CBDT notifies 40% tax rate for foreign companies having Place of Effective Management (POEM) in India

CBDT issues final notification u/s. 115JH specifying tax consequences in respect of a foreign company treated as resident in India because of its POEM being in India. CBDT further clarified that, “The rate of income tax applicable to a foreign company (40%) shall apply, even though the residential status of the foreign company changes from non-resident to resident on the basis of POEM.” This clarification will have retrospective applicability from the date POEM came into effect.

Also, with respect to compliance of TDS provisions relating to Collection and Recovery, the final notification prescribes that the provisions applicable to a foreign company will prevail over provisions applicable for resident companies in normal scenario. In this regard, the compliance of TDS provisions as applicable to the foreign company prior to its becoming Indian resident shall be considered sufficient.

Similarly, the notification amends the ‘modification / adaptation’ condition with respect to opening WDV of asset, brought forward losses and unabsorbed depreciation. The official link of the notification is below:


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