Foreign Companies may be required to file tax returns in India

Impact of increase in withholding tax on rates for Fees for Technical Services and Royalty

As per Indian Tax laws, payments made to Non-Residents/Foreign Companies for Fees for Technical Services (FTS) and Royalties were liable to tax at the effective tax rate of 10.92% (including surcharge and education cess).

Further, Indian Tax Laws2 also provide that where India has entered into a Double Tax Avoidance Agreement (DTAA) with other countries, provisions of the DTAA or Act, whichever is beneficial shall apply.

Currently, many Tax Treaties signed by India with major countries like the United States of America, the United Kingdom, etc., prescribe a higher tax rate of 15% for Royalty and FTS. Further, many other Treaties with countries like Germany, Singapore, France, etc, provide for a tax rate of 10%.