Delhi High Court: payments taxable as foreign technical services
Big update for global companies: The Delhi High Court just ruled that when Indian firms pay foreign companies (like EY U.S.) for sending over employees, those payments count as "foreign technical services" and are taxable under the India-US tax treaty.
Even if these employees work in India, they're still considered on the US company's payroll and offering technical know-how.
Indian businesses must withhold 10-15% tax
Indian businesses now have to withhold 10% to 15% tax on these payments, even if they're called reimbursements with no extra profit added.
This could bump up costs by around 10% for multinationals bringing in foreign staff.
Experts think MNCs might need to rethink how they handle employee transfers to India, since the court's decision means more scrutiny (and possibly more taxes) on cross-border work arrangements.