Tax rate
This query is : Resolved
03 February 2016
Dear all, can any anybody please clarify that what is tax rate applicable for subsidiary company whose holding company is foreign entity? And also what is the tax rate if the foreign entity has branch in india? Does this subsidiary co. and branch means the same?
04 February 2016
Subsidiary of a company registered as per the Companies Act, 2013 or any erstwhile is a domestic company and the income of the same is taxable normally at 30% (i.e. same as other Indian Companies).
If the foreign entity is carrying any business in India through a PE, then relevant DTAA has to be referred (normally article 7 of the DTAA).
Subsidiary company registered in India and a branch though registered with MCA as branch or liaisoning office are not the one and the same.
If the foreign entity is carrying any business in India through a PE, then relevant DTAA has to be referred (normally article 7 of the DTAA).
Subsidiary company registered in India and a branch though registered with MCA as branch or liaisoning office are not the one and the same.
04 February 2016
Then such branch shall be taxable at 40 right sir?
04 February 2016
Then such branch shall be taxable at 40, right sir?
04 February 2016
So for branch 40 tax rate shall apply?
26 July 2025
You're absolutely right to clarify this — **subsidiary** and **branch** of a foreign company are **not the same** under Indian tax law, and **different tax rates apply**. Here's a clear breakdown:
---
### 🔹 1. **Subsidiary Company (Indian Company)**
* If a **foreign company incorporates a subsidiary in India** (i.e., an Indian company registered under the Companies Act), it is treated as a **domestic company** for income tax purposes.
✅ **Tax Rate (as per FY 2024-25):**
* **25%** (if turnover ≤ ₹400 crores in FY 2022-23)
* **30%** (if turnover > ₹400 crores)
* Plus applicable surcharge and cess
👉 **MAT (Minimum Alternate Tax)** may apply at 15% (plus surcharge/cess), if applicable.
---
### 🔹 2. **Branch Office / Project Office / Liaison Office of Foreign Company**
* A **branch office of a foreign company in India** is **not an Indian company**. It is treated as a **foreign company with a Permanent Establishment (PE)** in India.
✅ **Tax Rate:**
* **40% (plus surcharge and cess)** — since it is taxed as a **foreign company**
* **Surcharge**:
* 2% if total income > ₹1 crore
* 5% if total income > ₹10 crore
* **Health & Education Cess**: 4% on tax + surcharge
📌 **DTAA (Double Taxation Avoidance Agreement)** may reduce the effective tax burden, subject to eligibility and filings (like Form 10F, TRC etc.).
---
### 🔹 3. **Are Subsidiary and Branch the Same?**
**No.** Key differences:
| Aspect | Subsidiary | Branch Office |
| ------------------ | ----------------------------------------- | ---------------------------------- |
| Legal Status | Separate legal entity (Indian Co.) | Extension of foreign company |
| Tax Classification | Domestic company | Foreign company |
| Tax Rate | 25% / 30% | 40% |
| Repatriation Rules | Through dividends (subject to DDT or WHT) | Subject to RBI rules on remittance |
| Control | Managed independently | Controlled directly by parent |
---
### ✅ Conclusion
* **Subsidiary** (Indian company): taxed as a **domestic company** (25%/30%)
* **Branch** (of foreign company): taxed as a **foreign company** at **40%**
Let me know if you want help with:
* DTAA applicability for a specific country
* Incorporation vs branch analysis
* Tax planning for inbound investments
Happy to assist!
---
### 🔹 1. **Subsidiary Company (Indian Company)**
* If a **foreign company incorporates a subsidiary in India** (i.e., an Indian company registered under the Companies Act), it is treated as a **domestic company** for income tax purposes.
✅ **Tax Rate (as per FY 2024-25):**
* **25%** (if turnover ≤ ₹400 crores in FY 2022-23)
* **30%** (if turnover > ₹400 crores)
* Plus applicable surcharge and cess
👉 **MAT (Minimum Alternate Tax)** may apply at 15% (plus surcharge/cess), if applicable.
---
### 🔹 2. **Branch Office / Project Office / Liaison Office of Foreign Company**
* A **branch office of a foreign company in India** is **not an Indian company**. It is treated as a **foreign company with a Permanent Establishment (PE)** in India.
✅ **Tax Rate:**
* **40% (plus surcharge and cess)** — since it is taxed as a **foreign company**
* **Surcharge**:
* 2% if total income > ₹1 crore
* 5% if total income > ₹10 crore
* **Health & Education Cess**: 4% on tax + surcharge
📌 **DTAA (Double Taxation Avoidance Agreement)** may reduce the effective tax burden, subject to eligibility and filings (like Form 10F, TRC etc.).
---
### 🔹 3. **Are Subsidiary and Branch the Same?**
**No.** Key differences:
| Aspect | Subsidiary | Branch Office |
| ------------------ | ----------------------------------------- | ---------------------------------- |
| Legal Status | Separate legal entity (Indian Co.) | Extension of foreign company |
| Tax Classification | Domestic company | Foreign company |
| Tax Rate | 25% / 30% | 40% |
| Repatriation Rules | Through dividends (subject to DDT or WHT) | Subject to RBI rules on remittance |
| Control | Managed independently | Controlled directly by parent |
---
### ✅ Conclusion
* **Subsidiary** (Indian company): taxed as a **domestic company** (25%/30%)
* **Branch** (of foreign company): taxed as a **foreign company** at **40%**
Let me know if you want help with:
* DTAA applicability for a specific country
* Incorporation vs branch analysis
* Tax planning for inbound investments
Happy to assist!
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