Table of Contents
1. What is section 115A of the income tax Act?
- Section 115A provides the tax rates applicable on interest, dividends, royalty and fees for technical services in the case of Non-resident/foreign companies.
2. To whom section 115A is applicable?
- Section 115A applies to a Non Resident or a foreign company.
3. What is the rate of tax applicable for dividend received by non-resident?
- Income by way of dividend from the Indian company which is included in the total income is taxable at the rate of 20%.
4. What is the rate of tax applicable for Income from units of mutual fund received by a non- resident?
- Income received from units of mutual fund is taxable at the rate of 20%. (refer below FAQ for the types of mutual fund covered)
5. What do you mean by income received from mutual funds?
- A non-resident shall receive Interest and/or dividend from mutual funds.
6. What are all types of mutual fund in respect of which income tax at the rate of 20% is applicable as per Section 115A?
- Mutual Fund specified under Section 10(23D) of the Income tax Act, 1962, namely
- Mutual Fund registered under SEBI Act, 1992
- Mutual Fund set up by a public sector bank or a public financial institution or authorised by the RBI
- Units of UTI Mutual fund (Unit trust of India)
7. What are the types of interest income covered under Section 115A?
- Interest received from
- Infrastructure debt fund (as referred to in S.10(47))
- Indian company (as referred to in S. 194LC)
- Government or Indian concern
- Units of business trust (as referred to in S. 194LBA)
- Interest received by
- Foreign Institutional Investor or a Qualified Foreign Investor (as referred to in S. 194LD)
Refer the below FAQ for the tax rates on the below mentioned interest incomes
8. What is the rate of tax applicable for the interest income received by non-residents?
- In respect of interest received from
- Infrastructure debt fund (as referred to in S.10(47)) – 5%
- Indian company (as referred to in S. 194LC) – 5%
- Government or Indian concern – 20%
- Units of business trust (as referred to in S. 194LBA) – 5%
- Interest received by
- Foreign Institutional Investor or a Qualified Foreign Investor (as referred to in S. 194LD) – 5%
9. What is the rate of tax applicable for royalty and fees for technical services received by a non- resident?
- Section 115A in respect of royalty and fees for technical services is applicable only if the non-resident does not have a permanent establishment in India.
- If, a non-resident does not have a permanent establishment in India, royalty and fees for technical services is taxed at 10%
10. What do you mean by royalty under section 115A?
- Royalty shall have the same meaning as given in explanation 2 to section 9(vi) of the Income tax act, 1961.
11. Can the assessee claim any deduction or allowance while computing his income under section 115A?
- 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.
12. Can we claim deduction under chapter VI-A against income computed as per section 115A?
- If the gross total income of the assessee consists only of the income referred under this section, no deduction shall be allowed to the assessee under chapter VI-A.
- In any other case, deduction under chapter VI-A can be claimed only against other income included in the gross total income (i.e. income other than income under section 115A)
- However, units located in IFSC (International Financial Services Centre) can claim deduction under section 80LA in respect of income computed as per section 115A.
13. Is furnishing of returns necessary for an assessee having income taxable under section 115A?
- If the total income of the assessee, consists only of income as per section 115A, it is not mandatoryto file return of income under section 139(1)