Union Budget 2023 increases TDS on Non residents earning Royalty / FTS income from 10% to 20%
Union Budget 2023 passed in Lok Sabha today, has made an amendment w.e.f. 1 April 2023 , wherein the withholding tax rate on any payments made to non-residents qualifying as “Fees for Technical Services” or “Royalty” under Indian domestic tax act has been increased from 10% to 20%.
Earlier, as the domestic tax rate of 10% was similar to the 10% rate in majority tax treaties (there is a slight difference on account of surcharge and cess), tax payers generally tend to opt for the local tax rate of around 11% and were exempted from filing tax returns. With the significant jump in the tax rate, tax payers may now prefer to avail the beneficial treaty rate. This would however require the Non resident taxpayer to compulsorily file tax return in India [including TP Certificate in Form 3CEB where non resident have transactions with Indian group company/(ies)]. This amendment would therefore increase compliance burden for non residents having transactions with Indian companies.
Shikha Gupta
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