Section 207 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 207 sets the tax on specified income of a non-resident (other than a company) or a foreign company: dividends at 20% (or 10% from a unit in an International Financial Services Centre), interest at 20% or 5% or at the rates in section 393, royalty and fees for technical services at 20% under an approved agreement, and the rest of total income at rates in force. It also bars expenses, limits Chapter VIII deductions and excuses a return where tax is fully deducted at source. This article reads it as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
A non-resident (not being a company) or a foreign company with the income in section 207(1) pays tax at the rate in column C: 20% on dividend, 10% on dividend from an International Financial Services Centre unit, 20% or 5% on certain interest, and 20% on income from certain units; the balance of total income is taxed at rates in force. Royalty and fees for technical services under an approved agreement are taxed at 20% under sub-section (2). No expenditure is allowed, and no return is needed if tax has been deducted at source at not less than the specified rate.
Scope
Section 207 is in Chapter XIII, Part E, "Special provisions relating to non-residents and foreign companies". The Act came into force on the 1st April, 2026 (section 1(3)), save as otherwise provided. The rates are those printed in the section; later amendments, rules and notifications should be checked. A "foreign company" and "non-resident" are terms defined in the Act.
The preceding section is section 206 (MAT and AMT). The rates of tax deduction at source for payments to non-residents are in section 393. Related sections on units, bonds and GDRs are covered in sections 208 and 209 and on foreign institutional investors in section 210. For the Chapter overview, see Chapter XIII of the Income-tax Act, 2025. If you receive income from India as a non-resident or a foreign company, our NRI tax filing team can help.
Section 207(1): the first Table
The income-tax payable on the total income of a non-resident (not being a company) or of a foreign company which includes any income specified in column B of the Table is the aggregate of income-tax computed at the rate in column C applied on the corresponding income in column B.
| Serial number | Income | Rate of income-tax payable |
|---|---|---|
| 1 | Dividend, other than dividends specified against serial number 2 | 20% |
| 2 | Dividend received from a unit in an International Financial Services Centre | 10% |
| 3 | Interest received from Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency, not being interest referred to against serial numbers 4 and 5 | 20% |
| 4 | Interest received from an infrastructure debt fund referred to in Schedule VII (Table: serial number 46) | 5% |
| 5 | Interest of the nature and extent referred to in section 393(2) (Table: serial numbers 2, 3 and 4) | Rates specified in section 393(2) (Table: serial numbers 2, 3 and 4) |
| 6 | Distributed income being interest referred to in section 393(2) (Table: serial number 6) | Rate specified in section 393(2) (Table: serial number 6) |
| 7 | Income received in respect of units, purchased in foreign currency, of a Mutual Fund specified in Schedule VII (Table: serial number 20 or 21) or of the Unit Trust of India | 20% |
| 8 | Total income as reduced by income referred to against serial numbers 1 to 7 | Rates in force |
In the first row, the words "other than dividends specified against serial number 2" are printed in square brackets, and stray numbers (7 and 8) follow the cross-references in rows 5 and 6; they are not part of the text. The Table has eight rows, so any total-income balance falls to row 8 at "rates in force", a term defined in section 2(90).
Section 207(2): royalty and fees for technical services
Where the total income of a non-resident (not being a company) or of a foreign company includes income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made with Government or an Indian concern after the 31st March, 1976, other than income referred to in section 59(1), and:
- (a) the agreement is approved by the Central Government where it is with an Indian concern; or
- (b) where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, it is as per that policy,
then, subject to sub-section (3), the income-tax payable is the aggregate of tax at the rate in column C of the second Table.
| Serial number | Income | Rate of income-tax payable |
|---|---|---|
| 1 | Royalty other than income referred to in section 59(1) | 20% |
| 2 | Fees for technical services other than income referred to in section 59(1) | 20% |
| 3 | Total income as reduced by income referred to against serial numbers 1 and 2 | Rates in force |
The two conditions (a) and (b) are alternatives; the sub-section reads "(a) ... or (b) ...". Whether an agreement has been approved, and what the industrial policy is, are matters outside the text of the Act and are not in the text consulted.
Section 207(3): copyright and software
Where the royalty in sub-section (2) is in consideration for the transfer or grant of all or any rights (including the granting of a licence) (a) in respect of copyright in any book to an Indian concern, or (b) in respect of any computer software to a person resident in India, then sub-section (2) applies to that royalty without application of clause (a) or (b) of that sub-section. So the approval and industrial-policy conditions are not needed for those two kinds of royalty.
Section 207(4): definitions
- "computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device, or any customised electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to a place outside India by any means;
- "fees for technical services" has the meaning assigned in section 9;
- "royalty" has the meaning assigned in section 9.
Section 207(5): no expenditure
No deduction in respect of any expenditure or allowance is allowed under sections 28 to 58, 60 and 61 and section 93 for computing the income referred to in sub-sections (1) and (2). The rates are therefore applied to the gross income.
Section 207(6) and (7): Chapter VIII deductions
Where the gross total income of an assessee:
| Clause | Case | Result |
|---|---|---|
| (a) | consists only of the income in sub-section (1) (serial numbers 1 to 7) | no deduction is allowed under Chapter VIII and Schedule XV |
| (b) | includes any income in sub-section (1) (serial numbers 1 to 7) | the gross total income is reduced by that income, and the Chapter VIII deduction is allowed as if the reduced amount were the gross total income |
Sub-section (7) says sub-section (6) does not apply to a deduction allowed to a Unit of an International Financial Services Centre under section 147; see our article on section 147. A printing slip: the sub-section (6)(a) reference reads "SI. No." with a capital letter I, and the serial range is split across lines; it is read as "serial numbers 1 to 7".
Section 207(8): when no return is needed
It is not necessary for an assessee to furnish a return of income under section 263(1) if:
- (a) the total income during the tax year consisted only of income in sub-section (1) (serial numbers 1 to 7) and sub-section (2) (serial numbers 1 and 2); and
- (b) the tax deductible at source under Chapter XIX-B has been deducted from such income at a rate not less than the rate specified in sub-sections (1) and (2).
A worked example
Names and amounts are invented; the 20%, 10% and 5% rates are as printed.
Rhine Components GmbH, a foreign company, receives in a tax year: dividend of Rs. 8,00,000 from an Indian company; dividend of Rs. 3,00,000 from a unit in an International Financial Services Centre; interest of Rs. 4,00,000 from an infrastructure debt fund; and royalty of Rs. 6,00,000 from an Indian concern under an agreement approved by the Central Government.
- Dividend: Rs. 8,00,000 x 20% = Rs. 1,60,000.
- IFSC unit dividend: Rs. 3,00,000 x 10% = Rs. 30,000.
- Infrastructure debt fund interest: Rs. 4,00,000 x 5% = Rs. 20,000.
- Royalty under sub-section (2): Rs. 6,00,000 x 20% = Rs. 1,20,000.
- Total tax = Rs. 1,60,000 + Rs. 30,000 + Rs. 20,000 + Rs. 1,20,000 = Rs. 3,30,000, with no deduction for expenditure (sub-section (5)).
If tax at source was deducted from every item at not less than the rate for that item and there was no other income, sub-section (8) means Rhine need not furnish a return under section 263(1).
Need help with Indian-source income of a foreign company?
Whether an agreement is approved, whether tax at the right rate was deducted and whether a return is still needed are separate questions. Our NRI tax filing service can review the income and the deduction certificates against section 207.
Key takeaways
- Section 207(1) fixes rates of 20%, 10% and 5% on specified income, with the balance of total income at rates in force.
- Royalty and fees for technical services under an approved agreement are taxed at 20% under sub-section (2).
- Copyright royalty to an Indian concern and software royalty to a resident are not subject to the approval and policy conditions.
- No expenditure or allowance is deducted from the income in sub-sections (1) and (2).
- A return is not needed if only this income is received and tax is deducted at source at not less than the specified rate.
Read next
- Sections 208 and 209: units, bonds and GDRs bought in foreign currency
- Section 210: foreign institutional investors
- Section 205: conditions for concessional tax
- Section 206: MAT and AMT
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.