How is ITR e-filing done by Foreign Companies

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ITR e-filing for Foreign Companies

For the purposes of income tax (ITR e-filing), a company is a commercial entity that is obliged to pay dividends to its shareholders out of its net profits each year. A domestic company is one that is registered with the Registrar of Companies and complies with the provisions of the Indian Companies Act, 2013. Any company that is not domestic is then considered a foreign company.

ITR e-filing done by Foreign Companies

India is still considered one of the hottest destinations for Foreign Direct Investment with such inflows increasing by 18% to reach USD 46.4 billion in 2016 according to a Price Water House Coopers report of 2017. Where foreign exchange is concerned, the RBI gets involved to monitor whether the country has enough international currency to meet its trade obligations. The relevant rules under the Foreign Exchange Management Act, 1999.

Any entity whether domestic or foreign triggers a tax event in India if it accrues, earns or accepts any income withinn the geographical boundaries of this country. These companies then need to file an annual tax return like any other commercial entity. The tax slabs as published by the CBDT are given below.

Income Tax Rates for Assessment Year 2018-19 (Fiscal Year 2017-18)

Nature of IncomeTax Rate
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government50%
Any other income40%
  1. Surcharge on Income tax: To the tax calculated after applying the above tax rate is added a surcharge under the following scheme:
      1. For annual turnovers lying between INR 1 crore and INR 10 crores the surcharge is 2% of the tax computed previously.
      2. For annual turnovers exceeding INR 10 crore the surcharge is 5% of the tax computed previously.

For both of these classes, the total amount of tax after accommodating surcharge should not be more than the difference between the turnover and 1 crore and between the turnover and 10 crore respectively.

  1. Education Cess: To the amount computed in Step 1 is added an education cess at the rate of 2%
  2. Secondary and higher education cess: To the amount computed in Step 2 is added a secondary and higher education cess at the rate of 1%.
Some Common Taxable Triggers in Indian Law for Foreign Companies
  • Sections 90, 90A and 91 of the Income Tax Act, cover the subjects of Double Taxation Avoidance Agreements with consenting countries. Those foreign entities claiming relief under these sections should also e-file their income tax returns either through a CA or at the income tax login portal.
  • According to judicial precedent, even those companies that incur losses are obligated to file annual ITR e-filing for the periods during which they operated in the expectation of profit within India.
  • Section 115JG mandates that the Indian branch of a foreign bank which is turned into a subsidiary company becomes liable to income tax in India for that assessment year. Further, capital gains resulting from the conversion are to be considered as taxable income and depreciation, loss etc. can be offset according to rules set by the Reserve Bank.
  • Where Indian companies receive dividends from equity through a foreign company, taxes shall be computed according to provisions set out in Section 115BBD.
  • FII income is subject to taxation as per Section 196D.
  • Royalties transferred to a foreign company outside India are subject to Section 44D and those for technical service charges and dividends to be distributed to them by Section 115A.
  • Foreign entities engaged in critical infrastructure and construction projects are to pay only 10% of their fees according to Section 44BBB as income from business or profession.
  • Failure to comply could result in interest chargeable at 1% of amount due or a fine of Rupees 5000 for failing to meet the due date for ITR e-filing of ITRs. Concealment of income could attract as high as 300% the tax due.

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7 COMMENTS

  1. Great work.. Thnx for this this really help me alot.This blog is really helpfull for us to know more about How is ITR e-filing done by Foreign Companies .This tell us everything that we should know about .How is ITR e-filing done by Foreign Companies. This is like a algorithm to fill taxes becaute it tell us step by step how we should fill taxes and yes it is also easy to understand. It tell breifly and accurately about taxes. The best thing about this blog is that we can get every information hear only. we shoud not go on different side to search about itr. Great work keep it up.
    Can you tell me more about anual tax retrurn?

  2. Thanks for this Blog. This blog tell us everything that we should know about .How is ITR e-filing done by Foreign Companies. This is like a algorithm to fill taxes becaute it tell us step by step how we should fill taxes and yes it is also easy to understand. It tell breifly and accurately about taxes. The best thing about this blog is that we can get every information hear only.This blog is really helpfull for us to know more about How is ITR e-filing done by Foreign Companies .

  3. taking this opportunity to appreciate your wok behind this simple and understandable blog which include how is ITR e-filling done by Foreign Companies.the most attracting thing to say about ITR blog’s is that it contains everything which touches each and every corner of tax and in depth.

  4. Very nicely written.It’s awesome that ALL INDIA ITR has shared this great info with us. The blog is really helpful and explains everything very easily. It explains how foreign companies should e-file Income Tax Return in very easy steps. Great work. Can you provide me more information on this topic?

  5. Thanks this blog has really helped me alot. This really helps and tells a process that is required to fill up an Income tax return. This blog tell us step by step how we should fill taxes and yes it is also easy to understand. Each and every details have been mentioned in simple and clear language.
    i would prefer anyone to have a eye on it to clear all their doubts.The blog tells us how are ITR e-fillings are done by the foreign companies this was very much needed since India is getting more and more Mnc’s day by day so it is useful for the people to know the mechanism. The best thing about this blog is that we can get every information hear only. We shoud not go on different side to search about itr. Great work keep it up.It tell breifly and accurately about taxes. The blog is very detailed and the way it explains the things is very easy to understand and to retain it really helps a person on how to fill up the ITR and how to enquire about it. Great work from ALL INDIA ITR since it is a very well written and a very useful blog. I have one question though foreign companies get many advantages when they invest in India this helps them to sa e alot of tax them how come that tax amount is compensated??

  6. I’m looking for this for a long time & finally I understood all things that how foreign companies file their ITR & what are the charges or penalties are their for late filling ITR’s but their is one question in my mind, If any foreingn company wants to set up in India so what other taxes differ from domestic companies they shall to pay?

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