Section 115A of Income Tax Act "Tax on dividends, royalty and technical service fees in the case of foreign companies"
115A. (1) Where the total income of-
(a) a non-resident (not being a company) or of a foreign
company, includes any income by way of-
(i) dividends 64[other than dividends referred to in section
115-O] ; or
(ii) interest received from Government or an Indian concern
on monies borrowed or debt incurred by Government or the
Indian concern in foreign currency not being interest of the
nature referred to in sub-clause (iia) or sub-clause (iiaa);
or
(iia) interest received from an infrastructure debt fund
referred to in clause (47) of section 10; or
(iiaa) interest of the nature and extent referred to in
section 194LC; or
(iiab) interest of the nature and extent referred to in
section 194LD; or
(iiac) distributed income being interest referred to in
sub-section (2) of section 194LBA;
(iii) income received in respect of units, purchased in
foreign currency, of a Mutual Fund specified under clause
(23D) of section 10 or of the Unit Trust of India,
the income-tax payable shall be aggregate of-
(A) the amount of income-tax calculated on the amount of
income by way of dividends 65[other than dividends referred
to in section 115-O], if any, included in the total income,
at the rate of twenty per cent ;
(B) the amount of income-tax calculated on the amount of
income by way of interest referred to in sub-clause (ii), if
any, included in the total income, at the rate of twenty per
cent ;
(BA) the amount of income-tax calculated on the amount of
income by way of interest referred to in sub-clause (iia) or
sub-clause (iiaa) or sub-clause (iiab) or sub-clause (iiac),
if any, included in the total income, at the rate of five
per cent;
Following clause (BA) shall be substituted for the existing
clause (BA) of section 115A by the Finance Act, 2020, w.e.f.
1-4-2021 :
(BA) the amount of income-tax calculated on the amount of
income by way of interest referred to in,-
(i) sub-clause (iia), if any, included in the total income,
at the rate of five per cent;
(ii) sub-clause (iiaa) or sub-clause (iiab) or sub-clause (iiac),
if any, included in the total income, at the rate provided
in the respective sections referred to in the said
sub-clauses;
(C) the amount of income-tax calculated on the income in
respect of units referred to in sub-clause (iii), if any,
included in the total income, at the rate of twenty per cent
; and
(D) the amount of income-tax with which he or it would have
been chargeable had his or its total income been reduced by
the amount of income referred to in sub-clause (i),
sub-clause (ii), sub-clause (iia), sub-clause (iiaa),
sub-clause (iiab) , sub-clause (iiac) and sub-clause (iii) ;
(b) a non-resident (not being a company) or a foreign
company, includes any income by way of royalty or fees for
technical services other than income referred to in
sub-section (1) of section 44DA 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, and where such agreement is
with an Indian concern, the agreement is approved by the
Central Government or 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, subject to the provisions of sub-sections
(1A) and (2), the income-tax payable shall be the aggregate
of,-
(A) the amount of income-tax calculated on the income by way
of royalty, if any, included in the total income, at the
rate of ten per cent;
(B) the amount of income-tax calculated on the income by way
of fees for technical services, if any, included in the
total income, at the rate of ten per cent; and
(C) the amount of income-tax with which it would have been
chargeable had its total income been reduced by the amount
of income by way of royalty and fees for technical services.
Explanation.-For the purposes of this section,-
(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 currency" shall have the same meaning as in the
Explanation below item (g) of sub-clause (iv) of clause (15)
of section 10 ;
(c) "royalty" shall have the same meaning as in Explanation
2 to clause (vi) of sub-section (1) of section 9 ;
(d) "Unit Trust of India" means the Unit Trust of India
established under the Unit Trust of India Act, 1963 (52 of
1963).
(1A) Where the royalty referred to in clause (b) of
sub-section (1) is in consideration for the transfer of all
or any rights (including the granting of a licence) in
respect of copyright in any book to an Indian concern or in
respect of any computer software to a person resident in
India, the provisions of sub-section (1) shall apply in
relation to such royalty as if the words the agreement is
approved by the Central Government or 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 occurring in the said clause had
been omitted :
Provided that such book is on a subject, the books on which
are permitted, according to the Import Trade Control Policy
of the Government of India for the period commencing from
the 1st day of April, 1977, and ending with the 31st day of
March, 1978, to be imported into India under an Open General
Licence :
Provided further that such computer software is permitted
according to the Import Trade Control Policy of the
Government of India for the time being in force to be
imported into India under an Open General Licence.
Explanation 1.-In this sub-section, "Open General Licence"
means an Open General Licence issued by the Central
Government in pursuance of the Imports (Control) Order,
1955.
Explanation 2.-In this sub-section, the expression "computer
software" shall have the meaning assigned to it in clause
(b) of the Explanation to section 80HHE.
(2) Nothing contained in sub-section (1) shall apply in
relation to any income by way of royalty received by a
foreign company from an Indian concern in pursuance of an
agreement made by it with the Indian concern after the 31st
day of March, 1976, if such agreement is deemed, for the
purposes of the first proviso to clause (vi) of sub-section
(1) of section 9, to have been made before the 1st day of
April, 1976; and the provisions of the annual Finance Act
for calculating, charging, deducting or computing income-tax
shall apply in relation to such income as if such income had
been received in pursuance of an agreement made before the
1st day of April, 1976.
(3) No deduction in respect of any expenditure or allowance
shall be allowed to the assessee under sections 28 to 44C
and section 57 in computing his or its income referred to in
sub-section (1).
(4) Where in the case of an assessee referred to in
sub-section (1),-
(a) the gross total income consists only of the income
referred to in clause (a) of that sub-section, no deduction
shall be allowed to him or it under Chapter VI-A;
(b) the gross total income includes any income referred to
in clause (a) of that sub-section, the gross total income
shall be reduced by the amount of such income and the
deduction under Chapter VI-A shall be allowed as if the
gross total income as so reduced were the gross total income
of the assessee:
66[Provided that nothing contained in this sub-section shall
apply to a deduction allowed to a Unit of an International
Financial Services Centre under section 80LA.]
(5) It shall not be necessary for an assessee referred to in
sub-section (1) to furnish under sub-section (1) of section
139 a return of his or its income if-
(a) his or its total income in respect of which he or it is
assessable under this Act during the previous year consisted
only of income referred to in clause (a) 67[or clause (b)]
of sub-section (1); and
68[(b) the tax deductible at source under the provisions of
Part B of Chapter XVII has been deducted from such income
and the rate of such deduction is not less than the rate
specified under clause (a) or, as the case may be, clause
(b) of sub-section (1).]