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CS Professional · Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Return of Companies

Under the Income-tax Act, 2025 (applicable from June 2027), a foreign company's total income includes dividend from an Indian company (not from an IFSC unit). At what rate is tax payable on this dividend under section 207(1)?

The tax rate is 20%. Section 207(1) taxes dividend received by a foreign company, other than dividend from an International Financial Services Centre unit, at 20%. The lower 10% rate is reserved for IFSC unit dividends, and rates in force apply only to remaining income.

  1. A10%
  2. B20%Correct
  3. C5%
  4. DRates in force

Explanation

Section 207(1), Table Sl. No. 1, fixes 20% on dividend other than dividend received from an IFSC unit. The 10% rate applies only to dividend from an IFSC unit. 'Rates in force' applies only to the residual total income.

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