When doing business with India, one must be aware of the tax risks. As of April 1st, 2023, India has doubled its withholding tax rate on technical services and royalties from 10 % to 20 %. India applies a wide understanding of the term “technical services". Additionally, the Indian tax obligation in this regard is not dependent on whether the services were physically performed in India. India has agreed on a 10 % taxing right on technical services in many of its double tax treaties, e.g. with Austria. As the treaty tax rate and the Indian national tax rate for the withholding tax on technical services and royalties now fall apart, foreign service providers must deal with Indian domestic formal procedures to apply treaty benefits. Nevertheless, the risk of excessive taxation of profits from Indian projects remains.
