Cash flow relief: FPIs granted breather on dividend taxation in Budget

The Union Budget has rationalised the tax on dividends for foreign portfolio investors (FPIs), bringing it at par with treaty rates, which could be lower than the 20 per cent tax rate applied today. Last year’s Union Budget had created uncertainty regarding the amount of tax that had to be withheld on dividend paid to non-residents. This was because the exact tax rate was not specified under Section 195, which covers tax deducted at source (TDS) or withholding tax for non-residents.

The Finance Act, 2020, had clarified that a withholding tax rate of 20 per cent plus surcharge and cess be