Tax on dividends, royalty and technical service fees in the case of foreign companies.

4[(1) Where the total income of—

1. (a) a non-resident (not being a company) or of a foreign company, includes any income by way of—
   • (i) 5[dividends other than dividends referred to in section 115-O]; or
   • (ii) interest received from Government or an Indian concern on monies borrowed or debt incurred by Government or the Indian concern in foreign currency 6[not being interest of the nature referred to in 7[sub-clause (iia) or sub-clause (iiaa)]]; or 6[(iia) interest received from an infrastructure debt fund referred to in clause (47) of section 10; or] 8[(iiaa) interest of the nature and extent referred to in section 194LC; or] 9[(iiab) interest of the nature and extent referred to in section 194LD; or] 10[(iiac) distributed income being interest referred to in sub-section (2) of section 194LBA;]
   • (iii) income received in respect of units, purchased in foreign currency, of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India, the income-tax payable shall be aggregate of—
2. (A) the amount of income-tax calculated on the amount of income by way of 5[dividends other than dividends referred to in section 115-O], if any, included in the total income, at the rate of twenty per cent;
3. (B) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (ii), if any, included in the total income, at the rate of twenty per cent.; 6[(BA) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (iia) 11[or sub-clause (iiaa)] 9[or sub-clause (iiab)] 10[or sub-clause (iiac)], if any, included in the total income, at the rate of five per cent.;]
4. (C) the amount of income-tax calculated on the income in respect of units referred to in sub-clause (iii), if any, included in the total income, at the rate of twenty per cent; and
5. (D) the amount of income-tax with which he or it would have been chargeable had his or its total income been reduced by the amount of income referred to in sub-clause (i), sub-clause (ii) 1[, sub-clause (iia)] 2[, sub-clause (iiaa)] 3[, sub-clause (iiab)] 4[, sub-clause (iiac)] and sub-clause (iii);
6. (b) 5[a non-resident (not being a company) or a foreign company, includes any income by way of royalty or fees for technical services other than income referred to in sub-section (1) of section 44DA] received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976, and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy, then, subject to the provisions of sub-sections (1A) and (2), the income-tax payable shall be the aggregate of,— 6[(A) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of 7[ten per cent.];
7. (B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of 7[ten per cent.]; and]
8. (C) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income by way of royalty and fees for technical services. Explanation.—For the purposes of this section,—
9. (a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
10. (b) “foreign currency” shall have the same meaning as in the Explanation below item (g) of sub-clause (iv) of clause (15) of section 10;
11. (c) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
12. (d) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963).] 8[(1A) Where the royalty referred to in clause (b) of sub-section (1) is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book to an Indian concern 9[or in respect of any computer software to a person resident in India], the provisions of sub-section (1) shall apply in relation to such royalty as if the words 10[ 11[the agreement is approved by the Central Government or where it relates to a matter] included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy] occurring in the said clause had been omitted: Provided that such book is on a subject, the books on which are permitted, according to the Import Trade Control Policy of the Government of India for the period commencing from the 1st day of April, 1977, and ending with the 31st day of March, 1978, to be imported into India under an Open General Licence: 1[Provided further that such computer software is permitted according to the Import Trade Control Policy of the Government of India for the time being in force to be imported into India under an Open General Licence.] 2[Explanation 1].—In this sub-section, “Open General Licence” means an Open General Licence issued by the Central Government in pursuance of the Imports (Control) Order, 1955.] 3[Explanation 2.—In this sub-section, the expression “computer software” shall have the meaning assigned to it in clause (b) of the Explanation to section 80HHE.]

¹ Ins. by Act 22 of 1995, s. 24 (w.e.f. 1-7-1995). Earlier section 113 dealing with “Tax in the case of non-resident” omitted by Act 10 of 1965, s. 35 (w.e.f. 1-4-1965).

² Ins. by Act 20 of 2002, s. 44 (w.e.f. 1-6-2002).

³ Ins. by Act 66 of 1976, s. 20 (w.e.f. 1-6-1976).

⁴ Subs. by Act 32 of 1994, s. 32, for sub-section (1) (w.e.f. 1-4-1995).

⁵ Subs. by Act 32 of 2003, s. 50, for “dividends” (w.e.f. 1-4-2004). Earlier the word “dividends” substituted by Act 26 of 1997, s. 32 (w.e.f. 1-4-1998) and the words, figures and letter “other than dividends referred to in section 115-O” omitted by Act 20 of 2002, s. 45 (w.e.f. 1-4-2003).

⁶ Ins. by Act 8 of 2011, s. 16 (w.e.f. 1-6-2011).

⁷ Subs. by Act 23 of 2012, s. 44, for “clause (iia)” (w.e.f. 1-7-2012).

⁸ Ins. by s. 44, ibid (w.e.f. 1-7-2012).

⁹ Ins. by Act 17 of 2013, s. 27 (w.e.f. 1-4-2014).

¹⁰ Ins. by Act 25 of 2014, s. 36 (w.e.f. 1-4-2015).

¹¹ Ins. by Act 23 of 2012, s. 44 (w.e.f. 1-7-2012).

¹ Ins. by Act 8 of 2011, s. 16 (w.e.f. 1-6-2011).

² Ins. by Act 23 of 2012, s. 44 (w.e.f. 1-7-2012).

³ Ins. by Act 17 of 2013, s. 27 (w.e.f. 1-4-2014).

⁴ Ins. by Act 25 of 2014, s. 36 (w.e.f. 1-4-2015).

⁵ Subs. by Act 32 of 2003, s. 50, for “a foreign company, includes any income by way of royalty or fees for technical services” (w.e.f. 1-4-2004).

⁶ Subs. by Act 17 of 2013, s. 27 for sub-clauses (A), (AA), (B) and (BB) (w.e.f. 1-4-2014).

⁷ Subs. by Act 20 of 2015, s. 28 for “Twenty-five per cent.” (w.e.f. 1-4-2016).

⁸ Ins. by Act 29 of 1977, s. 22 (w.e.f. 1-4-1978).

⁹ Ins. by Act 49 of 1991, s. 40 (w.e.f. 1-4-1991).

¹⁰ Subs. by Act 18 of 1992, s. 54, for “and approved by the Central Government” (w.e.f. 1-6-1992).

¹¹ Subs. by 32 of 1994, s. 32, for “approved by the Central Government or where the agreement relates to a matter” (w.e.f. 1-4-1995).

1. (2) Nothing contained in sub-section (1) shall apply in relation to any income by way of royalty received by a foreign company from an Indian concern in pursuance of an agreement made by it with the Indian concern after the 31st day of March, 1976, if such agreement is deemed, for the 4[purposes of the first proviso] to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 1976; and the provisions of the annual Finance Act for calculating, charging, deducting or computing income-tax shall apply in relation to such income as if such income had been received in pursuance of an agreement made before the 1st day of April, 1976.] 5[(3) No deduction in respect of any expenditure or allowance shall be allowed to the assessee under sections 28 to 44C and section 57 in computing his or its income referred to in sub-section (1).
2. (4) Where in the case of an assessee referred to in sub-section (1),(a) the gross total income consists only of the income referred to in clause (a) of that sub-section, no deduction shall be allowed to him or it under Chapter VI-A;
   • (b) the gross total income includes any income referred to in clause (a) of that sub-section, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
3. (5) It shall not be necessary for an assessee referred to in sub-section (1) to furnish under sub-section (1) of section 139 a return of his or its income if—
   • (a) his or its total income in respect of which he or it is assessable under this Act during the previous year consisted only of income referred to in clause (a) of sub-section (1); and
   • (b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.] 6[115AB. Tax on income from units purchased in foreign currency or capital gains arising from their transfer.—(1) Where the total income of an assessee, being an overseas financial organisation (hereinafter referred to as Offshore Fund) includes—
   • (a) income received in respect of units purchased in foreign currency; or (b) income by way of long-term capital gains arising from the transfer of units purchased in foreign currency, the income-tax payable shall be the aggregate of—
     • (i) the amount of income-tax calculated on the income in respect of units referred to in clause (a), if any, included in the total income, at the rate of ten per cent;
     • (ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent; and 2. The existing Explanation renumbered as Explanation 1 by s. 40, ibid (w.e.f. 1-4-1991).
     • (iii) the amount of income-tax with which the Offshore Fund would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).
4. (2) Where the gross total income of the Offshore Fund,—
   • (a) consists only of income from units or income by way of long-term capital gains arising from the transfer of units, or both, no deduction shall be allowed to the assessee under sections 28 to 44C 1*** or clause (i) or clause (iii) of section 57 or under Chapter VI-A 2[and nothing contained in the provisions of the second proviso to section 48 shall apply to income referred to in clause (b) of sub-section (1)];
   • (b) includes any income referred to in clause (a), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee. Explanation.—For the purposes of this section,—
   • (a) “overseas financial organisation” means any fund, institution, association or body, whether incorporated or not, established under the laws of a country outside India, which has entered into an arrangement for investment in India with any public sector bank or public financial institution or a mutual fund specified under clause (23D) of section 10 and such arrangement is approved by the 3[Securities and Exchange Board of India, established under the Securities and Exchange Board of India Act, 1992 (15 of 1992),] for this purpose;
   • (b) “unit” means unit of a mutual fund specified under clause (23D) of section 10 or of the Unit Trust of India;
   • (c) “foreign currency” shall have the meaning as in 4[the Foreign Exchange Management Act, 1999 (42 of 1999)];
   • (d) “public sector bank” shall have the meaning assigned to it in clause (23D) of section 10;
   • (e) “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
   • (f) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963)]. 5[115AC. Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.—(1) Where the total income of an assessee, being a non- resident, includes—
   • (a) income by way of interest on bonds of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, or on bonds of a public sector company sold by the Government, and purchased by him in foreign currency; or
   • (b) income by way of dividends 6[, other than dividends referred to in section 115-O,] on Global Depository Receipts—
     • (i) issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, against the initial issue of shares of an Indian company and purchased by him in foreign currency through an approved intermediary; or
     • (ii) issued against the shares of a public sector company sold by the Government and purchased by him in foreign currency through an approved intermediary; or 1. The words, brackets and figures “or sub-section (2) of section 48” omitted by Act 18 of 1992, s. 55 (w.e.f. 1-4-1993).
     • (iii) 1[issued or re-issued] in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, against the existing shares of an Indian company purchased by him in foreign currency through an approved intermediary; or 2*
   • (c) income by way of long-term capital gains arising from the transfer of bonds referred to in clause (a) or, as the case may be, Global Depository Receipts referred to in clause (b), the income-tax payable shall be the aggregate of—
     • (i) the amount of income-tax calculated on the income by way of interest or dividends 3[, other than dividends referred to in section 115-O], as the case may be, in respect of bonds referred to in clause (a) or Global Depository Receipts referred to in clause (b), if any, included in the total income, at the rate of ten per cent;
     • (ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, at the rate of ten per cent; and
     • (iii) the amount of income-tax with which the non-resident would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a), (b) and (c).
5. (2) Where the gross total income of the non-resident—
   • (a) consists only of income by way of interest or dividends 2[, other than dividends referred to in section 115-O] in respect of bonds referred to in clause (a) of sub-section (1) or, as the case may be, Global Depository Receipts referred to in clause (b) of that sub-section, no deduction shall be allowed to him under sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VIA;
   • (b) includes any income referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the assessee.
6. (3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of long-term capital gains arising out of the transfer of long-term capital asset, being bonds or Global Depository Receipts referred to in clause (c) of sub-section (1).
7. (4) It shall not be necessary for a non-resident to furnish under sub-section (1) of section 139 a return of his income if—
   • (a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clauses (a) and (b) of sub-section (1); and
   • (b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.
8. (5) Where the assessee acquired Global Depository Receipts or bonds in an amalgamated or resulting company by virtue of his holding Global Depository Receipts or bonds in the amalgamating or demerged company, as the case may be, in accordance with the provisions of sub-section (1), the provisions of that sub-section shall apply to such Global Depository Receipts or bonds. Explanation.—For the purposes of this section,—
   • (a) “approved intermediary” means an intermediary who is approved in accordance with such scheme as may be notified by the Central Government in the Official Gazette;
   • (b) “Global Depository Receipts” shall have the same meaning as in clause (a) of the Explanation to section 115ACA.] 2. Sub-clause (iv) omitted by s. 46, ibid (w.e.f. 1-4-2002).

¹ Ins. by Act 49 of 1991, s. 40 (w.e.f. 1-4-1991).

³ Ins. by s. 40, ibid. (w.e.f. 1-4-1991).

⁴ Subs. by s. 40, ibid., for “purposes of the proviso” (w.e.f. 1-4-1991).

⁵ Ins. by Act 32 of 1994, s. 32 (w.e.f. 1-4-1995).

⁶ Ins. by Act 49 of 1991, s. 41 (w.e.f. 1-4-1992).

² Ins. by s. 55, ibid. (w.e.f. 1-4-1993).

³ Subs. by Act 14 of 2001, s. 51, for “Central Government” (w.e.f. 1-6-2001).

⁴ Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013).

⁵ Subs. by Act 14 of 2001, s. 52, for section 115AC (w.e.f. 1-4-2002).

⁶ Subs. by Act 32 of 2003, s. 50, for “dividends” (w.e.f. 1-4-2004). Earlier the words, figures and letter “other than dividends referred to in section 115-O” omitted by Act 20 of 2002, s. 45 (w.e.f. 1-4-2003).

¹ Subs. by Act 20 of 2002, s. 46, for “re-issued” (w.e.f. 1-4-2002).

³ Subs. by Act 32 of 2003, s. 51, for “dividends” (w.e.f. 1-4-2004).