Taxability of Foreign Branch
This query is : Resolved
09 September 2010
Dear Experts pls advice on following issue:
Fact of Case:
Our company has the Branches at Brazil,Thialand etc. In individual countries these are registered under local law as branch of Indian company. The books of Accounts of the branches where audited and taxes are paid in respective country(i.e Brazil,Thailand)..
Query:
whether the business income earned by branch will taxable in India? If yes how the tax will be workout considering Advance Tax,Tds paid in foreign countries.
Fact of Case:
Our company has the Branches at Brazil,Thialand etc. In individual countries these are registered under local law as branch of Indian company. The books of Accounts of the branches where audited and taxes are paid in respective country(i.e Brazil,Thailand)..
Query:
whether the business income earned by branch will taxable in India? If yes how the tax will be workout considering Advance Tax,Tds paid in foreign countries.
09 September 2010
Dear Amol,
please follow this link which may have answer to your query.Several situations are described here one of which may fit into your requirement.http://law.incometaxindia.gov.in/DIT/File_opener.aspxfn=http://law.incometaxindia.gov.in/Directtaxlaws/act2005/fc2.htm.Alsoyou may follow DTAA implications at http://law.incometaxindia.gov.in/DIT/File_opener.aspxfn=http://law.incometaxindia.gov.in/Directtaxlaws/cbdt/dta/A1_Brazil.htm and at http://law.incometaxindia.gov.in/DIT/File_opener.aspxfn=http://law.incometaxindia.gov.in/Directtaxlaws/cbdt/dta/A1_Thailand.htm
please follow this link which may have answer to your query.Several situations are described here one of which may fit into your requirement.http://law.incometaxindia.gov.in/DIT/File_opener.aspxfn=http://law.incometaxindia.gov.in/Directtaxlaws/act2005/fc2.htm.Alsoyou may follow DTAA implications at http://law.incometaxindia.gov.in/DIT/File_opener.aspxfn=http://law.incometaxindia.gov.in/Directtaxlaws/cbdt/dta/A1_Brazil.htm and at http://law.incometaxindia.gov.in/DIT/File_opener.aspxfn=http://law.incometaxindia.gov.in/Directtaxlaws/cbdt/dta/A1_Thailand.htm
26 July 2025
Great question! Here's a clear breakdown about **taxability of foreign branches** of an Indian company:
---
### Taxability of Foreign Branch Income in India
1. **Global Income Taxation for Indian Companies**
An Indian company is **resident in India** and hence **taxed on its global income**. This means income earned by its foreign branches (e.g., in Brazil, Thailand) is **taxable in India**.
2. **Taxation in Foreign Country (Branch Location)**
The foreign branches pay tax locally in the countries where they operate.
3. **Double Taxation Avoidance Agreement (DTAA)**
India has DTAAs with many countries (including Brazil, Thailand) to avoid double taxation:
* Tax paid in the foreign country can be claimed as **credit** against Indian tax liability on the same income.
* Credit is allowed **subject to rules and limits** under the DTAA and Indian Income Tax Act (Section 90 & 91).
4. **How to Compute Tax in India**
* Compute the total income including foreign branch profits.
* Calculate Indian tax liability on global income.
* Deduct foreign tax paid (as per DTAA) as **foreign tax credit**.
* Pay the balance as advance tax or regular tax.
5. **TDS and Advance Tax**
* Foreign tax paid is **not TDS**, but can be claimed as foreign tax credit.
* The company should adjust its advance tax payments based on total tax liability after credit.
* TDS provisions mainly apply to payments made by or to Indian entities.
6. **Documentation Required**
* Tax paid certificate from foreign tax authorities.
* Proof of branch registration and operation.
* Details of income, expenses, and taxes paid.
---
### Summary Table
| Aspect | Treatment |
| ------------------- | ------------------------------------------- |
| Taxability in India | Yes, Indian company taxed on global income |
| Foreign Tax Paid | Can be claimed as foreign tax credit (DTAA) |
| Advance Tax & TDS | Pay advance tax net of foreign tax credit |
| Documentation | Foreign tax certificates, branch financials |
---
If you want, I can help draft an example of tax computation or clarify any DTAA provisions specific to Brazil or Thailand!
---
### Taxability of Foreign Branch Income in India
1. **Global Income Taxation for Indian Companies**
An Indian company is **resident in India** and hence **taxed on its global income**. This means income earned by its foreign branches (e.g., in Brazil, Thailand) is **taxable in India**.
2. **Taxation in Foreign Country (Branch Location)**
The foreign branches pay tax locally in the countries where they operate.
3. **Double Taxation Avoidance Agreement (DTAA)**
India has DTAAs with many countries (including Brazil, Thailand) to avoid double taxation:
* Tax paid in the foreign country can be claimed as **credit** against Indian tax liability on the same income.
* Credit is allowed **subject to rules and limits** under the DTAA and Indian Income Tax Act (Section 90 & 91).
4. **How to Compute Tax in India**
* Compute the total income including foreign branch profits.
* Calculate Indian tax liability on global income.
* Deduct foreign tax paid (as per DTAA) as **foreign tax credit**.
* Pay the balance as advance tax or regular tax.
5. **TDS and Advance Tax**
* Foreign tax paid is **not TDS**, but can be claimed as foreign tax credit.
* The company should adjust its advance tax payments based on total tax liability after credit.
* TDS provisions mainly apply to payments made by or to Indian entities.
6. **Documentation Required**
* Tax paid certificate from foreign tax authorities.
* Proof of branch registration and operation.
* Details of income, expenses, and taxes paid.
---
### Summary Table
| Aspect | Treatment |
| ------------------- | ------------------------------------------- |
| Taxability in India | Yes, Indian company taxed on global income |
| Foreign Tax Paid | Can be claimed as foreign tax credit (DTAA) |
| Advance Tax & TDS | Pay advance tax net of foreign tax credit |
| Documentation | Foreign tax certificates, branch financials |
---
If you want, I can help draft an example of tax computation or clarify any DTAA provisions specific to Brazil or Thailand!
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