INDIA: Dividend Surcharge Tax Cap Enacted

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October 1, 2020 TO: ICI Members
ICI Global Members
Accounting/Treasurers Committee
ICI Global Tax Committee
Tax Committee SUBJECTS: Fund Accounting & Financial Reporting
International/Global
Tax RE: INDIA: Dividend Surcharge Tax Cap Enacted

 

On September 29, 2020, the Indian Government enacted a cap on surcharge tax at a rate of 15 percent on dividends paid to non-corporate and non-firm foreign portfolio investors (FPIs) – see attachment. The legislation addresses the concerns raised by ICI Global in its submissions to the Indian Government earlier this year.[1]

The legislation is retroactive to April 1, 2020. Thus, effective tax rates for covered FPIs are as follows:

Dividend income Effective tax rate (%) Dividend income <= Rs 5 million 20.80 Rs 5 million > Dividend income <= Rs 10 million 22.88 Dividend income > Rs 10 million 23.92

Accordingly, non-corporate and non-firm FPIs organized in the US would not need to rely on the US-India tax treaty to reduce the withholding tax rate on dividends.

 

Katie Sunderland
Assistant General Counsel

 

Attachment

endnotes

[1] See ICI Memorandum No. 32600, dated July 14, 2020; ICI Memorandum No. 32345, dated April 1, 2020; and ICI Memorandum No. 32255, dated March 2, 2020.