Section 115A – Specified Rate on Payment of Royalty or Fees for Technical Services to Non-Residents (pdf) Section 115A(1)(b) provides a specified rate of Tax in case :-
| Eligible Assessee (Recepient) | Non-resident (not being a company) or |
| A Foreign Company | |
| Nature of Income | Royalty or Fees for Technical Services (FTS) Exclusion – Income referred to in Section 44DA(1)Section 44DA is applicable if the recipient carries on business in India through (i) a Permanent Establishment (PE) situated in India ; or (ii) performs professional services from a fixed place of profession situated in India ; and the right, property or contract in respect of which Royalty or FTS are paid is effectively connected with such PE of fixed place of profession. |
| Payee | Government or |
| an Indian ConcernBranch of Foreign Company – was considered an Indian Concern – See CBDT Circular No. 740 dated 17-04-1996 & affirmed in Dresdner Bank AG vs. Addl. CIT (2006) 108 ITD 375 (MUM) & ABN Amro Bank NV (2011) 198 Taxman 376 (Cal). | |
| Nature of Agreement | Agreement is made on or after 1 April 1976 and |
In case of Agreement with Indian Concern :-
Exclusion :- Where the Royalty is in consideration for the transfer of all or any rights (including the granting of a license) in respect of any computer software to a person resident in India and such computer software is permitted for the time-being in force to imported into India under an Open General License according to the Import Trade Control Policy – the condition relating to the Agreement u/s 115(1)(b) being approval of the Central Government or the requirement that it relates to a matter included in the Industrial policy shall be omitted. [See Section 115A(1A) of the Income Tax Act] |
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| Rate of Tax | in respect of income by way of Royalty or Fees for Technical Services [FTS] Income Tax @ 25% + applicable Surcharge & Education Cess(Applicable with effect from 01-04-2014 i.e., Assessment Year 2014-15 and corresponding previous year is Financial Year 2013-14). |
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