Doing Business in India - RSM Austria

4.5 Income of Offshore Funds
Income of approved offshore funds from units of specified mutual funds and long
term capital gains on their transfer are taxed @ 10% plus surcharge at applicable
rates if the units are purchased in foreign currency.
5.0 WITHHOLDING TAXES
Every person, other than an individual and Hindu Undivided Family whose turnover
is below Rs. 40,00,000 in case of business entities and Rs. 10,00,000 in case of
profession, making certain specified payments including, interest, rent, fees for
professional and technical services rendered, brokerage and commission, contract
payments is required to deduct tax at source (TDS) at prescribed rates. From salary
payment, every person is required to deduct tax at source. In the case of nonresidents,
tax is required to be withheld as per the provisions of income-tax law as
modified by applicable double tax treaty provisions.
T h e F i n a n c e A c t , 2 0 1 0 i n c r e a s e d t h e t u r n o v e r l i m i t f r o m
Rs. 40,00,000 to Rs. 60,00,000 in case of business entities and Rs. 10,00,000 to
Rs. 15,00,000 in case of professions, which is applicable from financial year 2010-11.
Withholding taxes are normally payable within seven days of the end of the month in
which the tax is deducted / collected. However, tax on salary is payable within seven
days of payment of salary.
The person responsible for deducting tax at source is required to file annual return
of TDS before the specified dates. The non-filing of annual return of TDS or failure to
issue certificate within the prescribed period will attract penalty as specified in the
Act.
In case the income of a non-resident is not chargeable to tax in India or is taxable at
rates lower than that prescribed for withholding taxes, an application can be made
to the tax authorities for permission to deduct withholding taxes at a lower rate
than those prescribed under the Act.
The domestic rate of Tax Deduction at Source (TDS) for financial year 2010-11 as per
by the Finance Act 2010 is as per Annexure II.
6.0 DOUBLE TAX TREATIES
The Government of India has entered into comprehensive Double Tax Avoidance
Agreements (DTAA) with about 78 countries to avoid double taxation of income.
Certain other limited agreements are entered into by India to avoid double taxation
of income only from shipping and air transport.
For countries with no DTAAs with India, a unilateral tax credit for tax paid in foreign
countries is available under Indian domestic law to a resident tax payer. This relief is
by way of deduction from the Indian income tax of a sum which is calculated on the
double taxed income at the lower of Indian rate of tax or the rate of tax of the other
country where tax has been paid. The list of the countries with which India has
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DOING BUSINESS IN INDIA