The government has doubled the withholding tax rate on royalties and fees for technical services earned by non-resident companies to 20% from 10%. The change has been brought about through the amendments made to the Finance Bill, 2023 by finance minister Nirmala Sitharaman on Friday.

While many companies are covered by double taxation avoidance agreements, under which they would get the beneficial tax rate of 10-15%, experts said it would lead to a higher compliance burden, as they would still require the tax residency certificate and related documentation from the foreign firm to avail the tax benefit.

The withholding tax is usually paid by the Indian company and India Inc is still weighing out the impact of the move on their policies. “The rate under the Income Tax Act has been increased to 20%.