Prepared by Baskar P & Sanjay Kumar S
FTS & Royalty rates under Section115A have been increased from 10% to 20% with effect from 1st April 2023.
Tax rates applicable on various Payment to Non-Residents (NR):
| Nature of payments | On or before 31st March 2023 | From 1st April 2023 | Tax Treaty Rates |
| Dividend | 20% | 20% | 5% to 20% |
| Royalty | 10% | 20% | 10% or 15% or 20% |
| FTS | 10% | 20% | Nil to 20% |
| Interest | 5% / 20% | 5%/ 20% | 7.5% to 15% |
*Additional education cess @ 4% and surcharge @ 2% / 5% shall be applicable.
Beneficial tax treaty provisions
- Section 90(2) – NR can opt for the tax rate as per the Act or treaty, whichever is beneficial.
- Section 90 (4) & (5) – To claim benefit under a tax treaty, a Tax Residency Certificate (TRC) and Form 10F to be provided.
- TRC is required to be furnished by the NR to substantiate the tax residency in its home country.
- 10F is to be provided in cases where the information as per rules 21AB is not provided in the TRC.
- No PE declaration to confirm that NR does not have a PE in India [ to rule out higher withholding tax rate of 40%].
Electronic Filing of Form 10F
Considering Practical challenges faced by NRs and to mitigate genuine hardship CBDT on 28th March 2023 issued a notification extends filing of Form 10F physically till 30th September 2023.
Summary
| Particulars | Tax Rates between 1st April – September 2023 | From October 2023 |
| If No tax treaty documents are provided | 21.84% | 21.84% |
| If all tax treaty documents are provided including electronic 10F | Rate as per Treaty | Rate as per Treaty |
| If all tax treaty documents are provided and Form 10F is manual. | Rate as per Treaty | 21.84% |
Tax Return Filing under various scenarios
| Income earned by NR | Requirement to file return by obtaining PAN |
| Only Royalty & FTS income under Section 115A and WHT is as per the rates in the Act (21.84%) | No requirement to file the return. |
| Only Royalty & FTS income under Section 115A and WHT is as per the tax treaty rates. | Return to be filed in India after obtaining the PAN. |
| Interest, dividend, Royalty & FTS income under section 115A – For atleast one of these income, the WHT rate is as per tax treaty | Return to be filed in India after obtaining the PAN. |
