International Taxation

International taxation deals with how income is taxed when it moves between India and another country. The core questions are which country has the right to tax a given income, whether a tax treaty reduces or removes double taxation, how much tax must be withheld on a cross-border payment, and what exchange-control rules under FEMA apply to the money movement. For a foreign company, it also covers whether its activity in India creates a taxable presence. We work through these questions before a transaction is set up, since the structure chosen affects the tax outcome.

India taxes residents on their worldwide income and non-residents only on income that has its source in India. Whether income has an Indian source is governed by Section 9 [ITA 2025: s. 9], titled income deemed to accrue or arise in India. Section 9 [ITA 2025: s. 9] treats income as Indian-source in defined cases, such as a business connection in India, interest or royalty paid by a resident, or fees for technical services used in India. Where a tax treaty applies, the treaty can further limit India's right to tax that income.

A DTAA is a treaty between India and another country that decides which of the two may tax a particular type of income, and at what rate. The Ministry of Finance Annual Report 2025–26 confirms that India has entered into DTAAs/conventions with 96 countries. Taipei is separately covered by a Section 90A [ITA 2025: s. 159] specified-association arrangement, producing 97 counterpart jurisdictions only when Taipei is counted separately. A treaty prevents double taxation in one of two ways: it may give taxing rights to only one country, the exemption method, or it may let both tax while the residence country gives credit for tax paid in the source country, the credit method. The power to enter into or adopt these arrangements sits in Section 90 [ITA 2025: s. 159] and Section 90A [ITA 2025: s. 159]. Where an operative treaty rate is lower than the domestic rate, the taxpayer may apply it if the relevant treaty-entitlement conditions are met.

A non-resident claiming a treaty rate must establish residence in the treaty country and provide the prescribed information to the Indian payer or tax authority. Two documents support the claim: a Tax Residency Certificate (TRC) issued by the home country, and a declaration giving further details. For income received from 1 April 2026, the prescribed information must be provided in Form 10F [ITR 2026: Form 41] under Section 90 [ITA 2025: s. 159(8)] and Rule 21AB [ITR 2026: r. 75]. Under Rule 21AB [ITR 2026: r. 75], Form 10F [ITR 2026: Form 41] information is required whenever relief is claimed under Section 90 [ITA 2025: s. 159(1)] or Section 90A [ITA 2025: s. 159(2)], whereas the earlier Form 10F [ITR 2026: Form 41] was required where the TRC did not already carry the prescribed details. For income received up to 31 March 2026, the earlier Rule 21AB [ITR 2026: r. 75] and Form 10F [ITR 2026: Form 41] continue to apply. Without the TRC and prescribed information, the treaty rate cannot be established.

When an Indian payer makes a payment to a non-resident that is chargeable to tax in India, tax must be deducted at source before the money is remitted. The obligation is governed by Section 195 [ITA 2025: s. 393(2), Table row 17]; the corresponding provision [ITA 2025: s. 393(2), Table row 17] applies from 1 April 2026. The amount to deduct is the lower of the rate under the Act and the rate under the applicable treaty, where the treaty conditions are met. The payer reports these deductions in Form 27Q [ITR 2026: Form 144].

These are the compliance documents for a foreign remittance. Form 15CA [ITR 2026: Form 145] is the remitter's declaration about the payment and the tax position, and Form 15CB [ITR 2026: Form 146] is a certificate from a Chartered Accountant confirming the taxability and the rate applied. For a sum chargeable to tax that exceeds Rs 5 lakh in the tax year, Part C of Form 15CA [ITR 2026: Form 145] is accompanied by Form 15CB [ITR 2026: Form 146] unless an Assessing Officer certificate or order under Section 195(2) [ITA 2025: s. 395(2)] or Section 197 [ITA 2025: s. 395(1)] is used; Rule 37BB [ITR 2026: r. 220] also lists remittances for which these forms are not required. For remittances up to 31 March 2026, the earlier forms and rules continue to apply.

Yes, in two situations. First, where a treaty sets a rate lower than the domestic rate and the recipient provides a TRC and Form 10F [ITR 2026: Form 41], the payer can withhold at the treaty rate. Second, the recipient may apply for a lower or nil deduction certificate under Section 197 [ITA 2025: s. 395(1)]; for a sum payable to a non-resident under Section 195 [ITA 2025: s. 393(2), Table row 17], the payer may apply under Section 195(2) [ITA 2025: s. 395(2)] to determine the appropriate taxable proportion. We assess which route fits, since applying a treaty rate without adequate documentation can expose the payer to a shortfall demand.

A Permanent Establishment (PE) is a level of business presence that gives India the right to tax a foreign company's business profits. Under most treaties it includes a fixed place of business such as an office, branch or factory, a dependent agent who habitually concludes contracts, and in some cases a long-running project or the furnishing of services in India beyond a threshold period. Where a PE exists, India can tax the profits attributable to it. Domestic law reaches similar ground through the business connection test in Section 9 [ITA 2025: s. 9], and through Significant Economic Presence, which can create a taxable nexus for a foreign digital business without any physical presence. Assessing PE risk before activity begins helps a foreign company structure its India operations with the tax outcome in view.

A foreign company usually chooses between a wholly owned subsidiary, a branch office, a liaison office, a project office, or a joint venture. A subsidiary is an Indian company and is taxed as a resident; a branch is taxed as a foreign company on its India profits, generally at a higher rate; a liaison office may carry out only limited representative activities and cannot earn income in India. The choice affects the tax rate, the permitted activities, the FEMA approvals, and the exit route. We compare the options against the commercial plan and the foreign-investment rules before recommending a structure.

An Indian resident taxed in India on income that was also taxed in another country can claim a Foreign Tax Credit, which reduces the Indian tax by the foreign tax paid on the same income, subject to limits. The claim is made by filing Form 67 [ITR 2026: Form 44] under Rule 128 [ITR 2026: r. 76]. For tax year 2026-27 onward, Form 67 [ITR 2026: Form 44] must be furnished within 12 months from the end of the relevant tax year where the return is furnished under Section 139(1) [ITA 2025: s. 263(1)] or Section 139(4) [ITA 2025: s. 263(4)]. The form must be verified by an accountant where the taxpayer is a company or, for another taxpayer, where the foreign tax paid outside India for the tax year is Rs 1 lakh or more. We reconcile the foreign tax against the treaty and the Indian computation so the credit is claimed correctly.

The Foreign Exchange Management Act (FEMA) is the law administered by the Reserve Bank of India that governs foreign-exchange transactions, including foreign investment into India and Indian investment abroad. Tax decides how much is payable on cross-border income; FEMA decides whether and how the money may move, and what must be reported to the RBI. The two run together: a structure that is tax-efficient still has to satisfy FEMA on the investment route, the pricing, and the reporting. We align the tax position with the FEMA requirements so a transaction stands up on both.

When an Indian company issues capital instruments to a person resident outside India, it reports the allotment to the RBI in Form FC-GPR through the FIRMS portal within 30 days of allotment. A transfer of shares between a resident and a non-resident is reported in Form FC-TRS. Separately, any Indian entity that holds foreign investment or has invested abroad files an annual Foreign Liabilities and Assets (FLA) return by 15 July each year, based on its position as at 31 March. These are RBI filings under FEMA and are distinct from the income tax forms. Missing them is treated as a FEMA contravention.

Overseas Direct Investment (ODI) by an Indian entity is governed by the FEMA overseas investment framework. The investment is routed through an authorised dealer bank, which allots a Unique Identification Number for the overseas entity, and the investment must stay within the financial-commitment limit, broadly up to 400% of the Indian entity's net worth under the automatic route. After investing, the Indian entity files an Annual Performance Report for each overseas entity by 31 December each year, even where that entity is dormant, and continues to report through the FLA return. We help structure the holding, confirm the route, and keep the annual reporting current.

From 1 April 2026, international-tax section and form numbers change and reporting uses Tax Year terminology. Treaty relief is governed by Section 90 [ITA 2025: s. 159], unilateral relief under Section 91 [ITA 2025: s. 160], and the source rule is in Section 9 [ITA 2025: s. 9]. Withholding on payments to non-residents is governed by Section 195 [ITA 2025: s. 393(2), Table row 17]; recipient lower or nil certificates and payer appropriate-proportion applications are distinguished in Section 197 [ITA 2025: s. 395(1)] and Section 195(2) [ITA 2025: s. 395(2)]. The applicable forms are Form 10F [ITR 2026: Form 41], Form 15CA [ITR 2026: Form 145], Form 15CB [ITR 2026: Form 146], Form 27Q [ITR 2026: Form 144], and Form 67 [ITR 2026: Form 44]. Compliance governed through 31 March 2026 continues under the earlier Act, Rules, and forms. We apply the set that matches the year of the income.