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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

Under the Income-tax Act, 2025 text, how is a higher rate of tax on a foreign company, compared with the rate for a domestic company, viewed for treaty purposes?

A charge of tax on a foreign company at a rate higher than that applicable to a domestic company is not regarded as a less favourable charge or levy of tax. The same rule applies to a company incorporated in a specified territory.

  1. AIt is regarded as a less favourable charge of tax on the foreign company
  2. BIt is not regarded as a less favourable charge or levy of tax on the foreign companyCorrect
  3. CIt is prohibited unless the treaty expressly permits it
  4. DIt is permitted only for companies incorporated in specified territories

Explanation

The text says a charge on a foreign company at a rate higher than that for a domestic company shall not be regarded as a less favourable charge or levy of tax. The same applies to a company incorporated in a specified territory, so the last option wrongly restricts it.

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