Withholding Tax Rates

Know withholding tax rates is important for people making payments to a foreign company or an NRI. This ensures proper taxes are paid by deduction or withholding. There are countries with which India has a Double Taxation Avoidance Agreement.
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What is Withholding Tax?

Person who is making payment to a non-resident or a foreign company is required to withhold tax. The tax is deductible at the rate prescribed under the Act or relevant Double Taxation Avoidance Agreement (DTAA).

Withholding tax is an obligation on the part of the payer to withhold tax at the time of paying rent, commission, salary, professional services, contract etc. at the rates specified in the tax rule.

Withholding taxes are the government’s way of ensuring that proper taxes are paid on item by way of either withholding or deducting the relevant tax amount from the income of an individual or an enterprise.

When payment has to be made for a non-resident Indian, the payer is obliged to deduct tax at source. If the payment is not taxable, then the payer must make an application to the assessing officer to determine the proportion that is chargeable to tax. The tax is then to be deducted only on that chargeable proportion.

The tax must be deducted at the rate prescribed or rate specified in Double Taxation Avoidance Agreement, whichever is beneficial to the assessee.

What is the Withholding Tax Rate in India?

The current rate for withholding tax in India for making payments to non-residents are:

  • Interest – 20%
  • Dividends paid by domestic companies – Nil
  • Royalties – 10%
  • Technical services – 10%
  • Individuals – 30% of the income
  • Companies – 40% of the net income.

Note: The rates are general and are applicable in respect of countries that India does not have a Double Taxation Avoidance Agreement.

Countries with which India has Double Taxation Avoidance Agreement, the taxes are determined as follows:

Country

Dividend

Interest

Royalty

Technical service fee

Albania

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Armenia

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Australia

15%

15%

  • 10% in case of rental of equipment or services

  • 15% if payer is Government or specified organisation during first 5 years of agreement

  • 20% in other cases during first 5 years of agreement

  • 15% in subsequent years

Same as the royalty

Austria

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Bangladesh

10% if the recipient holds at least 10% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

No provision

Belarus

10% if the recipient holds at least 25% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15%

Belgium

15%`

15% if loan is granted by bank

10%

10%

Botswana

7.5% if the recipient holds at least 25% of the shares of the company paying dividends

10% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Brazil

15%

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

25% for trademark use

15% for others

15%

Bulgaria

15%

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15% for literary, artistic, scientific work other than that used for television or radio

20% for other cases

20%

Canada

15% if the recipient holds at least 10% of the shares of the company paying dividends

25% for other cases

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10 – 15%

10 – 15%

China

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Columbia

5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Croatia

5% if the recipient holds at least 10% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Cyprus

10% if the recipient holds at least 10% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15% or 10%

Czech Republic

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Denmark

15% if the recipient holds at least 25% of the shares of the company paying dividends

25% for other cases

10% if loan is granted by bank

15% for others

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

20%

20%

Estonia

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Ethiopia

7.5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Finland

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Fiji

5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

France

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Georgia

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Germany

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Hungary

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Indonesia

10% if the recipient holds at least 25% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

No provision

Iceland

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Ireland

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Israel

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Italy

15% if the recipient holds at least 10% of the shares of the company paying dividends

25% for other cases

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

20%

20%

Japan

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Jordan

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

20%

20%

Kazakhstan

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Kenya

15%

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

20%

17.5%

Korea

15% if the recipient holds at least 20% of the shares of the company paying dividends

20% for other cases

10% if interest is paid to a bank

15% for others

15%

15%

Kuwait

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

10%

Kyrgyz Republic

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15%

Latvia

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Lithuania

5% if the recipient holds at least 10% of the shares of the company paying dividends

15%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Luxembourg

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Malaysia

5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Malta

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Mongolia

15%

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15%

Mauritius

5% if the recipient holds at least 10% of the shares of the company paying dividends

15% for other cases

No provision

15%

No provision

Montenegro

5% or 15%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Myanmar

5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

No provision

Morocco

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Mozambique

7.5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

No provision

Namibia

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Nepal

5% if the recipient holds at least 25% of the shares of the company paying dividends

10% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

No provision

Netherlands

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

New Zealand

15%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Norway

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Oman

10% if the recipient holds at least 10% of the shares of the company paying dividends

12.5% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15%

Philippines

15% if the recipient holds at least 10% of the shares of the company paying dividends

20% for other cases

10% if interest is paid to financial institution or an insurance company

15% in other cases

15% if payable if the collaboration is approved by the Government of India

No provision

Poland

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15%

Portuguese Republic

10% if recipient holds 25% of the capital stock of the company paying dividends

15%

10%

10%

10%

Qatar

5% if the recipient holds at least 10% of the shares of the company paying dividends

10% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Romania

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Russian Federation

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Saudi Arabia

5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

No provision

Serbia

5% if the recipient holds at least 25% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Singapore

10% if the recipient holds at least 25% of the shares of the company paying dividends

15% for other cases

10% of loan is granted by bank

15% for others

10%

10%

Slovenia

15% if the recipient holds at least 10% of the shares of the company paying dividends

15% for other cases

10%

10%

10%

South Africa

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Spain

15%

15%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10% if royalties relating to the payments for use or the right to use, industrial, commercial or scientific equipment.

20% for technical services and other royalties

20%

Sri Lanka

7.5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Sudan

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Sweden

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Swiss Confederation

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Syrian Arab Republic

5% if the recipient holds at least 10% of the shares of the company paying dividends

10% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

No provision

Tajikistan

5% if the recipient holds at least 25% of the shares of the company paying dividends

10% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

No provision

Tanzania

5% if recipient owns 25% share in the company paying the dividend

10% for others

10%

10%

No provision

Thailand

15% if the recipient holds at least 10% of the shares of the company paying dividends

20% for other cases

10% of interest is received by a financial institution or insurance company

25% for others

15%

No provision

Trinidad and Tobago

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Turkey

15%

10% if recipient is bank

15% in other cases

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

15%

15%

Turkmenistan

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Uganda

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Ukraine

10% if the recipient holds at least 25% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

United Arab Emirates

10%

5% if loan granted by bank

12.5 for other cases

10%

No provision

United Mexican States

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

United Kingdom

15% - if dividends are paid out of income deriving from movable and immovable property

10% on other cases

10% if recipient is bank

15% in other cases

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10% if royalties relating to the payments for use or the right to use, industrial, commercial or scientific equipment.

20% for technical services and other royalties

10% if royalties relating to the payments for use or the right to use, industrial, commercial or scientific equipment.

20% for technical services and other royalties

United States

15% if the recipient holds at least 10% of the shares of the company paying dividends

25% for other cases

10% of loan is granted by bank or if you are paying interest to an insurance company

15% for others

10% or 15%

10% or 15%

Uruguay

5%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Uzbekistan

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Vietnam

10%

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

Zambia

5% if the recipient holds at least 25% of the shares of the company paying dividends

15% for other cases

10%

Dividend or interest earned by government and RBI is exempt from taxation in the country of source

10%

10%

If the person who is required to deduct the sum in accordance with the IT Act does not deduct, he shall be deemed as an ‘assessee in default’ and he will be liable to pay interest and penalty.

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