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India - Benin — Orbitax Withholding Tax Rates

Capital Gains

  • Best Rates10.92%
  • Domestic Rates 10.92%
  • Treaty Rates-
  • EU Rates-

Domestic

Capital gains arising to non-residents and foreign portfolio investors (FPIs) from the transfer of capital assets are subject to special tax rates under the Income Tax Act, based on the nature of the relevant capital assets, viz. short-term or long-term. Short-term capital assets are defined as:

  • Listed shares/ securities or units of an equity-oriented mutual fund held for not more than 12 months;
  • Market linked debentures and units of specified mutual fund (less than or equal to 35% of the proceeds are invested in equity shares of domestic companies) acquired on or after 1 April 2023;
  • Unlisted shares of a company/ immovable property held for not more than 24 months; and
  • Any other capital asset held for not more than 36 months.

Any capital asset not covered above as a short-term asset is considered a long-term capital asset.

Long-term capital gains are calculated after considering the indexed cost of acquisition and the cost of improvement, i.e., the acquisition/ improvement cost is increased by a prescribed multiplier based on the period of holding to adjust for inflation.

The following rates apply on capital gains:

  • Arising from the transfer of listed shares or specified securities on which securities transaction tax (see Sec. 8.1.3. in India Analysis Chapter) has been paid (effective 1 April 2018):
    • 10% (plus applicable surcharge and cess) in case of long-term capital gains exceeding INR 100,000;
    • 15% (plus applicable surcharge and cess) in case of short-term capital gains; and
  • Arising from the transfer of any other capital assets (including other securities):
    • 10% (plus applicable surcharge and cess) in case of long-term capital gains arising from other securities;
    • 20% (plus applicable surcharge and cess) in case of any other long-term capital gains;
    • standard corporate tax rate of 40% (plus applicable surcharge and cess) in case of any other short-term capital gains; and
    • 30% (plus applicable surcharge and cess) in case of short-term capital gains earned by FPIs.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on capital gains as follows:

 

 

Income

Long-Term Capital Gains

Short-Term Capital Gains

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

40%

40%

40%

Surcharge

Nil

2%

5%

Nil

2%

5%

Health and Education cess

4%

4%

4%

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

41.60%

42.43%

43.68%

 

Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

Dividend

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Effective from 1 April 2020, tax is withheld at the rate of 20% (plus applicable surcharge and cess) on the gross amount declared, distributed, or paid to non-resident recipients by domestic companies.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on dividends as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

 A reduced withholding tax rate of 10% (plus applicable surcharge and cess) applies on:

  • Dividends paid on Global Depository Receipts (GDRs) issued by an Indian company or a public sector company, provided the GDRs are purchased in foreign currency; and
  • Dividends received by a business trust from a special purpose vehicle (Real Estate Investment Trust and Infrastructure Investment Trust) distributed to the unit holders of the business trust.

Until 31 March 2020, dividends distributed by an Indian company were not taxable in the hands of the recipient. Instead, a dividend distribution tax (DDT) applied on dividends distributed by Indian companies at the rate of 15% (plus applicable surcharge and cess).

Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

 

Interest

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Interest paid to a non‐resident without a branch or permanent establishment in India (to which the income is connected) is subject to withholding tax at the rate of 20%.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on interest as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

Certain reduced withholding tax rates also apply as follows:

  • 10% (plus applicable surcharge and cess) on income by way of interest in respect of bonds issued by an Indian company or a public sector company, provided the bonds are purchased in foreign currency; and
  • 5% (plus applicable surcharge and cess) on the following interest income earned by a non‐resident or Foreign Portfolio Investor (FPI):
    • Interest on certain borrowings in foreign currency, subject to certain conditions;
    • Interest on borrowings by way of specified infrastructure debt funds;
    • Interest on long term bonds if the borrowing is made between 1 October 2014 and 30 June 2023;
    • Interest payment to FPIs in respect of bonds issued by Indian companies and on government securities up to 30 June 2023; and
    • Interest payments on Municipal Bonds.

Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

Royalty - Copyright

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Tax is withheld at the rate of 20% (increased from 10% effective 1 April 2023) on royalties paid by a resident to a non‐resident.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on royalties as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

Subject to an applicable tax treaty, if the royalties paid are effectively connected to a permanent establishment in India of the non-resident recipient, the tax is withheld on a net income basis at a rate of 40% (plus applicable surcharge and cess) after allowing a deduction for expenses. The following are not deductible for this purpose:

  • Expenditure not wholly and exclusively incurred for the business of the permanent establishment; and
  • Amounts paid otherwise than towards reimbursement of actual expenses by the permanent establishment to its head office or to any of its other offices.

 Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

Note that the Supreme Court on 2 March 2021 ruled that payments to non-residents for the use of the software must not be classified as royalties under India’s tax treaties and, therefore, should not attract the royalty withholding tax in situations covered by a tax treaty.

Royalty - Patent

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Tax is withheld at the rate of 20% (increased from 10% effective 1 April 2023) on royalties paid by a resident to a non‐resident.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on royalties as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

Subject to an applicable tax treaty, if the royalties paid are effectively connected to a permanent establishment in India of the non-resident recipient, the tax is withheld on a net income basis at a rate of 40% (plus applicable surcharge and cess) after allowing a deduction for expenses. The following are not deductible for this purpose:

  • Expenditure not wholly and exclusively incurred for the business of the permanent establishment; and
  • Amounts paid otherwise than towards reimbursement of actual expenses by the permanent establishment to its head office or to any of its other offices.

 Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

Note that the Supreme Court on 2 March 2021 ruled that payments to non-residents for the use of the software must not be classified as royalties under India’s tax treaties and, therefore, should not attract the royalty withholding tax in situations covered by a tax treaty.

Royalty - Trademark

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Tax is withheld at the rate of 20% (increased from 10% effective 1 April 2023) on royalties paid by a resident to a non‐resident.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on royalties as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

Subject to an applicable tax treaty, if the royalties paid are effectively connected to a permanent establishment in India of the non-resident recipient, the tax is withheld on a net income basis at a rate of 40% (plus applicable surcharge and cess) after allowing a deduction for expenses. The following are not deductible for this purpose:

  • Expenditure not wholly and exclusively incurred for the business of the permanent establishment; and
  • Amounts paid otherwise than towards reimbursement of actual expenses by the permanent establishment to its head office or to any of its other offices.

 Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

Note that the Supreme Court on 2 March 2021 ruled that payments to non-residents for the use of the software must not be classified as royalties under India’s tax treaties and, therefore, should not attract the royalty withholding tax in situations covered by a tax treaty.

Sales

  • Best Rates0%
  • Domestic Rates 0%
  • Treaty Rates-
  • EU Rates-

Domestic

The rate shown is based on physical sales which typically do not attract a withholding tax. Note, however, that more and more countries apply various types of taxes to “digital transactions” and similar. India specifically provides for an equalisation levy at the rate of 2% for non-resident e-commerce operators; and VAT at the standard rate of 18% on supplies provided through a digital marketplace in India. For details of such taxes in India, see Sec. 8.2.1. and Sec. 12. in India Analysis chapter.

Service - Management

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Tax is withheld at the rate of 20% (increased from 10% effective 1 April 2023) on managerial service fees paid by a resident to a non-resident.

 A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on service fees as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

 Subject to the provisions of the applicable tax treaty, if the service fees paid are effectively connected to a permanent establishment in India of the non-resident recipient, the tax is withheld on a net income basis at a rate of 40% (plus applicable surcharge and cess) after allowing a deduction for expenses. The following are not deductible for this purpose:

  • Expenditure not wholly and exclusively incurred for the business of the permanent establishment; and
  • Amounts paid otherwise than towards reimbursement of actual expenses by the permanent establishment to its head office or to any of its other offices.

Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.

Service - Technical

  • Best Rates21.84%
  • Domestic Rates 21.84%
  • Treaty Rates-
  • EU Rates-

Domestic

Tax is withheld at the rate of 20% (increased from 10% effective 1 April 2023) on technical service fees paid by a resident to a non-resident.

A surcharge applies at progressive rates on the tax amount, viz. 0% where income is less than or equal to INR 10 million, 2% where the total income exceeds INR 10 million but is less than or equal to INR 100 million, and 5% where the total income exceeds INR 100 million. A Health and Education Cess of 4% also applies on the tax and surcharge. This results in an effective tax rate on service fees as follows:

Income

Below INR 10 million

INR 10 million to INR 100 million

Above INR 100 million

Basic Rate

20%

20%

20%

Surcharge

Nil

2%

5%

Health and Education Cess

4%

4%

4%

Effective Tax Rate

20.80%

21.22%

21.84%

 

Subject to the provisions of the applicable tax treaty, if the service fees paid are effectively connected to a permanent establishment in India of the non-resident recipient, the tax is withheld on a net income basis at a rate of 40% (plus applicable surcharge and cess) after allowing a deduction for expenses. The following are not deductible for this purpose:

  • Expenditure not wholly and exclusively incurred for the business of the permanent establishment; and
  • Amounts paid otherwise than towards reimbursement of actual expenses by the permanent establishment to its head office or to any of its other offices.

Effective 1 July 2021, tax should be withheld at twice the rate specified under domestic law for payments made to non-residents having a permanent establishment in India, where:

  • The non-resident has not filed the tax return for one financial year (reduced from two financial years effective 1 April 2022) preceding the financial year in which tax is required to be withheld;
  • The due date for filing the tax return has expired; and
  • The aggregate of the tax withheld is INR 50,000 or above in the said financial year.