Foreign Subsidiary Income Tax Return Filing
| Market Price: | |
|---|---|
| Filing CA Price: | ₹35000/- excl. GST |
| ₹41300/- incl. GST | |
| You Save: | ₹25000/- (42%) |
| Complete By: | within 7 days from payment |
Foreign company means a company which is not a domestic company, i.e. a company registered outside India in any other foreign country. The Foreign Company may be treated as Domestic Company if such company makes prescribed arrangement in India as per Rule 27. Foreign nationals are individuals who are not citizens of India. Income and capital gains earned by a foreign national in India is taxable under the Income Tax Act.
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Filing Income Tax Return (ITR)
The Income Tax Act states the following concerning filing of Income Tax Return:
- For foreign company/non-residents other than foreign companies, the provisions with respect to the filing of income tax return mention that any company is required to file income tax return in India if it has earned, accrued or received any money in India. The definition of ‘company’ includes foreign companies. Thus, all the companies, which have had any transaction in which they have received/accrued payment from an Indian entity and tax has been deducted on such payments should file income tax return for such income.
- Although the Act states that the section mandating the filing of income tax return is merely a machinery section and would apply only where the transaction entered by the foreign assessee is liable to be taxed in India, a completely different view was taken in the Advance Ruling of VNU International B.V., wherein the Authority for Advance Ruling (AAR) held that a “company (including a foreign company) is required to file a return regardless of whether it earns income or incurs a loss.”
- In the said case, the assessee applicant earned a capital gain by transfer of shares of an Indian company, which was exempt due to India-Netherlands Tax Treaty. The question was whether it was bound to file a return in the absence of any taxable income earned.
- The Authority of Advance Ruling held that even if the capital gain is not taxable in India, then also the assessee is required to file a return.
- Thus, this case law has further burdened all foreign companies and those receiving consideration from India, either in the form of reimbursement or any income, are required to report it through return filing. Also, if any assessee is availing the benefit of tax treaty entered by India with any country, then also reporting requirement is there.
