Non-resident investors are staring at higher tax rates on dividends

Those not availing treaty benefits may have to shell out as much as 40% tax

Non-resident investors coming through the foreign direct investment (FDI) route and not availing treaty benefits are a worried lot as they stare at a higher tax outgo, with the withholding tax on dividends considerably higher than the applicable tax rates.

Post amendment, Section 115A of the Income Tax Act provides that non-residents would be taxed on the dividend at 20 per cent, plus surcharge and cess. The TDS or withholding tax is governed by Section 195, for which rates are specified each year in Part II of the first schedule of the Finance Act as “rates in force”. Usually, both TDS