The Indian units of MNCs typically pay their foreign parents 1-2% of outstanding debt as a fee for such guarantees. The foreign parent companies have been considering this payment as interest and arguing that it should be taxed at a lower rate.
Acknowledging that effective taxation of mobile income is a key challenge, the G20 leaders including Prime Minister Manmohan Singh vowed to take steps to change rules to tackle tax avoidance, harmful practices and aggressive tax planning.