Taxation of Foreign Entities in India
In this truly globalized era, an increasingly large number of cross border business relations are formed on a daily basis. India has seen large increases in the volume of trade with other nations and companies of all sizes are looking towards India for business development and growth.
As is now par for the course, situations arise where Non residents earn income from India in lieu of goods and services provided and, correspondingly, where Indian companies receive goods and services from providers based outside of India this raises the question of taxability of proceeds against such goods and services and tax deductions on the same.
Primarily, the questions in the minds of both the receiver and renderer of services include but are not limited to :
- Is income earned against such services taxable in India?
- Do Indian receivers of such goods and services need to deduct TDS on such payments?
This note is shall be most useful for non resident companies doing business with or in India and, expatriates working in India.
This note should also resolve confusion in the minds of Indian businesses who need to withhold taxes at source on such amounts so paid to foreign entities. Failure to correctly deduct such taxes can lead to dis-allowance of expenses and the Indian entities being labeled assesses in default.
We look forward to your questions and comments on the report.