Salary taxability of branch office
This query is : Resolved
15 November 2011
An indian pvt limited has a branch office in London. Employees working there are Britishers and not indians . Would TDS liability arise in India ie would the company need to deduct tax in India and deposit in India if yes how would those employees claim TDS credit
15 November 2011
Salary paid in other countries to other country nationals will not attract Indian income tax, need to be taxed as per the particular nation taxation
15 November 2011
Thanks Mr Krishnan
but how the effect needs to be shown in our TDS returns as branch office expenses will be consolidated in HO books there would be mismatch between the gross amount of salary booked and TDS deposited because HO books will only record TDS which is deposietd on Indian employees
but how the effect needs to be shown in our TDS returns as branch office expenses will be consolidated in HO books there would be mismatch between the gross amount of salary booked and TDS deposited because HO books will only record TDS which is deposietd on Indian employees
22 July 2025
Great question! Here's how this typically works:
Salary Taxability & TDS:
Salaries paid by the London branch to foreign nationals (non-Indians) are not taxable in India.
Therefore, no TDS deduction is required on those salaries in India.
Accounting in Head Office (India):
The London branch expenses (including salaries of British employees) get consolidated into the Head Office (HO) books as branch office expenses.
The HO will record the gross salary expense but will only deduct TDS on salaries paid to Indian employees working in India (if applicable).
Mismatch in TDS Returns:
Yes, there can be a mismatch between the gross salary booked in HO accounts and TDS deposited because:
Gross salary includes branch office salaries paid abroad (no TDS).
TDS is only deposited for Indian employees.
This mismatch is understandable and acceptable, as TDS liability arises only on salaries taxable in India.
Reporting in TDS Returns:
In the TDS return (Form 24Q for salary payments), only Indian employees’ salaries and TDS deducted should be reported.
Salaries paid outside India to foreign nationals should not be included in the TDS returns.
Summary:
No TDS on foreign branch salaries paid to foreign nationals.
Branch office salaries appear as expenses in HO books.
TDS returns reflect only Indian employee salary payments and deductions.
No credit or claims needed by foreign employees in India for TDS not deducted.
Salary Taxability & TDS:
Salaries paid by the London branch to foreign nationals (non-Indians) are not taxable in India.
Therefore, no TDS deduction is required on those salaries in India.
Accounting in Head Office (India):
The London branch expenses (including salaries of British employees) get consolidated into the Head Office (HO) books as branch office expenses.
The HO will record the gross salary expense but will only deduct TDS on salaries paid to Indian employees working in India (if applicable).
Mismatch in TDS Returns:
Yes, there can be a mismatch between the gross salary booked in HO accounts and TDS deposited because:
Gross salary includes branch office salaries paid abroad (no TDS).
TDS is only deposited for Indian employees.
This mismatch is understandable and acceptable, as TDS liability arises only on salaries taxable in India.
Reporting in TDS Returns:
In the TDS return (Form 24Q for salary payments), only Indian employees’ salaries and TDS deducted should be reported.
Salaries paid outside India to foreign nationals should not be included in the TDS returns.
Summary:
No TDS on foreign branch salaries paid to foreign nationals.
Branch office salaries appear as expenses in HO books.
TDS returns reflect only Indian employee salary payments and deductions.
No credit or claims needed by foreign employees in India for TDS not deducted.
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