The National Stock Exchange of India (NSE) has issued a circular to listed companies regarding the use of the NSDL Tax Service Platform for simplifying tax relief claims for Foreign Portfolio Investors (FPIs). Following amendments in the Income Tax Act through Finance Acts of 2020, 2021, and 2023, dividend and interest income is taxable for shareholders and bondholders, with tax deducted at source (TDS) as per applicable rates. FPIs, however, are subject to TDS at 20% or a reduced rate under the Double Taxation Avoidance Agreement (DTAA) if they furnish required documents such as Form 10F, tax residency certificate, and permanent establishment status. To ease the burden of repeatedly submitting these documents to multiple companies, the NSDL platform allows custodians to upload these documents once per fiscal year. Issuers and Registrars & Transfer Agents (RTAs) can then access these documents to determine TDS rates for dividends and interest income of FPIs. This initiative aims to improve efficiency and support ease of doing business for listed entities.
National Stock Exchange of India
Circular Ref No: NSE/CML/2024/32 Date: October 25, 2024
To,
The Company Secretary,
All Listed Entities
Subject: Fetching of document from Tax Service Platform available with Depository by Listed Companies for giving tax claim relief to Foreign Portfolio Investors (FPls) from the perspective of ease of doing business.
Dear Sir/ Madam,
Pursuant to the amendments made in the Income Tax Act by the Finance Acts, 2020, 2021 and 2023, dividend and interest paid by companies are taxable in the hands of shareholders and bond holders. Further, the companies are required to deduct tax at source (TDS) at the rates applicable to each category of the shareholder. However, certain categories of domestic Investors are exempted while for other categories like Foreign Portfolio Investor (FPIs), tax has to be deducted at 20% (plus surcharge and cess) or at a beneficial tax rate applicable under Double Taxation Avoidance Agreement (DTAA).
In case of FPIs, Custodians/FPIs are required to provide certain set of documents like Form 10F, permanent establishment document, tax residency certificate to every company which is declaring dividend/interest to claim tax benefit.
With a view to manage the operational challenges of providing same set of client documents/details to every company, NSDL has developed a tax services platform to enable Custodians to upload such client documents once in a financial year which can be accessed by Issuers and Registrars and Transfer Agent (RTAs) for determining the rate for tax deductions.
From an ease of doing business perspective, all the Listed Companies are requested to take note of the aforesaid Tax Service Platform for fetching required documents for giving tax claim benefit in respect of tax withheld at source in case of dividend/interest income for FPIs.
Yours faithfully,
For National Stock Exchange of India Limited
Ajit Mahadik
Manager – Listing Compliance
