Corporate Tax Rates: The corporate tax rate for foreign companies is 40%. However, the effective tax rate is lower than this amount on account of deductions and exemptions available. The foreign companies can avail of Tax holidays if Indian business is set up in Special Economic Zones. Also, Infrastructure Sector Projects enjoy special tax treatment and tax holidays.
Corporate tax rates for domestic companies were recently reduced in 2019 to 22% plus surtax etc. for an effective tax rate around 25%. To encourage investments, new companies in manufacturing businesses enjoy a lower tax rate of 15%. There are conditions such as exemptions and deductions cannot be used along with these lower rates.
Personal Income Tax Rates: Tax rates have generally remained constant except the tax threshold at lower incomes and surcharge at a higher income. The rate which also applies to NRI, is 10% above 2.5 Lakh rupees, 20% above 5 Lakh rupees and a maximum rate of 30% for income above 10 Lakh rupees. Surcharges and cess added based on income levels, for example, 10% above 50 Lakh rupees and 15% above 1 crore rupees. Surcharge has been increased at higher incomes recently. Refer Income Tax site for tax rates in India.
Certain Income is not chargeable in the hands of the non-resident. Section 10. Examples are:
- Interest on bonds or securities notified by the Central Government including premium on redemption
Interest on money standing to the credit in a Non-resident (External) account in India.
- Remuneration received by a non-Indian citizen as an employee of a foreign enterprise for services rendered by him during his stay in India, if: a) Foreign enterprise is not engaged in any trade or business in India b) His stay in India does not exceed in aggregate a period of 90 days in such previous year
- Salary received by a non-resident, for services rendered in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous years
For detailed list of tax free income refer to Income Tax website.
A non-resident can apply either provision of the Act or the relevant DTAA (India has entered into with counterpart foreign country), whichever is more beneficial.