We are a software company(Registered as private limited company in India) and 99% of the shares are held by our Parent company registered in Norway. We are engaged in software development and the parent company wants us to pay Royalty on Sales @ 30%
- Question 1: Whether the royalty paid to our parent company is taxable in India in the hands of the parent company?
- Question 2: If so whether tax is payable on the gross amount or not and at what rate (as per DTA no rate is specified)?
- Question 3: Whether withholding tax is applicable?
Your Email : subbaiyapb@gmail.com
“ the total income33 of any previous year of a person who is a non-resident includes all income from whatever source derived which
- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or
- (b) accrues or arises or is deemed to accrue or arise to him in India during such year
Deemed to accrue or arise in India is given in section 9 of the I T Act .There is specific provision related to Royalty in section 9(vi)(b) of the I T Act. The said provision states
(vi) income by way of royalty payable by (b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or
Thus ,it is clear that royalty payments by a person resident in India is deemed to accrue or arise in India if does not fall within exception provided in the said provision .Hence royalty to be paid by you to parent company is chargeable to income tax in India.
Withholding Tax @ what Rate
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