Section 10(48) of the Income Tax Act provides an exemption in respect of income received by certain foreign companies. This provision aims to promote foreign investment and encourage the establishment of business operations in India.
To be eligible for this exemption, the following conditions must be satisfied:
- The foreign company must be a resident of a country with which India has a double taxation avoidance agreement (DTAA).
- The income must be covered by the DTAA.
- The foreign company must satisfy the conditions specified in the DTAA.
The types of income that are typically exempt from tax under Section 10(48) include:
- Fees for technical services
- Capital gains
The specific conditions that must be satisfied by the foreign company to claim exemption under Section 10(48) will vary depending on the terms of the DTAA between India and the country of residence of the foreign company.
Here are some examples of cases where the exemption under Section 10(48) will be available:
- A US company receives dividends from its Indian subsidiary. The US company will be exempt from paying Indian income tax on the dividends, if the US-India DTAA is applicable.
- A Japanese company receives interest on a loan made to an Indian company. The Japanese company will be exempt from paying Indian income tax on the interest, if the Japan-India DTAA is applicable.
- A German company receives royalties from an Indian company for the use of its patented technology. The German company will be exempt from paying Indian income tax on the royalties, if the Germany-India DTAA is applicable.
- Foreign companies that hold investments in Indian companies.
- Foreign companies that provide loans to Indian companies.
- Foreign companies that own intellectual property that is used in India.
- Foreign companies that provide technical services in India.
It is important to note that the exemption under Section 10(48) is only available to foreign companies. Indian companies are not eligible for this exemption.
Section 10(48) of the Income Tax Act provides a beneficial exemption for foreign companies engaged in the development, maintenance, and operation of notified infrastructure facilities. This exemption encourages foreign investment in India’s infrastructure sector and promotes economic growth. However, it is important for foreign companies to meet the eligibility criteria and fulfill the conditions in order to avail the exemption. By providing this exemption, the Indian government aims to attract foreign companies and boost infrastructure development in the country.