Page 73 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes 3.2.2 Foreign Companies Income Tax Rates

Following are the Foreign Companies income tax rates:
For dividends: 20% for non-treaty foreign companies and 15% in case of companies under
the treaty based in the United States

For interest gains: 20% for non-treaty foreign companies and 15% for companies under the
treaty based in the United States

For royalties: 30% for non-treaty foreign companies and 20% for companies under the
treaty based in the United States
For the technology based services in case of non-treaty foreign companies and 20% for
companies under the treaty based in the United States
For all other kinds of income and gains: 55% in case of non-treaty foreign companies and
55% for the companies under the treaty based in the United States
Attention should be given on levying inter corporate rates in case holding is minimum
Attention should be given on the fact that sanctions of the tax authorities on tax withholding
Attention should be given on several of the tax treaties that India signed with other
countries and also on the various encouraging tax rates

3.2.3 Tax Rebates under Corporate Tax Rate

Some of the tax rebates under corporate tax rate in India:
Gains pertaining to long term capital are subject to low tax incidence

Venture capital funds and venture capital companies have special tax provisions
Specula tax provisions are applicable for non-resident Indians involved in activities in
India

Under the Finance Bill 1996, the Minimum Alternative Tax (MAT) is levied on the corporate
sector
Taxes can eat away at business profits. To address it, small business owners and corporate
leaders look for ways to reduce their tax liability—and the tax planning process is an integral
part of this activity.

(i) Identification: Tax planning is the act of developing a plan to minimize or defer taxes paid
against current business revenue or income. The planning process includes understanding
all local, state and federal tax obligations, determining which deductions are available
and how and when to pay each tax.
(ii) Function: The essence of tax planning is determining how to maximize tax deductions
against current revenue. Options include, but are not limited to, deductions associated
with incorporation status (sole proprietorship, S-corporation, LLC or C-corporation), capital
expenditures and setting up 401(k) plans for employees. Business owners use the tax
planning process to find and take advantage of all deductions available.
(iii) Significance: Companies decide whether to expand and hire new employees based on
their tax burden. For this reason, tax planning is crucial and business owners do it religiously
every year.

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