Section 115A Income Tax Act 1961 and Section 207 Income Tax Act 2025

Tax on dividends, interest, royalty and fees for technical services of non-residents and foreign companies, with the current law from 1 April 2026 and the corresponding legacy provision under Section 115A.

Updated: 28 September 2026

What does Section 207 of the Income-tax Act, 2025 cover?

Section 207 is a special-rate provision for specified income of a non-resident, including a foreign company. It covers specified dividends, specified interest, income from certain units purchased in foreign currency, and qualifying royalty or fees for technical services received from the Government or an Indian concern.

The section broadly continues the subject matter of former Section 115A of the Income-tax Act, 1961, but uses the reorganised structure and section numbering of the Income-tax Act, 2025.

Current tax rates under Section 207

The principal rates stated in Section 207 are summarised below. These are base income-tax rates under the section; applicable surcharge and health and education cess, where relevant, must be considered separately.

Royalty and fees for technical services under Section 207(2)

Section 207(2) applies where the total income of a non-resident, including a foreign company, contains royalty or fees for technical services received from the Government or an Indian concern under a qualifying agreement made after 31 March 1976, other than income covered by Section 59(1).

For an agreement with an Indian concern, the statutory conditions concerning Central Government approval or conformity with the applicable industrial policy must also be examined. Where the provision applies, qualifying royalty and qualifying fees for technical services are each taxed at 20% on the relevant income.

Meaning of royalty and fees for technical services

Royalty

For Section 207, the expression royalty takes its meaning from Section 9 of the Income-tax Act, 2025. In substance, the statutory concept covers consideration for specified rights, licences, information, use of intellectual property, specified equipment or processes, and connected services, subject to the exact statutory wording and exclusions.

Fees for technical services

Fees for technical services also takes its meaning from Section 9. The statutory concept includes consideration for rendering managerial, technical or consultancy services, including provision of technical or other personnel, subject to the exclusions and conditions stated in the Act.

Whether a receipt is royalty or fees for technical services can also depend on the applicable Double Taxation Avoidance Agreement, because treaty definitions may differ from the domestic-law definition.

Permanent establishment: when Section 59 may apply instead

Section 207 excludes royalty and fees for technical services that fall within Section 59(1). Section 59 deals with royalty or fees for technical services received by a specified non-resident where the relevant right, property or contract is effectively connected with a permanent establishment in India or a fixed place of profession in India and the statutory conditions are met.

In such a case, the income is computed under the head Profits and gains of business or profession, rather than simply applying the gross-basis special rate for royalty or technical-service fees under Section 207.

Deductions and return filing

Section 207 contains special rules restricting deductions against the income covered by its special-rate provisions. It also contains a return-filing relaxation where the assessee's total income consists only of the specified Section 207 income and tax has been deducted at source at a rate not lower than the rate specified by the section, subject to the precise statutory conditions.

Taxpayers should verify whether all conditions for the filing relaxation are met. A treaty claim, permanent establishment issue, other Indian-source income or a shortfall in tax deduction can affect the position.

DTAA may provide a more beneficial rate or narrower scope

For a non-resident entitled to the benefit of an applicable Double Taxation Avoidance Agreement, the treaty should be checked before applying the domestic-law result. Indian tax law generally permits application of the treaty provisions to the extent they are more beneficial to the eligible assessee, subject to the statutory requirements for claiming treaty relief.

This is particularly important for royalty and fees for technical services because treaties may prescribe a lower rate, use a narrower definition, or contain additional tests. The residence certificate and other prescribed documentation should therefore be reviewed along with the relevant treaty article.

Legacy Section 115A of the Income-tax Act, 1961

Before 1 April 2026, Section 115A was the principal special-rate provision for the same broad categories of non-resident income. In its later form, it included dividends, specified interest, specified unit income, royalty and fees for technical services. Qualifying royalty and fees for technical services under Section 115A(1)(b) were taxable at 20%, other than income governed by Section 44DA.

The old page text showing a 10% rate for royalty and fees for technical services reflected an earlier version of the law and should not be used as the current rate. Section 115A also referred to definitions of royalty and fees for technical services in Section 9 of the 1961 Act.

For matters relating to periods governed by the Income-tax Act, 1961, the applicable version of Section 115A for the relevant assessment year should be checked because the provision was amended several times.

Official Income Tax Department resources

This article is a general legal and tax information resource. Apply the law for the relevant tax year and facts, and check the applicable DTAA where treaty relief is claimed.