Income Tax Planning for Non-Resident Companies in India
For global investors and foreign-owned companies operating in India, repatriating profits to the parent entity or shareholders abroad is a key objective. However, this process must comply with Indian tax laws, FEMA regulations, and Reserve Bank of India (RBI) reporting requirements.
At Jain Prachi & Company, we provide comprehensive repatriation advisory to ensure smooth, compliant, and tax-efficient profit transfers from India to your home country.
What Is Repatriation of Profits?
Repatriation refers to the transfer of net earnings (dividends, interest, royalties, capital gains, or retained earnings) from an Indian business entity to its foreign shareholder or parent company outside India.
Entities eligible to repatriate profits include:
- Wholly Owned Subsidiaries (WOS)
- Joint ventures with foreign shareholding
- Branch offices, project offices, and liaison offices
- NRIs holding shares in Indian companies
When and How Can Profits Be Repatriated from India?
Repatriation is allowed under FEMA guidelines and can occur under the following routes:
🔹 Dividend Distribution
Dividends declared by an Indian company can be freely repatriated to its foreign shareholders after the payment of Dividend Distribution Tax was abolished in 2020.
- TDS applies under Section 195 on dividends paid to non-residents.
- Applicable rate is 20% or lower under DTAA.
- RBI approval is not required if remittance is done via authorised dealer banks under automatic route.
🔹 Royalty and Technical Fees
Companies paying royalties or fees for technical services (FTS) to their foreign parent can remit payments as per the licensing or service agreement filed with RBI.
- TDS at 10% under domestic law; may vary under DTAA
- No RBI approval needed for bonafide agreements
🔹 Interest Payments on Loans
If a foreign parent has lent money to its Indian subsidiary or JV, interest payments on ECB (External Commercial Borrowing) can be repatriated.
- Subject to ECB norms and limits
- Interest must be at arm’s length
- TDS applies at 5% or DTAA rate
🔹 Capital Gains
Non-residents can repatriate sale proceeds of investments in shares, assets, or property in India after tax deduction and compliance with FEMA reporting.
Key Compliance Requirements for Repatriation
Repatriation is permitted only after satisfying the following compliance norms:
PAN and TAN of Foreign Shareholders
Mandatory for tax deduction and income tax return filing in India.
Form 15CA & 15CB Certification
Every remittance outside India must be supported by Form 15CA (by the company) and Form 15CB (issued by a Chartered Accountant). These certify that taxes have been properly deducted.
Transfer Pricing and Arms-Length Pricing
Royalty, FTS, and interest transactions must comply with TP guidelines. Jain Prachi & Company helps benchmark rates to avoid scrutiny.
FIRC and Inward Remittance Proof
Original investment proof and shareholding structure must be documented.
RBI Reporting under FEMA
Repatriations must be reported through AD banks and relevant FEMA forms (e.g., FCGPR, FC-TRS) to RBI.
Common Challenges Faced by Foreign Companies
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Delays due to incomplete FEMA filings
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Rejection of Form 15CB by CA due to TDS errors
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Incorrect DTAA interpretation causing excess tax
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Issues in dividend declaration process
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Transfer pricing disputes during audit or assessment
Jain Prachi & Company provides proactive solutions by handling the complete end-to-end repatriation process, including RBI filings, tax certification, and CA attestations.
Our Repatriation Advisory Services Include:
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Preparation of Form 15CA/15CB
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DTAA application and tax planning
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RBI and FEMA documentation and liaison
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Guidance on dividend declaration and board resolutions
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Transfer pricing support for royalty and FTS
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Advising on profit retention vs. repatriation options
Tax Rates Applicable on Repatriated Income
|
Type of Income |
TDS Rate (Domestic) |
DTAA Rate (May Vary) |
|
Dividend |
20% |
5–15% |
|
Royalty/FTS |
10% |
10–15% |
|
Interest (ECB) |
5% |
5–10% |
|
Capital Gains (Shares) |
10–20% |
Subject to treaty |
Our team ensures your tax liability is minimised through lawful planning and treaty benefits.
Why Choose Jain Prachi & Company
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Expertise in FEMA, taxation, and RBI compliance
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360° support from tax computation to fund remittance
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Experience with MNCs, NRIs, and cross-border structuring
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Transparent pricing and prompt service delivery
Plan a Smooth Repatriation from India
Don’t risk delays or penalties by ignoring repatriation compliance. Let our experts handle your paperwork, certifications, and filings while you focus on expanding globally.
Email: contactus@jainprachi.com
Website: https://jainprachi.com
Talk to our team today and secure your repatriation strategy.
FAQs: Repatriating Profits from India
Q: Is RBI approval required for repatriating dividends?
No, if the remittance is made through authorised banks under the automatic route.
Q: Is repatriation allowed from liaison offices?
Liaison offices cannot earn income in India and thus cannot repatriate profits. Only reimbursement of expenses is allowed.
Q: Can taxes be minimised on profit repatriation?
Yes, by applying relevant DTAA provisions and using appropriate repatriation methods.
