Cross border leasing

[Sreehari K]

Hi Team,

We are an Indian pvt ltd company and are planning to lease an equipment from USA for 10 years. We will be paying monthly XXX amount as monthly rent to US company and this will be in US dollars. Please can you let me know if we need to

1) Get prior approval from DGFT, RBI

2) Will the rent paid to the USA company be taxable. What will be the TDS rate and does this come under the double taxation agreement. Will this be considered as royalty, technical fees, other income under double taxation?

Regards,

Sreehari

​78128 05670

[DR.MARIAPPAN GOVINDARAJAN]

In my opinion you have to get approval. The rent paid is liable to tax.

[Sreehari K]

Dear Mariappan,

Thanks for your message.

From my research, it looks like operating lease does not fall under the automatic approval route and should not ideally require prior approval from RBI and DGFT.

On the TDS, this is applicable I am trying to find out the exact amount under the Double Taxation agreement between India and USA.

Dear members,

Can you give your comments.

Regards,

Sreehari

AI Summary

Cross-border lease compliance: whether prior approvals are required and tax withholding applies to rent paid abroad. Cross-border lease of equipment from a US lessor for ten years raises whether prior regulatory approvals are required and whether rent remitted in foreign currency is taxable in India; the lessee questions whether operating leases fall under automatic approval routes. The discussion notes an initial view that approval is required and rent is taxable, while the lessee seeks clarification on applicable TDS withholding and whether the payment is characterised as royalty, technical fees, or other income under the India-US double taxation framework.