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The requirement to file a tax return in India is provided under Section 139(1) of the Indian Income-tax Act, 1961 (the Act), whereby all companies are required to furnish an income tax return irrespective whether the income earned by them (which has territorial nexus with India) is chargeable to tax in India or not (see Castlet on Investment Ltd and XYZ/ABC Equity Fund for such obligation on foreign companies).

Section 115A(5) of the Act provides relief to nonresident taxpayers who derive dividend and/or interest income from the requirement to furnish a tax return in India, subject to the condition that the tax has been with-held by the Indian payer in terms of the provisions of the Act.

At present, no such exemption is available to nonresidents deriving income by way of ‘‘royalty’’ or ‘‘fees for technical services’’ (FTS), subject to tax in India under clause (b) of sub-section (1) of Section 115A of the Act. In the Finance Bill, 2020, which was tabled in the Lower House of the Parliament on February 1, 2020, provisions of Section 115A of the Act are proposed to be amended to extend the exemption from the requirement to furnish tax returns in India to nonresidents deriving income by way of royalty or FTS, where tax has been withheld at source.

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