Section 115A of the Income Tax Act, of 1961 is a provision that deals with the taxation of income earned by foreign companies in India. It applies to those foreign companies which do not have a permanent establishment in India but are engaged in business activities within the country.
Taxability of Income
Under Section 115A, any income earned by a foreign company from sources within India is considered taxable in India. This includes income earned from any business operations, investments, or other activities conducted in India. The tax on such income is calculated at the rate of 40% (plus surcharge and cess as applicable) and is deducted at the source by the payer of such income.
Definition of Income
The definition of “income” under this section is broad and includes all types of revenue, profits, gains, or other forms of income earned by a foreign company in India. It also covers income earned from the sale of goods or services, royalties, interest, dividends, or any other type of income derived from sources within India.
Exceptions to Applicability
There are certain exceptions to the applicability of Section 115A. For instance, if the foreign company has a permanent establishment in India, then the income earned by it from the such establishment will be taxed under the normal provisions of the Income Tax Act. Similarly, if the foreign company is a resident of a country with which India has a Double Taxation Avoidance Agreement (DTAA), then the tax on such income will be determined by the provisions of the relevant DTAA.
Tax Identification Number (TIN)
Foreign companies engaged in business activities in India are required to obtain a Tax Identification Number (TIN) for the purpose of filing tax returns and complying with other tax-related obligations.
Final Conclusion
In conclusion, Section 115A of the Income Tax Act is an important provision that governs the tax treatment of income earned by foreign companies in India. Any foreign company that engages in business activities in India should be aware of the provisions of this section and ensure compliance with the applicable tax laws. It is advisable to seek professional advice in this regard to avoid any legal implications.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Here are some frequently asked questions (FAQs) related to Section 115A of the Income tax act:
Q. What is Section 115A of the Income Tax Act?
A. Section 115A of the Income Tax Act is a provision that deals with the taxation of income earned by foreign companies in India.
Q. Which foreign companies are covered under Section 115A?
A. Section 115A applies to foreign companies that do not have a permanent establishment in India but are engaged in business activities within the country.
Q. What is the tax rate applicable under Section 115A?
A. The tax rate applicable under Section 115A is 40% (plus surcharge and cess as applicable).
Q. What is the definition of “income” under Section 115A?
A. The definition of “income” under Section 115A is broad and includes all types of revenue, profits, gains, or other forms of income earned by a foreign company in India.
Q. Are there any exceptions to the applicability of Section 115A?
A. Yes, there are certain exceptions to the applicability of Section 115A. For instance, if the foreign company has a permanent establishment in India, then the income earned by it from the such establishment will be taxed under the normal provisions of the Income Tax Act.
Q. Do foreign companies need to obtain a Tax Identification Number (TIN) in India?
A. Yes, foreign companies engaged in business activities in India are required to obtain a Tax Identification Number (TIN) for the purpose of filing tax returns and complying with other tax-related obligations.
Q. What should foreign companies do to comply with Section 115A of the Income Tax Act?
A. Foreign companies engaged in business activities in India should ensure compliance with the provisions of Section 115A, including obtaining a TIN, filing tax returns, and paying taxes on income earned in India. It is advisable to seek professional advice in this regard to avoid any legal implications.
