Information about taxation in India

WITHHOLDING TAX

India has comprehensive withholding tax laws that require payers (resident or non-resident) to deduct tax on payments made to non-residents if those payments are taxable in India. The kind of payment, the recipient's tax residence, and the presence of tax treaty advantages all affect the withholding tax rate.

If any recipient of income from India is required to withhold taxes under Indian domestic tax law, they must obtain a Permanent Account Number (PAN) (learn how to obtain a PAN here). Indian payers are required by domestic tax legislation to withhold tax at a rate of 20% or higher in the absence of a PAN.

Since the tax legislation allows for major negative repercussions for non-withholding, such as the denial of a tax deduction for the expenditure, the recovery of taxes, as well as interest and penalty, there has been an increase in the attention on withholding taxes. On matters involving withholding tax, there has been significant tax litigation in recent years.

There is a tax deduction under section 80g.

TAX TREATY PROVISIONS IN INDIA

If treaty provisions are more advantageous than domestic tax law, a non-resident has the right to enforce them. A tax residence certificate must be submitted together with any other information that may be required in order to implement treaty terms.

CAPITAL GAINS IN INDIA

Currently, capital gains are taxed according to the type of asset and the length of time it was held. Short-term capital gains are taxed at regular corporation tax rates and are only applicable to assets held for a maximum of 36 months (12 months in the case of shares). Taxes on long-term capital gains range from 10% to 20%. (plus applicable surcharge and education cess).

Listed shares and instruments have preferential rates ranging from 0% to 15% (plus any relevant surcharge and education cess), depending on the length of ownership. Indian law has measures for taxing shares transferred indirectly. Any transfer of an asset or interest in a firm that derives a significant portion of its value from assets in India would thus be subject to capital gains tax. To limit the use of indirect transfers, a significant barrier was recently established.

BRANCH REPATRIATION IN INDIA

Even if such measures are being considered for introduction under the DTC, there is no tax on the transfer of earnings made by a branch of a non-resident corporation to its head office.

WEALTH TAX AND GIFT TAX IN INDIA

In India, there is no gift tax, but there are anti-avoidance rules that apply to some transactions that are made without due care. Up until last year, there existed a 1% wealth tax, but it is no longer in effect.

You are at an apt place for knowing about 80g income tax.