NEW DELHI: The amended India-Mauritius tax treaty has inserted a new clause allowing source-based taxation at 10 per cent on fees paid for technical and consultancy services.
Besides, permanent establishment for the ‘services’ sector has been introduced under which the business income of an employee of a foreign company in India will be taxable if he or she spends 90 days in India in the past 12 months.
The revision provides for 10 per cent tax on gross basis for fees for technical services (FTS) in the source state, according to the text of the treaty amendment signed on Tuesday.
So far, a company or entity was deemed to have a permanent establishment (PE) in India if it had a place of business or site or office building or factory workshop.
Tax experts said that now if a company’s employees spend 90 man days in India, then the companies’ business income in India will be taxable at 40 per cent.
“Through the inclusion of the services PE clause, the tax net has been widened,” an expert said, adding that tax credit can be obtained.
The tax will be at the highest applicable rate between the two countries. (AGENCIES)
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