The Finance Act of 2022 has not made any change in the tax rates applicable for foreign companies (i.e. companies other than domestic companies) in India for AY 2022-23. As a result, the existing tax rates for foreign companies, applicable in respect of the AY 2021-22, shall continue to be applicable.
In the case of a foreign company, normally the income tax rate is 40% for AY 2022-23, except for income from royalties or technical fees in certain cases which attracts a 50% tax rate.
Tax Rates
| Nature of Income | Income Tax Rate |
| Royalties received from government or an Indian concern pursuant to an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services pursuant to an agreement made after February 29, 1964, but before April 1, 1976, where such an agreement has, in either case, been approved by the Central Government | 50% |
| Any other income | 40% |
In other words, in the case of a foreign company, tax rate shall be 50% in respect of royalties received from the government or an Indian concern under an approved agreement made after March 31, 1961, but before April 1, 1976.
Similar tax rate (50%) shall apply for technical services received by such a company from the government or an Indian concern under an approved agreement made after February 29, 1964, but before April 1, 1976.
On the balance of the total income of a foreign company, the tax rate of 40% shall be applicable.
In addition, surcharge, health and education cess (HEC), and minimum alternate tax (MAT) provisions shall be applicable in the case of foreign companies, as under:
Surcharge
The tax so computed (including under provisions of Sections 111A, 112, or 112A of the Income-tax Act) shall attract a surcharge at the rate of 2% where the total income of such a company exceeds Rs. 1 crore but is up to Rs. 10 crores, and at the rate of 5% where the total income of such a company exceeds Rs. 10 crores, subject to provisions relating to marginal relief.
Higher Education Cess (HEC)
The aggregate amount of income tax and surcharge shall be subject to HEC @ 4% in the case of foreign companies.
Minimum Alternate Tax (MAT)
Where the normal tax liability of the foreign company is less than 15% of the book profits, except in the case of companies covered under Explanation 4 of Section 115JB of the Income Tax Act, 1961, the MAT shall be applicable at 15% of the book profits. Besides, the surcharge and health and education fees shall be applicable, as above.
Related Posts: >> Finance Act, 2022 <<
| Income Tax Slabs/ Rates: | Income Tax Cess, Surcharge & Rebate |
| Resident Individuals | Education Cess Rates |
| NRIs/ HUFs/ AOP/ BOI/ AJP | Surcharge Rates |
| Partnership Firms and LLPs | Marginal Relief from Surcharge |
| Domestic Companies | Rebate u/s 87A for Individuals |
| Foreign Companies | |
| Co-operative Societies | |
| Local Authorities |