The rates of income tax, surcharge, HEC and MAT, applicable in the case of foreign companies in India in respect of AY 2023-24, are as follows:
Income Tax Rates
In the case of a foreign company, normally the income tax rate is 40% for AY 2023-24, except for income from royalties or technical fees in certain cases which attracts a 50% tax rate, as summarised here-under:
|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.
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.
Health & Education Cess (HEC) Rates
The aggregate amount of income tax and surcharge shall be subject to HEC @ 4% in the case of foreign companies.
Minimum Alternate Tax (MAT) Rates
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.
The provisions of MAT do not apply to foreign companies not having a permanent establishment (PE) in India or where it opts for presumptive taxation scheme of Sections 44B, 44BB, 44BBA or 44BBB, as per Explanation 4 of Section 115JB.