Section 115A of ITA, 1961 : Section 115A: Tax On Dividends, Royalty And Technical Service Fees In The Case Of Foreign Companies

Explanation using Example

Imagine a non-resident individual, John, who is a citizen of the United Kingdom and has invested in Indian government securities. During the financial year, John receives interest income from these securities amounting to INR 100,000. This interest income is his only income from India for that year, and tax has been deducted at source on this income by the Indian government.

Under Section 115A of the Income-tax Act, 1961, John's tax liability in India would be calculated at the rate of 20% on his interest income, which amounts to INR 20,000. Since the tax has already been deducted at source, John may not have any further tax liability, assuming the deducted amount is equal to or more than INR 20,000. Moreover, John is not required to file a tax return in India for this income if the tax has indeed been deducted at source and this is his only income from India.

Additionally, no deductions for any expenditure or allowances will be allowed against this income, and since his total income in India is only the interest income, he is not eligible for any deductions under Chapter VI-A of the Income-tax Act, 1961.