–25 (five previous years)

• FY 2025–26 (current year)

In return, the MCD will:

• Waive 100% of interest and penalty on these 6 years

• Write off all tax, interest, and penalty dues prior to FY 2020–21

• Stop any ongoing recovery or litigation for old dues

• Issue a legal waiver certificate confirming your compliance

2. Why Was This Scheme Introduced?

MCD has large volumes of uncollected property taxes stuck in disputes, bounced cheques, underpayments, and litigation. Instead of going through costly legal processes, SUNIYO offers a way for both taxpayers and MCD to settle pending amounts peacefully.

This scheme is supported by Sections 115 and 119 of the Delhi Municipal Corporation Act, 1957 and is fully valid in law.

It also helps MCD clean up its records before stricter digital tracking, GIS mapping, and post-scheme audits begin from April 2026.

3. Who Can Use SUNIYO?

You are eligible if:

• You have never paid property tax

• You have paid irregularly or partially

• Your tax case is pending in court

• Your bank accounts or property are under attachment

• Your cheques have bounced in the past

• You are a government department, PSU, or institutional owner

Even if you have already paid the current year tax (FY 2025–26) and received 10% rebate, you can still opt for SUNIYO by paying the tax for the remaining five previous years.

4. What If I Have Already Paid FY 2025–26 Tax with Rebate?

This is one of the most common questions.

The answer is: You can still opt for SUNIYO and get full benefits.

Let’s say you paid your current year property tax (FY 2025–26) in June or July 2025 and claimed the 10% early payment rebate.

You can now pay the basic tax for FY 2020–21 to FY 2024–25 under SUNIYO.

MCD will treat your FY 2025–26 payment as valid and apply the full waiver for past interest, penalty, and dues before 2020–21 — as long as you complete the remaining payments before 30 September 2025.

So, you get:

• 10% rebate for early payment

• SUNIYO waiver on past dues

• No need to pay FY 2025–26 again

• Clean legal property tax record

5. What If I’m a Regular Taxpayer With No Past Dues?

If you have always paid your tax correctly and on time, you don’t need SUNIYO.

Just ensure you pay FY 2025–26 by 31 July 2025 to claim your 10% rebate, and you are in full compliance.

SUNIYO is only for taxpayers with pending past dues or disputes. It gives no extra benefit to already compliant taxpayers.

6. Key Dates to Remember

• 31 July 2025: Last date to pay FY 2025–26 and get 10% rebate (for all taxpayers)

• 30 September 2025: Last date to pay under SUNIYO and get 100% waiver

• 1 April 2026 to 31 March 2027: MCD will scrutinize property tax returns filed under SUNIYO

If you don’t act by 30 September 2025, you lose all waivers, and MCD can recover full tax, interest, penalty, and may even initiate attachment or prosecution.

7. How to Avail SUNIYO

Step-by-step process:

1. Visit: https://mcdonline.nic.in/ptrmcd/web/citizen/info

2. Log in with your mobile number, email, or UPIC (15-digit property ID)

3. Select “Pay Tax (SUNIYO)” tab

4. The system will check if you already paid FY 2025–26

5. Pay the principal tax for FYs 2020–21 to 2024–25 if needed

6. Submit your PTR and download your tax receipt and waiver certificate

If you are a new taxpayer, first register on the portal and create or apply for a UPIC number.

8. What if I’m in a Court Case?

You can still use SUNIYO.

Simply download the affidavit format provided by MCD. Fill and sign it on a ₹10 stamp paper, declaring that you are withdrawing your case and opting for SUNIYO.

Upload this affidavit on the portal when filing your PTR.

9. What if I Overpay or File Incorrect Info?

If you overpay during SUNIYO, MCD will issue you a credit note, which you can use next year.

If you make a mistake while filing your PTR, you can correct it:

• Within 2 months of filing, or

• Up to 30 September 2025, whichever is earlier

If you don’t correct it and a shortfall is found during scrutiny in FY 2026–27, you may face a 30% penalty on the unpaid amount.

10. What Types of Properties Are Covered?

SUNIYO is available for:

• Residential and commercial properties

• Industrial buildings and shops

• Institutions and schools

• Properties in unauthorized colonies and Lal Dora areas

• Government and PSU buildings (some special rules apply)

All types of tax systems — Rateable Value and Unit Area — are eligible.

11. Summary – How to Save the Most

If you never paid before: Pay all 6 years’ basic tax now and get a clean record
If you paid FY 2025–26 with rebate: Pay past 5 years under SUNIYO and still get full waiver
If you’re a regular payer: Pay current year before 31 July 2025 to get 10% rebate
If you’re in court: File affidavit, opt in to SUNIYO, and settle peacefully
If you wait past 30 Sept 2025: You lose all waivers, face recovery and penalty

Final Word

SUNIYO 2025–26 is your chance to legally wipe out old dues, interest, and penalties by simply paying six years of basic property tax — or five, if current year is already paid.

You don’t get such a window often. After 30 September 2025, full recovery and scrutiny will begin.

Whether you’re a house owner, businessperson, landlord, institution, or government department — use SUNIYO to save money, time, and future trouble.

From Waste to Wealth: What Indian Businesses Can Learn from Bill Gates’ Sanitation Revolution

The Wake-Up Call: Why a Billion-Dollar Mind is Obsessed with Toilets

When Bill Gates stood on a stage in Beijing in 2018 holding a beaker of human waste, the world was stunned.

But that moment wasn’t a gimmick—it was a global alarm.
It signaled a future where sanitation is not a cost, but an economic multiplier.
Not a charity project, but human infrastructure.
Not a burden, but a billion-dollar business waiting to be built.

India’s Trilemma: Business Growth, Human Capital Loss, and the Sanitation Gap

India dreams of becoming a $5 trillion economy. Yet:

• ₹2 lakh crore is lost annually due to poor sanitation-related health and productivity.

• Over 1.5 million children die each year due to diarrheal diseases.

• School dropout rates among girls skyrocket after puberty due to lack of toilets.

This is not a health issue.
It is a human capital crisis.
And that means—it’s a business issue.

Dharma + CSR + ESG: A Trident Approach for Indian Business Families

India’s spiritual traditions always placed ‘Shauch’ (cleanliness) next to ‘Satya’ (truth) in the hierarchy of Dharma.
In the modern boardroom, that Dharma takes form through:

• Section 135 of the Companies Act, 2013 – CSR mandates

• BRSR and ESG compliance – for listed and global-facing companies

• Legacy consciousness – for family businesses carrying generational values

But the real question is:
Can we see toilets not as expenses—but as enablers of dignity, productivity, and prosperity?

What Bill Gates Got Right (And India Can Do Better)

Bill Gates did not fund toilets.
He funded R&D, new materials, AI-enabled diagnostics, waste-to-energy startups, decentralized off-grid systems.
He created an ecosystem—where science meets sanitation, and entrepreneurship meets empathy.

This is the model Indian business can and must replicate—with contextual intelligence.

 What That Looks Like:

Area	Gates Foundation	What Indian Companies Can Do
Vision	Reinvent the toilet	Reimagine sanitation as health, dignity & skilling
Strategy	Tech, not just toilets	Fund sanitation startups via CSR/ESG
Talent	Engineers & social scientists	Engage IITs, polytechnics, SHGs
Impact	Global R&D breakthroughs	India-specific models: rural, peri-urban, tribal
Returns	Disease reduction, innovation	Healthier workers, skilling women, ESG value

Five Ways Indian Businesses Can Lead the Sanitation Economy

1. Invest in Innovation, Not Just Infrastructure
   Fund R&D labs, social ventures, and scalable toilet tech—bio-toilets, AI for sanitation mapping, greywater recycling.

2. Adopt Districts, Not Just Villages
   Use CSR to create replicable sanitation ecosystems—toilets, water, awareness, menstrual hygiene, waste management.

3. Make Sanitation Part of HR Strategy
   Toilets are not just for guests. Worker welfare includes hygiene, clean drinking water, and preventive health—this boosts retention and output.

4. Women-Led Sanitation Enterprises
   Empower SHGs and women entrepreneurs to maintain facilities and deliver hygiene products—CSR meets livelihood.

5. Sanitation in ESG Reports
   Highlight measurable impact—ODF zones, school girl retention, disease reduction, behavioral change—in global ESG disclosures.

Sanitation is Not a Toilet Problem. It’s a Human Potential Problem.

Every time a girl skips school because there’s no toilet, we lose a future scientist.
Every time a factory worker misses work due to cholera, we lose GDP.
Every time we treat sanitation as a side issue, we weaken our nation’s foundation.

And every time we elevate it to a core strategic investment, we unlock India’s real wealth—its people.

Final Word:

Toilets, Dharma, and the Business of Legacy

Sanitation is not “CSR for the poor.”
It is capital investment in India’s most undervalued asset—human dignity.
It is where Dharma, innovation, and business intersect.
And for Indian family businesses, it is the perfect arena to demonstrate legacy leadership.

“Dharma does not reside in rituals alone—it shines when we clean what others won’t even see.”
— Adapted from Indian scriptures

Let’s stop thinking of toilets as the end of the pipeline.
They are the starting point of every sustainable transformation.

Capital Gains Tax Filing for AY 2025–26: Stepwise Guide with Resident–NRI Scenarios, Tax-Saving Tips, and ITR-2 Disclosures

By CA Surekha Ahuja

The taxation of capital gains, especially when total income falls below the exemption limit, often raises confusion—particularly in the case of Non-Resident Indians (NRIs). This professional guide breaks down the issue with precision, based on the Income-tax Act, 1961, clarifies exemptions, obligations, and procedural nuances under both old and new tax regimes for AY 2025–26.

Tax Exemption Threshold: Resident vs. NRI (AY 2025–26)

Particulars	Resident Individual (below 60 years)	Resident Senior Citizen (60–79 years)	Resident Super Senior (80+)	NRI (All Ages)
Basic Exemption Limit	₹2.5 lakhs	₹3 lakhs	₹5 lakhs	₹2.5 lakhs
Rebate under Section 87A	Available if Total Income ≤ ₹7 lakhs (New Regime)	Available	Available	Not available
Benefit of Adjusting Basic Exemption Limit Against LTCG	Available	Available	Available	Not available

⚠️ Key Point: NRIs cannot adjust the basic exemption limit against long-term capital gains (LTCG) taxable under sections 112 or 112A. This is explicitly disallowed under the provisos to Section 112 and 112A.

Is Filing ITR Mandatory if Total Income (Including Capital Gain) is Below Threshold?

For Resident Individuals

• Not mandatory, if:

  • Total income after claiming exemptions and deductions is below the applicable basic exemption limit.

  • However, if TDS has been deducted (e.g., on property sales, mutual funds), filing is advisable to claim refunds.

For NRIs

• ITR filing becomes mandatory, if:

  • Capital gains income exceeds the basic exemption limit (₹2.5 lakhs).

  • Even if below ₹2.5 lakhs, TDS at flat rates (e.g., 10%, 15%, 20%) is deducted, and a refund is required.

  • Capital gains are not allowed to be reduced by the basic exemption limit.

Illustration Scenarios

Example 1: Resident Individual (Old Regime)

• Interest Income: ₹1,80,000

• LTCG on Equity: ₹60,000

• Total Income: ₹2,40,000

• Tax Payable: Nil

• ITR Filing: Not mandatory, but advisable if TDS deducted or loss to be carried forward.

Example 2: Resident Individual (New Regime)

• Salary: ₹4,20,000

• LTCG (112A): ₹2,10,000 (Out of which ₹1,00,000 exempt)

• Net LTCG Taxable: ₹1,10,000 @10% = ₹11,000

• Total Income: ₹5,30,000

• Rebate u/s 87A applicable → Final Tax = Nil

• ITR Filing: Mandatory if total income before deduction exceeds ₹2.5 lakhs.

Example 3: NRI

• Interest from NRO: ₹6,000

• LTCG on Listed Shares (after indexation): ₹60,000

• Total Income: ₹66,000

• Tax Deducted: ₹12,000 (assumed 20% on capital gains)

• Tax Payable: Likely Nil (if cost inflation adjusted)

• Refund: Yes

• ITR Filing: Mandatory to claim refund and comply.

Procedural Guide: ITR Filing for Capital Gains

Step	Action
1. Identify Asset Type	Equity shares, mutual funds, property, gold, etc.
2. Determine Holding Period	Short-Term vs. Long-Term gains based on asset class
3. Apply Relevant Section	Section 111A (STT paid equity), 112A (LTCG on equity), 112 (other LTCG), 115E/115C for NRIs
4. Compute Indexed Cost (if LTCG allowed indexation)	Apply CII for FY 2024–25 (currently 363)
5. File ITR	Use ITR-2 for capital gains (residents or NRIs). Report in Schedule CG with full breakup.

Tip: If you're an NRI, ensure Form 10F and TRC are available if you're claiming DTAA benefit.

Caution Points for Taxpayers

Point	Applicability
LTCG adjustment against basic exemption not allowed for NRIs	✔️ Yes
Tax deducted at flat rates must be claimed via ITR	✔️ Yes
Clubbing of capital loss with other income disallowed	✔️ Except under specific provisions
Capital loss cannot offset STCG under Section 111A or LTCG under 112A	✔️ Subject to conditions
TDS credit (Form 26AS / AIS) mismatch may delay refund	✔️ Check Form 26AS before filing

Tax Planning Insights

Strategy	Description
Use Indexation Wisely	NRIs can claim indexation benefit for property under Section 112
Choose Between Old vs. New Regime	LTCG impact may differ – compute both
Spread Gains Across Years	Plan sales to utilize basic exemption over multiple FYs
Claim DTAA Relief	Use Form 67 for FTC if foreign tax paid
Use Set-off Rules	Set off STCL/STT-LTCG with eligible gains for same or next 8 years

 FAQs

Q1: Is LTCG exempt up to ₹1 lakh for NRIs?
Yes, on listed equity shares/mutual funds covered under Section 112A.

Q2: Can NRI claim refund if total income is less than ₹2.5 lakhs?
Yes, by filing ITR and claiming credit of TDS.

Q3: Can Resident Senior Citizens skip filing if LTCG is small?
Yes, if total income is below exemption limit and no TDS deducted.

Q4: Can basic exemption be adjusted against LTCG?
Yes, for Residents. No, for NRIs.

Q5: Which ITR to use for capital gains?
ITR-2 (most appropriate for both Residents and NRIs with capital gains).

Final Summary Sheet

Situation	ITR Mandatory	Remarks
Resident, total income below ₹2.5L	❌ Optional (if no TDS)
Resident, LTCG within limit + rebate u/s 87A	✅ Yes
NRI, capital gains even below ₹2.5L	✅ Yes (to claim refund or disclose)
LTCG on equity > ₹1L	✅ Yes (always taxable at 10%)
TDS deducted on capital gains	✅ Yes (for refund claim)

Conclusion:

While residents enjoy more flexibility in claiming exemptions and avoiding return filing under threshold limits, NRIs are subject to flat taxation on capital gains, with limited offsets. Filing ITR is essential not just for compliance but also for claiming refunds and carry-forward of losses.

Proper reporting, document maintenance (e.g., broker summary, AIS, Form 26AS), and awareness of applicable sections can help avoid notices and optimize your tax outgo.

 

GST on Expatriate Secondment: Karnataka High Court Clarifies When It’s Not a ‘Supply of Manpower’

Introduction

The treatment of seconded expatriates under the GST regime has long been a grey area for multinational corporations (MNCs) operating in India. Questions often arise whether reimbursement of salary by an Indian company to a foreign parent or group entity constitutes a “supply of manpower” and attracts GST.

In a significant development, the Karnataka High Court in the case of M/s Alstom Transport India Ltd v. The Assistant Commissioner of Central Taxes (2023) has provided welcome clarity. The Court ruled that seconded employees, who work under the control and supervision of the Indian entity and whose salaries are reimbursed on an actual cost basis, do not constitute a supply of manpower services.

This ruling has important implications for HR structuring, GST litigation, and inter-company agreements.

Factual Background

• Alstom Transport India Ltd engaged expatriate employees from its foreign group entities.

• These employees were seconded to work in India.

• While their salaries were paid by the overseas entity, the Indian entity reimbursed the exact cost of salaries (without markup).

• GST authorities treated this reimbursement as “supply of manpower” service under Section 7 of the CGST Act, 2017, read with Schedule I.

• Tax demand was raised under the reverse charge mechanism (RCM), citing employee of overseas entity as the supplier.

Key Legal Issue

Does the reimbursement of salary to a foreign group company for seconded employees amount to a 'supply of manpower' under GST law?

Karnataka High Court’s Ruling

1. Real Employer–Employee Relationship Matters

The Court examined who truly employed and controlled the seconded staff. It held:

• The Indian entity had full control over day-to-day work, supervision, appraisal, and disciplinary action.

• The seconded employees were working as employees of the Indian company during the secondment period.

This aligns with the test of control and integration, often applied in judicial precedents to determine the employer.

2. Reimbursement Not Consideration

The reimbursement of salary without any markup or profit element was held not to be “consideration for service.” The Court reiterated that for any “supply” under GST, there must be a quid pro quo — a clear service provider–recipient relationship.

The foreign entity was merely a paymaster, and not supplying manpower for commercial consideration.

3. No Independent Service Provider Role

The High Court held that the foreign group entity was not providing any independent manpower service to Alstom India. There was no contractual obligation for supplying skilled workforce.

Hence, Section 7 read with Schedule I was not attracted, and RCM liability was unsustainable.

Legal Interpretation and Framework

• Section 7(1)(a), CGST Act: Defines “supply” to include all forms of supply for consideration by a person in the course of business.

• Schedule I: Covers supplies between related persons or between establishments of the same person, even without consideration.

• Entry 1 of Schedule III: Clarifies that services by an employee to the employer in the course of employment are not a “supply”.

The Court interpreted this harmoniously to protect employer–employee relationships from being taxed as deemed services, unless there is a clear deviation.

Judicial Support

The Karnataka High Court drew upon previous rulings, including:

• CCE v. Volkswagen India Pvt. Ltd. [2013 (30) STR 190 (Tri-Mum)] – reimbursement of salaries without profit element not a taxable service.

• BSR & Co. LLP v. CCE [2018 (17) GSTL 429 (Tri.-Mum)] – secondment does not constitute manpower supply when employee is under control of Indian entity.

• Cognizant India case [Madras HC, 2020] – upheld similar principle under pre-GST service tax regime.

Practical Takeaways for Businesses

Action Point	Guidance from the Judgment
Examine secondment contracts	Clearly show Indian entity has employment control, supervisory rights, and bears employer risks.
Avoid markups in reimbursements	Ensure salary reimbursements to foreign entities are at actual cost only.
Comply with PF and TDS	Indian entity must handle statutory employer obligations like PF, gratuity, and tax withholding.
Do not treat as manpower service	When seconded employees act as employees in substance, avoid RCM under manpower supply category.

Caution Points

• Substance over form: Merely calling someone a “seconded employee” won’t help if control and supervision still lie with the foreign entity.

• Inter-company agreements must be consistent: HR, finance, and legal teams should align language across contracts, Form 15CA/CB declarations, and secondment letters.

• CBIC may issue clarifications: Since this is a High Court judgment, central circulars could impact broader applicability. Litigation risk still remains for past cases.

Conclusion

The Karnataka High Court’s judgment in the Alstom Transport India case is a landmark in clarifying GST applicability on secondment arrangements. It reinforces the principle that true employer–employee relationships are not a “supply”, even when salaries are reimbursed cross-border.

This ruling offers strategic relief to MNCs, provided they structure secondments carefully, ensure real control resides with the Indian entity, and avoid treating reimbursements as commercial transactions.

Section 40A(3) of the Income-tax Act, 1961: An Analytical Commentary on Judicial Interpretation and Compliance Strategy

 Statutory Framework

Section 40A(3) – Text and Threshold

Section 40A(3) of the Income-tax Act, 1961 provides:

“Where the assessee incurs any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeds ₹10,000, no deduction shall be allowed in respect of such expenditure.”

Exception: The threshold is enhanced to ₹35,000 where the payment relates to plying, hiring, or leasing of goods carriages.

Rule 6DD of the Income-tax Rules, 1962 – Statutory Exceptions

Rule 6DD enumerates a non-exhaustive list of exceptions to Section 40A(3). Some key exceptions include:

• Clause (a): Payments in areas with no banking facility.

• Clause (c): Payments on bank holidays.

• Clause (f): Payments required by statutory or regulatory compulsion.

• Clause (k): Payments to an agent who is required to make cash payments on behalf of the assessee.

• Clause (l): Payments by authorised dealers or money changers for purchase of foreign currency or traveler’s cheques.

Legislative Intent and Doctrinal Basis

CBDT Circular No. 34, dated 5.03.1970:

This foundational circular clarified the anti-evasion purpose of Section 40A(3):

• To discourage cash payments,

• To ensure audit trail of high-value transactions,

• To combat fictitious or bogus claims.

However, the circular also emphasized practical leniency where business exigency or unavoidable circumstances exist. It stated:

“The terms of Rule 6DD are not exhaustive, and each case has to be considered based on its merits.”

Supreme Court in Attar Singh Gurmukh Singh v. ITO

[1991] 191 ITR 667 (SC):

The Court interpreted the provision liberally:

• The object is not to penalize genuine business transactions.

• If the identity of the payee is known and transaction is not doubted, rigid application of Section 40A(3) defeats the purpose.

• Substance over form must govern tax interpretation.

This ruling forms the bedrock of interpretive relief from a literal application of Section 40A(3).

Landmark Case Study: Pratap Uttam Purohit v. DCIT (2025)

Citation: [2025] 176 taxmann.com 627 (Mumbai - Trib.)

Factual Matrix:

• The assessee, a civil contractor, made bearer cheque payments to labour subcontractors.

• Payments made on Fridays, Saturdays, or bank holidays to ensure immediate cash disbursement to labour.

• AO disallowed ₹17.21 lakhs under Section 40A(3), alleging non-emergency and lack of pre-audit disclosure.

Tribunal’s Findings:

• Commercial Urgency: The contractor needed to pay labour before the weekend to avoid workforce attrition.

• Bearer Cheque as Enabler: Used to facilitate immediate withdrawal, not to obscure transactions.

• Agent Exception – Rule 6DD(k): Contractors were found to be agents disbursing wages.

• No Suspicion or Diversion: AO failed to prove any bogusness, inflation, or evasion.

• Held: Disallowance deleted. Section 40A(3) is not a straightjacket. Interpretation must balance revenue interest with business practicality.

Supporting Judicial Authorities

Case	Citation	Principle
Attar Singh Gurmukh Singh	191 ITR 667 (SC)	Section 40A(3) is not to hinder genuine business
Smt. Sangeeta Verma v. CIT	133 taxmann.com 97 (All HC)	Cash payment permitted where seller insisted
Pr. CIT v. Lord Chloro Alkali Ltd.	97 taxmann.com 514 (SC)	Cash payments to truck drivers in backward areas upheld
CIT v. Anupam Tele Services	366 ITR 122 (Guj)	Genuineness and business exigency override procedural lapses

These cases collectively underscore a contextual and purposive interpretation over a hyper-technical reading.

Counter Viewpoints – Judicial Precedents Against the Assessee

Case	Citation	Observation
CIT v. M. Pirai Choodi	334 ITR 262 (SC)	Genuineness not sufficient without Rule 6DD compliance
Shree Jagdamba Developers v. ITO	70 taxmann.com 385 (Guj HC)	Bearer cheque ≠ Account payee cheque
Kamal Kumar Dey v. ACIT	26 taxmann.com 196 (ITAT Kol.)	Business convenience is not a valid standalone defense

These rulings reflect the judiciary’s concern that liberal interpretations may dilute anti-evasion intent, especially when documentation or disclosure is inadequate.

Doctrinal Principles Emerging from Jurisprudence

1. Doctrine of Substance Over Form: If the transaction is genuine, traceable, and documented, procedural non-compliance may not invite disallowance.

2. Evidentiary Burden: The assessee must:

   • Demonstrate business necessity.

   • Establish identity of payee.

   • Record reasons for deviation from banking norms.

3. Bearer Cheque = Cash Equivalent:

   • Though not valid under Section 40A(3), Rule 6DD(k) may offer shelter if payee is an agent making cash payments.

4. Rule 6DD Must Be Interpreted Functionally, not narrowly.

Compliance Protocol & Best Practices for Taxpayers

Measure	Compliance Rationale
Maintain daily cash/payment logs	Enables traceability
Record reasons for cash or bearer cheque	Helps invoke Rule 6DD
Use agent declarations and confirmations	Supports exception under Rule 6DD(k)
Ensure audit trail and transparency in Form 3CD	Avoids audit objection
Avoid routine use of bearer cheques	Prevents pattern-based disallowances

Suggested Disclosure Language in Form 3CD Clause 21(d):

"Payments were made via bearer cheque on [date] to labour subcontractor [name] for weekend wage disbursement in areas with practical banking constraints. Supporting evidence enclosed."

Policy Suggestions & Reform Perspective

While the section targets cash-based evasion, blanket disallowance often penalizes genuine sectors like:

• Civil construction

• Agriculture

• Logistics/Transport

• Remote area operations

Recommended Reforms:

• Prescribe monetary tolerance limits or sector-based carve-outs.

• Mandate time-bound reporting of such payments rather than blanket disallowance.

• Provide centralised digital filing portal for invoking Rule 6DD exceptions with real-time documentation.

Conclusion: Section 40A(3) – A Norm, Not an Inflexible Rule

The Pratap Uttam Purohit ruling is a reaffirmation of the balanced judicial approach to Section 40A(3)—recognizing both the revenue's interest in traceability and the assessee’s operational realities.

Key Takeaways:

• Section 40A(3) is not absolute; it is subject to context, intention, and documentation.

• Rule 6DD is a safety valve, not merely a literal checklist.

• The ITAT ruling rightly acknowledged that commercial practicality must not be strangled by rigid formality, especially in sectors with known ground-level constraints.

For taxpayers, documented necessity, timely disclosure, and consistent explanation remain critical to defending cash-based payments from disallowance.