Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Taxed like an Indian company
A subsidiary incorporated in India by a foreign parent is, for tax, an Indian company — taxed on its global income at the domestic corporate rate (about 25%, or 22% under Section 115BAA), plus surcharge and cess. It files Indian returns and gets a tax audit like any company. Confirm current rates per the Finance Act.
Transfer pricing and repatriation
Because it transacts with its foreign parent and group, those dealings must be at arm’s length under transfer-pricing rules — with documentation and a Form 3CEB. Profits sent back as dividends are taxable in the parent’s hands with TDS, reduced by any tax treaty. Interest and royalties to the parent face their own withholding.
A worked example
Example: a US tech firm’s Indian subsidiary provides software services back to the parent. It is taxed at ~25% on its profit, must price the inter-company services at arm’s length (with a 3CEB report), and any dividend to the US parent suffers TDS at the treaty rate. Getting transfer pricing right is the single biggest risk area. Our team can handle the subsidiary’s tax and TP compliance.