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According to Section 2(23A) of the Income-tax Act, a “foreign company” refers to any company that is not classified as a domestic company.

Tax Rate Provisions

A. Income Tax

For the Assessment Year 2023-24 and Assessment Year 2022-23, the tax rates are as follows:

• Royalty or Fees for Technical Services:

  • Royalty: Received from the Government or an Indian concern under agreements made after March 31, 1961, but before April 1, 1976, or fees for rendering technical services under agreements made after February 29, 1964, but before April 1, 1976, approved by the Central Government: 50%.

• Any Other Income:

  • 40%.

Additional Charges:

• Surcharge:

  • 2% of the income-tax if total income exceeds ₹1 crore but does not exceed ₹10 crore.

  • 5% of the income-tax if total income exceeds ₹10 crore.

  • Marginal Relief:

    • If income exceeds ₹1 crore but does not exceed ₹10 crore, the total amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on total income of ₹1 crore by more than the amount of income that exceeds ₹1 crore.

    • If income exceeds ₹10 crore, the total amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on total income of ₹10 crore by more than the amount of income that exceeds ₹10 crore.

• Health and Education Cess:

  • Calculated at 4% of the total income-tax and surcharge.

B. Minimum Alternate Tax (MAT)

A company is liable to pay MAT at 15% of book profit (plus surcharge and education cess) if the normal tax liability is less than 15% of book profit. However, a foreign company is not liable to pay MAT on the following incomes if income-tax payable under normal provisions is less than 15%:

• Capital gains from the transfer of securities.

• Interest.

• Dividend.

• Royalty.

• Fees for technical services.

Exemptions from MAT: MAT provisions do not apply to a foreign company from April 1, 2001, if:

• The assessee is a resident of a country with which India has a Double Taxation Avoidance Agreement (DTAA) and does not have a permanent establishment in India.

• The assessee is a resident of a country with which India does not have a DTAA and is not required to seek registration under any company-related law.

Special Provisions for Foreign Companies

• Section 4: Charge of income-tax.

• Section 5: Scope of total income.

• Section 6: Residence in India.

• Section 7: Income deemed to be received.

• Section 44B read with Section 172: Special provision for computing profits and gains of shipping business.

For more detailed information, you can refer to the Income Tax Department of India’s website.