Does Witholding tax apply?
We’re planning to run a series of technical training courses in India and have been advised by our Indian business partner that all services are subject to a 20% witholding tax. When trying to confirm this on Gov websites, it appears that management and technical fees are exempt but the wording is very unclear.
Does anyone have specific experience in this area?
Try contacting Milan Patel of King and King chartered accountant as I believe have excellent knowledge of Indian market.
The applicable Withholding Tax (WHT) rate on payment in the nature of Royalty, Technical fees or transfer of Knowhow/Technology/Drawings/ Designs is primarily governed by India UK DTAA and relevant provisions contained in Income Tax Act,1961(ITA).
As per the Article 13 (2)(a)(ii) of the Indo-UK DTAA the applicable tax rate is 15%. Section 115A of the ITA provides for concessional tax rate of 10% for royalty agreement made on or after 1st June 2005 up to financial year 31.03.2013. The Finance Bill 2013 has proposed to increase this rate to 25% with effect from 1.4.2014. However, the rate of withholding tax under ITA vis-a-vis the tax treaty whichever is beneficial would apply provided you. furnish a Tax Residency Certificate (TRC) and obtains a PAN (Permanent Account Number) in India. In absence of PAN the applicable withholding tax rate would be 20% in view of mandate u/s. 206AA of the ITA.
To get the concessional WHT rate of 15% you should obtain PAN in India and furnish TRC to its payee in India