As per the Economic Times of India: In the Union Budget 2013-14, the Finance Minister has hiked taxes on royalty payments to NRI from 10 percent to 25 percent. A steep hike was observed in the tax rate on royalties and fees for technical services that an Indian company pays to an NRI or a Foreign Company.
In the Income tax Act the rate of tax on royalty is lower than the rates provided in a number of Double Tax Avoidance Agreements (DTAA). This is an inconsistency that must be corrected.
NRI Receiving Royalties
Royalty in simple means any payment made by the owner where the original property is retained and only the right to use is licensed out to the user.
According to the Income Tax Act “royalty” means consideration for any of the following:
- In respect of a patent, invention, model, design, secret formula or process or trade mark or similar property for the purpose of the transfer of all or any rights includingÂ the granting of a license.
- In respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films for the purpose of the transfer of all or any rights including the granting of a license.
- In respect toÂ imparting any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property.
- In respect to use of any patent, invention, model, design, secret formula or process or trade mark or similar property
- In respect ofÂ imparting any information concerning technical, industrial, commercial or scientific knowledge, experience or skill
- In respect to use or right to use any industrial, commercial or scientific equipment
- In respect of rendering any services in connection with the activities referred to above.
NRI Receiving Fees For Technical Services
Fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration that may come under the head “salaries.