Section 10(6C)- Exemption for Foreign Companies on Royalty/FTS Income

Table of Contents

Overview of Section 10(6C)

Section 10(6C) provides a tax exemption to foreign companies on income received as:

when the Indian payer (Government or Indian concern) bears the tax liability under an approved agreement.

Applicable Period: Agreements made between 1st June 2002 and 31st March 2024.
Approval Required: Must be approved by the Central Government(if related to industrial policy).
Tax Paid by Indian Entity: The Indian payer must pay tax on behalf of the foreign company.
Exemption Scope: The tax paid by the Indian entity is exemptfor the foreign company.

Scenario

Tax Treatment Under Section 10(6C)

SoftIndia Ltd. pays ₹2 croresto TechGlobal Inc. as royalty.
SoftIndia Ltd. also pays tax (₹20 lakhs)on behalf of TechGlobal Inc.
TechGlobal Inc. claims exemptionunder Section 10(6C) for the ₹20 lakhs tax paid by SoftIndia Ltd.
Result:

ASPECT	SECTION 10(6C)	SECTION 10(6A)	SECTION 10(6B)
Applicable Period	2002-2024	1976-2002	2002-2020
Income Covered	Royalty & FTS	Royalty & FTS	Royalty, FTS, Interest
Who Benefits?	Foreign Companies	Foreign Companies	Non-Residents + Foreign Companies
Tax Payer	Indian Concern	Indian Concern/Govt.	Indian Concern/Govt.

✅ Purpose: Encourages foreign technology transfer by reducing tax burden.

✅ No Double Taxation: Foreign company does not pay tax again on income already taxed in India.

✅ Approval Mandatory: Requires Central Government approval for industrial policy-related agreements.

✅ Time-Bound Benefit: Only applies to agreements signed before 31st March 2024.