Good news for Indian Companies: this Budget provides royalty and technical services at a lower rate.  

The provision of Sec. 115A: Specified Rate on Payment of Royalty and Fees for Technical Services to Non Residents provides specific rate of tax in case (amendment provision):

Where the total income of a foreign company, includes any income by way of

     -royalty or

     -fees for technical services

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

In case of Agreement with Indian Concern:-

1. the Agreement is approved by the Central Government; or
2. 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 the rate of tax shall be 25% + applicable Surcharge & Education Cess.

In the budget presented this Saturday, Jaitely has proposed to reduce the rate of income tax on royalty and fees for technical service from 25% to 10%.

This major amendment will facilitate technology inflow in India. Reduction in tax rate will help Indian Companies to hire services of foreign service providers at a lower cost. This will ultimately contribute to the growth of the Indian economy.

The proposal to reduce taxes on technical services from 25% to 10% with the aim to encourage tech start-ups will help facilitate technology transfer to India. This move will provide ease for doing business for IT start-ups.

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