International payment firms such as Visa, Mastercard and American express might get 15 per cent taxed over their Indian income, reported the Economic Times. According to the report, these firms might pay tax on their India income as they set up servers locally to comply with an RBI directive on data storage. 

Currently, these firms areout of the tax net in India, as they do not have a ‘permanent establishment’ in the country — they operate here through offices in jurisdictions such as Singapore and store data on servers located in countries like the US and Ireland. Permanent establishment, or place of business, is a concept in taxation that determines where an organisation is required to pay tax, the report said. 

Data localisation needs data about residents to be collected, processed, and stored inside the country, often before being transferred internationally, and usually transferred only after meeting local privacy or data protection laws.

The home based companies have welcomed the RBI guidelines, however, global companies fear increase in their expenses for creation of local servers.

Earlier, finance minister Arun Jaitley had said that Mastercard and Visa were losing market share to domestic payments networks, months after Mastercard complained to the U.S. government that Indian Prime Minister Narendra Modi was using nationalism to promote a local rival.

Finance Minister Arun Jaitley spoke about the surging growth of RuPay and Unified Payment Interface (UPI), which allows swift inter-bank fund transfers, on the second anniversary of Modi's shock decision to replace high-value bank notes in a bid to flush out untaxed wealth.

Modi has said when Indians use RuPay they were serving the country as its transaction fees stay within India and could help build roads, schools and hospitals, an endorsement that has worried Purchase, New York-based Mastercard, which is the world's second-largest payments processor.