US Technology Company: Royalty Return with Treaty Rate Substantiation
Situation
A US technology company was earning about ₹1.2 crore a year in royalty income from licensing technology to an Indian subsidiary. Absent a substantiated treaty position, this income risked being assessed at the higher ~20%+ domestic rate instead of the 10% treaty rate on scrutiny.
Approach
We prepared the company's India tax return reporting the royalty income, backed by the treaty rate position under the India-US DTAA, and ensured the TRC, Form 41 (formerly Form 10F), and supporting agreements were on file to substantiate the claim in case of scrutiny.
Outcome
The return was accepted with the 10% treaty rate applied rather than the ~20%+ domestic rate, avoiding over ₹12 lakh a year in potential additional tax exposure. This filing now serves as the template for the company's future India returns.
Identities are anonymized to protect client confidentiality. The situation, approach, and figures reflect an actual engagement.
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