The Indian Budget 2023 vide Finance Bill was presented on 1 February 2023 by the Hon’ble Finance Minister of India, Mrs. Nirmala Sitharaman. Recently, on 24 March 2023, the finance minister announced certain amendments to the originally proposed Finance Bill and the amended Bill was then passed by the Hon’ble Parliament of India which was further ratified into Finance Act 2023 on 31st March 2023.

 

One of the key amendments amongst the amended Finance Bill is increase in tax rate in respect of Royalty / Fees for Technical Services (‘FTS’) earned by the Non-resident taxpayers or Foreign Company in India. The existing provisions of Section 115A of the Income-tax Act (hereinafter referred to as ‘the Act’) lay down special tax provisions such that the Royalty and FTS income earned by non-residents from India would be chargeable to tax at the rate of 10%.

 

The Indian government vide amendment to the Indian Budget 2023 proposed to increase the special tax rate on Royalty income and FTS earned by a non-resident or a foreign company from the existing 10% to 20% [plus Surcharge and Health and Education Cess as applicable] provided that such royalty or fees is not connected to any Permanent Establishment or a fixed place of such non-resident in India. This amendment will come into force w.e.f. 1 April 2023.

 

In the attached newsflash, we discuss herewith the various aspects revolving around such tax rate increase in royalty and FTS u/s 115A for non-resident taxpayers.

 

Happy Reading !

 

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