Microlesson · 5-min read

Foreign Companies — Rates of Tax

# Foreign Companies and Rates of Tax

## Applicable Rates

Income	Rate
Royalties & fees for technical services (FTS) from Government / Indian concern under specific agreements	50%
Other income	35%

## Surcharge & Marginal Relief

Total income	Surcharge
> ₹1 cr ≤ ₹10 cr	2% of income-tax
> ₹10 cr	5% of income-tax

Marginal relief is available (same logic as individuals), and special CG rates u/s 112, 112A, 111A apply.

Note the contrast: Foreign companies bear lower surcharge (2% / 5%) than domestic companies (7% / 12%).

Worked example

### Example 1

Other income: A foreign company earns ₹12 crore of business income (not royalty/FTS). Tax @35% = ₹4.2 crore. Surcharge @5% (TI > ₹10 cr) = ₹21 lakh. Add 4% cess. Marginal relief is tested at the ₹10 crore threshold.

⚠️ Common exam mistakes

Applying domestic company surcharge rates (7%/12%) to foreign companies — they are 2%/5%.
Taxing all royalty/FTS at 35% — qualifying Government/Indian-concern royalty & FTS under specified agreements is taxed at 50%.
Forgetting marginal relief and the applicability of special CG rates to foreign companies.

Reference:

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Domestic Companies — Rates of

Incomes Taxable at Special Rat

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