Foreign Company Tax Return in India

A permanent establishment, or PE, is a level of business presence in India substantial enough that India gets the right to tax the profits connected to it. It can be a fixed place of business like a branch or project office, or it can arise through a dependent agent acting on the company's behalf, even without a physical office.

Yes. A branch office is generally treated as a permanent establishment, and the profits attributable to it are taxed as business income at the general foreign company rate.

At minimum: a PAN, a determination of whether a permanent establishment exists, filing ITR-6 by the applicable due date, a tax audit once turnover crosses the applicable threshold, and transfer pricing documentation where related-party transactions are involved. Companies with ongoing TDS obligations on payments made or received have additional compliance on top of this.

General business income connected to a permanent establishment is taxed at 35%, plus surcharge and cess, for an effective rate of roughly 36.4% to 38.2%. Royalty and fees for technical services without a PE are taxed differently, under Section 115A.

Section 115A sets a special rate for foreign companies and non-residents earning dividend, interest, royalty, or fees for technical services without a permanent establishment in India. Royalty and FTS are currently taxed at 20%, plus surcharge and cess, and dividends at 20%. A lower DTAA rate can apply instead where the recipient furnishes the required treaty documentation.

A company that is not registered in India but earns income from an Indian source. This is distinct from an Indian subsidiary of a foreign parent, which is a separate Indian legal entity taxed as a domestic company.

It depends on the nature of the income and whether a permanent establishment exists. Business income connected to a PE is taxed as business profits at the general rate. Passive income like royalty, dividend, and specified interest is taxed at the special rates under Section 115A, unless a treaty rate is more beneficial.

A tax audit is required once your India-connected turnover crosses the applicable threshold, or where transfer pricing provisions apply. This is a separate compliance step from the return itself, and it's assessed as part of our initial review of your case.

Yes, provided the treaty rate is more beneficial and you furnish a Tax Residency Certificate and Form 41 before or with your filing. Filing an Indian return is often necessary to substantiate the treaty position, even where you wouldn't otherwise be required to file.

Yes. A single transaction, such as the sale of shares or assets of an Indian entity, can create a filing obligation on its own. Don't assume a one-time transaction is exempt without checking.

ITR-6 is the applicable form for companies, including foreign companies with India-sourced income, unless a narrow charitable-purpose exemption applies.

You’ll need a PAN, a computation of India-sourced income under the Act and any applicable DTAA, and the correct ITR form, ITR-6 in most cases, filed through the Income Tax Department’s e-filing portal along with the tax audit report where applicable. The harder part is usually getting the permanent establishment position right before you compute anything, not the filing mechanics themselves.

Yes, in both directions. If your company makes payments to others from India, standard withholding rules apply. If your company receives payments from an Indian payer, royalty, FTS, interest, dividend, TDS is typically deducted at source before you’re paid, and that deduction interacts directly with what you owe or can claim back when you file. Our Withholding Tax Advisory service covers this in depth for companies making payments; this page covers what to do once you’re on the receiving end.

The two biggest levers are using the correct DTAA rate instead of the domestic rate where the treaty is more beneficial, and getting the permanent establishment position right so you’re not taxed at a higher rate than the facts justify. Beyond that, clean transfer pricing documentation avoids costly adjustments, and filing on time preserves your ability to carry forward losses against future Indian income. There’s no shortcut around any of these, but missing them is what actually costs companies money.