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T21: Tax of NRI being Foreign Company

FOREIGN ​C​OMPANY

Meaning

As per Section 2(23A) “foreign company” means a company which is not a domestic company

Tax rate

A. Income Tax

Assessment Year 2023-24 and Assessment year 2022-23

  • Nature of IncomeTax Rate
  • Royalty rece​ived from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government50%
  • Any other income40%

Add:

  • a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 5% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
  • (i) Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
  • (ii) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
  • b) Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four per cent of such income-tax and surcharge.

B. Minimum Alternate Tax

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

  • capital gains arising from transfer of securities,
  • interest,
  • Dividend,
  • royalty and
  • fees for technical services

Further, MAT provisions shall not be applicable with effect from April 1, 2001 to a foreign company, if—

i) the assessee is a resident of a country or a specified territory with which India has an Double Taxation Avoidance Agreement (‘DTAA) or the Central Government has adopted any agreement under sub-section (1) of section 90A and the assessee does not have a permanent establishment in India; or

ii) the assessee is a resident of a country with which India does not have an DTAA and the assessee is not required to seek registration under any law for the time being in force relating to companies.

Special Provisions applicable to Foreign Companies

For more details refer: https://www.incometaxindia.gov.in/pages/i-am/non-resident.aspx

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