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Taxation to foriegn company

sneh (student) (25 Points)

12 June 2012

interest paid to foreign company. is it taxable for foreign company under the slab rate or at special rate? if special rate, then at what %? also if they permanent establishment,will it make any difference?

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CA. CS. Khushboo Dodhia Vora (Practicing Charatered Accountant) (125 Points)
Replied 12 June 2012

Hi.

TDS on Interest paid to foreign Company is deducted @ 30% as per Section 195 of Income-tax ACt, 1961

However benefit of lower rate can be availed as per the Double Taxation Avoidance Agreement between India and the home country of the foreign country, if any.

You may also note that in absence of PAN of the foreign company, TDS would be deducted at 20% irrespective of the fact that lower rate is mentioned in the DTAA as per section 206AA.

If the foreign company as PE in India, then the interest income would be considered as Business Profits and Profits of the PE as attributable to the India Operations would be taxed in India (which involves all together a separate and disticnt working).