India Clarifies Dividends Paid by Foreign Companies out of Shares Deriving Value from Indian Assets are Not Deemed to be Indian Source Income

On 26 March 2015, the Indian Ministry of Finance issued Circular No. 4 /2015 clarifying the taxation of dividend income declared by a foreign company outside India when the share or interest in the company directly or indirectly derives its value substantially from assets located in India.

The clarification is in regard to Section 9(1)(i) of the Indian Income Tax Act which essentially states that any income directly or indirectly arising from a business connection, property, asset, source o…