Income Tax Rates for Foreign Companies: AY 2022-23

According to the Finance Act of 2022, there is no change in the tax rates for foreign companies (companies other than domestic companies) for AY 2022-23. As a result, the tax rates for foreign corporations shall not change from those listed in the Finance Act 2021 for the AY 2021–2022 period.

In the case of a company other than a domestic company, normally the rate of tax is 40% for AY 2022–23, the same as applicable for AY 2021–22. However, income from royalties or technical fees in certain cases attracts a 50% rate, as follows:

Nature of IncomeIncome 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 Government50%
Any other income40%

In other words, in the case of a company other than a domestic company, royalties received from the government or an Indian concern under an approved agreement made after March 31, 1961, but before April 1, 1976, shall be taxed at 50%.

Similarly, fees 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, shall be taxed at 50%.

On the balance of the total income of such a company, the tax rate shall be 40%.

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 Rates for Foreign Companies

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.

HEC Rates for Foreign Companies

The aggregate amount of income tax and surcharge shall be subject to HEC @ 4% in the case of foreign companies.

MAT Rates for Foreign Companies

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 IndividualsEducation Cess Rates
NRIs/ HUFs/ AOP/ BOI/ AJPSurcharge Rates
Partnership Firms and LLPsMarginal Relief from Surcharge
Domestic CompaniesRebate u/s 87A for Individuals
Foreign Companies 
Co-operative Societies 
Local Authorities 

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