Business
No tax on foreign firms' dividends outside India: CBDT
Chennai, March 27
The Central Board of Direct
Taxes (CBDT) has clarified that dividends declared and paid by a foreign
company outside India in respect of shares which derive their value
mainly from assets in India will not be deemed to be taxable in India.
The
CBDT's circular issued on March 26 puts at rest the concern raised by
many on the treatment of dividend declared and paid by a foreign company
under section 9(I)(i) of the Income Tax Act.
According to CBDT,
declaration of dividend by a foreign company outside India does not have
the effect of transfer of any underlying assets located in India.
"It
is, therefore, clarified that the dividends declared and paid by a
foreign company outside India in respect of shares which derive their
value substantially from assets situated in India would not be deemed to
be income accruing or arising in India by virtue of the provisions of
explanation 5 to section 9(I)(i) of the Act," it