Section 207: tax on royalty and fees for technical services for non-residents

The general 20% rate

Where a non-resident's (or foreign company's) total income includes income of the specified kinds set out in the section's table - which includes royalty, fees for technical services, and certain income from units purchased in foreign currency - the tax payable is computed at 20% on that income (other than income covered separately under Section 194(1)), plus tax on the balance of total income as if that balance were the whole total income.

The special rule for pre-1976 agreements

Where a non-resident's or foreign company's income includes royalty or fees for technical services received from the Government or an Indian concern under an agreement made after 31 March 1976 (approved by the Central Government where made with an Indian concern, or aligned with India's industrial policy at the time), the tax payable is computed at the rate specified in the section's table for that category, subject to a further condition in sub-section (3).

Where the royalty in that scenario is consideration for transferring rights in the copyright of a book to an Indian concern, or in computer software to a person resident in India, that further condition doesn't reduce the applicable rate.

No deductions, and return-filing exemption

As with the flat-rate provisions elsewhere in this Chapter, no deduction for expenditure or allowance is permitted under Sections 28 to 58, 60, 61 or 93 against income covered by this section, and Chapter VIII deductions are computed only on any remaining, non-covered income (subject to the Section 147 IFSC-unit exception).

An assessee need not furnish a return of income under Section 263(1) where their total income consisted only of income covered by this section and tax was fully deducted at source at not less than the rate specified here.

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