India

Alternate tax regime

The optional alternate personal tax regime, devoid of any deductions or exemptions, has been made the default tax regime effective 1 April 2023. The tax rates under this regime have been revised. Further, a rebate of 100% income tax has been allowed for resident individuals where total income does not exceed 700,000 Indian rupees (INR), and a standard deduction of INR 50,000 has been allowed. See the corresponding sections of India’s individual tax summary for details.

The taxpayers who want to opt for the old tax regime have to specifically indicate this preference in the manner as prescribed.

Increased withholding tax rate (WHT) for royalty and fee for technical service (FTS) payments made to non-residents

The 10% special tax rate, as provided under the domestic tax laws, on royalty and FTS income earned by a non-resident or a foreign company that does not have permanent establishment (PE) in India has been increased to 20%. Accordingly, royalty/FTS incomes that are chargeable to tax for a non-resident on or after 1 April 2023 will require  tax to be deducted at the rate of 20% plus applicable surcharge and cess under the domestic tax laws.

However, non-residents or foreign companies can still avail the benefit of a lower tax rate provided in the tax treaties, subject to compliance with the treaty eligibility conditions.

E-filing of Form 10F without Permanent Account Number (PAN) enabled

In order to be eligible to claim the tax treaty benefits, a non-resident is, inter alia, required to furnish certain details in Form 10F. The said form is required to be filed electronically on the income-tax portal. The Central Board of Direct Taxes (CBDT) has enabled non-residents, who do not have a PAN (i.e. tax identification number) and are not required to have a PAN, to e-file Form 10F on the income-tax portal by creating an account without the requirement of first obtaining a PAN.

Withdrawal of small outstanding direct tax demands

In the Interim Budget 2024-25, the Finance Minister announced withdrawal of petty, non-verified, non-reconciled or disputed tax demands under the Income-tax Act, 1961, Wealth-tax Act, 1957 and Gift-tax Act, 1958 (relevant Act). To bring this into effect, the CBDT has issued an order broadly providing below guidelines/ conditions based on which the tax demands will be withdrawn.

• The monetary limit of outstanding tax demands (which are outstanding as on 31 January 2024 under the relevant Acts) which are to be remitted or extinguished are as follows:
• Up to tax year 2009-10 – Each demand entry up to INR 25,000
• For tax years 2010-11 to 2014-15 – Each demand entry up to INR 10,000

• The tax demands will include principal amount of tax, interest, surcharge, cess, penalty or fee levied under the relevant Acts. However, remission/ extinguishment of outstanding demands qua a particular taxpayer cannot exceed the maximum ceiling limit of INR 100,000 and any demand entry exceeding the individual monetary limit will not form part of the maximum ceiling limit;
• Fractions of demand will be ignored for computing the maximum ceiling.
• Remission/ extinguishment of demand will be undertaken in a chronological manner;
• Interest levied under the relevant Acts on account of delay in payment of demand will not be considered;
• The demand waived will not be regarded as income of the taxpayer and hence no additional tax liability will arise in the hands of the taxpayer pursuant to remission or waiver of tax demands.
• There will be no remission/ extinguishment of outstanding demands with respect to tax deduction at source (TDS) and tax collection at source (TCS) provisions of the income-tax law.
• Post the remission/ extinguishment of demands, no interest on account of delay in payment of demand will be levied under any relevant Acts.
• Withdrawal/ remission of tax demands will not give any right to the taxpayers to claim credit or refund of waived amount and such waiver will also not grant immunity from any ongoing criminal proceedings or litigations in the case of a taxpayer.
• The withdrawal will be implemented by Directorate of Income-tax (Systems)/ Centralised Processing Centre (CPC), Bengaluru, preferably within two months from the date of CBDT order, i.e. 13 February 2024.