· Tax Excemptions for Foreign Investment in India
1) Income arising to foreign portfolio investors from transaction in securities is to be treated as capital gains. This would remove uncertainty in taxation on account of characterization of their income and would encourage flow of funds from FIIs
2) Concessional rate of 15 per cent on foreign dividends has been continued without any sunset date.
3) The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5 per cent on interest payments. Tax incentive extended to all types of bonds instead of only infrastructure bonds.
4) The period of applicability of reduced rate of tax at 5% in respect of income of foreign investors (FII and QFI) from corporate bonds and government securities, has been extended from 31.05.2015 to 30.06.2017.
5) The rate of tax on royalty and fees for technical services is reduced from 25% to 10%.
6) Advanced Pricing Agreement regime has been modified to allow for roll back to cover transfer pricing disputes of earlier four years.
7) Form 15CA and 15CB not required for foreign remittance in respect of 33 specified payments including import payments and payment by individuals under liberalized remittance scheme of Reserve Bank of India.
8) MAT shall not be applicable to a foreign company (including an FII /FPI), if it is a resident of country with India
o Has a Double Taxation Avoidance Agreement (DTAA) and such foreign company does not have a
Permanent Establishment (PE) in accordance therewith, or
o Does not have a DTAA and such foreign company is not required to seek registration under section 592 of the
Companies Act, 1956 or section 380 of the Companies Act, 2013.
9) Joint international agreements/arrangements for proactive information sharing, including Automatic Exchange of Information (AEOI) and the FATCA regime.
Following is not considered in Total Income under Section 10 of Income Tax Act:
where in the case of a foreign company deriving 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 but before the 1st day of June, 2002 and,—
(a) where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, such agreement is in accordance with that policy ; and
(b) in any other case, the agreement is approved by the Central Government,
the tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid.
Explanation.—For the purposes of this clause and clause (6B),—
(a) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;
(b) "foreign company" shall have the same meaning as in section 80B ;
(c) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pursuance of an agreement entered into before the 1st day of June, 2002 by the Central Government with the Government of a foreign State or an international organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved before that date by the Central Government, the tax so paid ;
(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under an agreement entered into after the 31st day of March, 1997 but before the 1st day of April, 1999, or entered into after the 31st day of March, 2007 and approved by the Central Government in this behalf and the tax on such income is payable by such Indian company under the terms of that agreement to the Central Government, the tax so paid.
Explanation.—For the purposes of this clause, the expression "foreign enterprise" means a person who is a non-resident;
(6C) any income arising to such foreign company, as the Central Government may, by notification in the Official Gazette, specify in this behalf, by way of royalty or fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India ;