FPIs may face challenges related to withholding tax on dividend income

Foreign portfolio investors (FPIs) may have to face challenges related to the withholding tax on dividend income, because of changes in the Budget.

The tax applies even to FPIs that might otherwise have been protected from a higher tax rate because of existing treaties. They may require special certificates from the revenue department or have to wait for a refund after filing their returns, say experts. Firms will be required to withhold tax at the rate of 20 per cent (plus applicable surcharge and education cess) on dividend to FPIs once the Budget changes come into effect. 

At present, they