NEW DELHI: Foreign companies generating income in India could soon get additional tax benefits with the Central Board of Direct Taxes (CBDT) indicating lowering of withholding tax rate. Both domestic and foreign firms with income in India are required to withhold taxes on any payment to another party and deposit that tax with the government. Companies usually have to withhold taxes interest, royalties or fees paid for technical services.
“Withholding tax deducted by various segments of business varies between 1 and 42 per cent. Since the refund quantum is so large, we have suggested the department to analyse the class on investors to whom the refund is due every year and reduce the TDS rate for them,” CBDT chairman Sushil Chandra said on Wednesday.
Speaking at an international tax conference organised by industry chamber Assocham, Chandra asked firms and multi-nationals operating in India to pay their due share of taxes. He also pointed that adequate safeguards have been put in place to ensure that anti-abuse provisions such as general anti-avoidance rule (GAAR) are not misused.
“We are open to any suggestions, which can make the life of a genuine taxpayer easy,” said Chandra.
He allayed the fear among MNCs on the use of GAAR, which will be invoked only if the tax provisions are misused. Companies, firms or MNCs should believe in fair taxation, he said.
GAAR, which became effective from April 2017, allows the I-T officers to seek information to verify if a transaction was done for the purpose of business or the firm had any intention to avoid taxes.