Satyam's class-action suit settlement amount is taxable in India, the Authority for Advance Ruling (AAR) has ruled.

Pronouncing its ruling pertaining to Satyam and PwC class-action suit in the US, AAR ruled that 30 per cent TDS would be deductable to the payment made to settle the suit out of the court.

While Satyam agreed to pay $125 million to PwC to settle the suit, PwC will now have to pay around $25 million in tax.

The AAR said in its ruling, "The settlement amount will be regarded as sum chargeable under the provisions of the Act as required under Sec. 195 of the Income-Tax Act."

The AAR also said that the tax would be deducted when the amount would transfer from the segregated account in India to the initial escrow account in the United States.

The United States investors who possessed American Depository Receipts (ADRs) of Satyam Computer Services had dragged the company to court after the company's former chairman Ramalinga Raju's admittance to a fraud in the year of 2009.

Following the admittance of fraud, shares in the company had slipped sharply on stock exchanges, including New York Stock Exchange, where Satyam ADRs were listed.

Tech Mahindra, which acquired Satyam in 2009, hit a settlement with the lead plaintiffs in the Southern District Court of New York in February 2011 by agreeing to $125 million subject to the approval of Indian statutory bodies like Reserve Bank of India.