Company: INFY
Filing Date: 2025-07-01
Form Type: 20-F
Source: 0000950170-25-091925
Chunk: 43

Company: Infosys Ltd
Filing Date: 2025-07-01
Form: 20-F
Item: Item 3
Chunk 43
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 to pay taxes on the unutilized reserve following the expiry of year specified. This would result in an increase to our effective tax rate.

In the event that the government of India or the government of another country changes its tax policies in a manner that is adverse to us, our tax expense may materially increase, reducing our profitability.
The General Anti Avoidance Rules (“GAAR”) provisions to deal with the Organisation for Economic Co- operation and Development’s (“OECD”)’s Base Erosion and Profit Shifting project of which India is an active participant was applicable from fiscal 2018. Pursuant to GAAR, an arrangement in which the main purpose, or one of the main purposes, is to obtain a tax benefit and may be declared as an “impermissible avoidance arrangement” if it also satisfies at least one of the following four tests:
•The arrangement creates rights and obligations, which are not normally created between parties dealing at arm’s length.
•It results in misuse or abuse of provisions of tax laws.
•It lacks commercial substance or is deemed to lack commercial substance.
•It is carried out in a manner, which is normally not employed for a bona fide purpose.
If any of our transactions are found to be impermissible avoidance arrangements under GAAR, our business, financial condition and results of operations may be adversely affected.

The Finance Act, 2023, effective April 1, 2023, increased the tax withholding rate on payment made to non- residents towards “royalty” and/or “fees for technical services” to 20% from 10% (plus applicable surcharge and cess), subject to furnishing of an Indian Permanent Account Number (“PAN”) or alternative documents in the absence of PAN by such non-residents. However, a lower rate may apply if a Double Taxation Avoidance Agreement read along with Multi-lateral Instrument (“MLI”) exists. Further, based on a Supreme Court ruling, payment to non-residents for purchase of software are not taxable as royalties as long as such payments are not characterized as royalties under a Double Taxation Avoidance Agreement and will not be subject to withholding as long as relevant tax documents are furnished by such non-residents. As we procure various software licenses and technical services from non-residents in the course of delivering our products and services to our clients, the cost of withholding tax on such purchase of software and services may be of additional cost to us as the Company may have to gross up for such withholding taxes in case relevant tax documents for