TDS on Royalty paid to non residents hiked to 20% in the Finance Bill 2023.

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TDS on Royalty paid to non residents hiked to 20% in the Finance Bill 2023

  1. Tax Rate u/s 115A for Royalty / FTS has been increased from 10% to 20% in the Finance Bill passed by the Parliament.

  1. Section 115A of the Income Tax Act has been amended to tax non-resident on royalty or Fees for Technical Services at 20%.

  1. Earlier, tax rate u/s 115A was 10%. Change of Tax Rate from 10% to 20% will impact to the non-residents of the countries with whom India doesn’t have Double Taxation Avoidance Agreement (DTAA).

  1. Now, they will be required to pay higher rate of 20% on income from Royalty and FTS.

  1. As per Sec 115A, a non resident is not required to file his return of income U/S 139(1), if TDS has been deducted at rate not less than prescribed by Sec 115A(1).

  1. Most of the DTAAs prescribe TDS rate of 10%. So TDS could be deducted by considering the beneficial rate under DTAA ie 10%. However a return of income will have to filed in such a case, which is an additional burden for the non resident.

  1. This amendment shall be applicable for AY 2024-25.
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