A foreign company receives ₹10 lakh of qualifying Indian royalty in tax year 2026–27. The royalty is not effectively connected with an Indian permanent establishment and no treaty reduction applies.…
Question and options
A foreign company receives ₹10 lakh of qualifying Indian royalty in tax year 2026–27. The royalty is not effectively connected with an Indian permanent establishment and no treaty reduction applies. What is the section 207 tax on this royalty before surcharge and cess?
₹3,00,000
Nil
₹1,00,000
₹2,00,000
Answer and explanation
Section 207(2) of the Income-tax Act, 2025 taxes royalty received by a foreign company from the Government or an Indian concern under a qualifying agreement at 20%, other than royalty effectively connected with a permanent establishment in India. Twenty per cent of ₹10 lakh is ₹2 lakh, before surcharge and cess.
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