Union Budget 2021: FPIs may have to wait for dividend tax relief

Firms will examine qualitative factors before extending treaty benefits

Companies may continue to withhold tax at domestic tax rates, even though the Budget amendment has allowed foreign portfolio investors (FPIs) to avail of lower treaty rates on dividends paid.

Experts said companies wanting to consider treaty benefits and deducting tax at a lower rate will have to examine the qualitative factors. They will have to consider whether FPIs are liable to tax and whether they are the beneficial owner of dividend income. Indian companies paying dividends may not have the resources at their disposal for every FPI to which it pays dividend.

Indian tax authorities in the past have ruled an