FPIs continue to pay higher tax on dividends despite Budget relief

NSDL readying a platform to make it easier for companies to deduct appropriate tax

Companies continue to withhold tax at domestic tax rates of 20 per cent, plus surcharge and cess in FY22 even though this year's Budget amendment has allowed foreign portfolio investors (FPIs) to avail of lower treaty rates of 5-15 per cent on dividends paid from April 1, said two people familiar with the matter.  

Indian companies paying dividends do not have the resources at their disposal to ascertain whether an FPI is eligible for treaty benefits and whether they are the beneficial owner of dividend income, they said. In the past, tax authorities have ruled an entity as not being