Taxation Essentials for Foreign Entrepreneurs in India

Clear and practical guide on taxes for foreign entrepreneurs in India, covering corporate tax, GST, TDS, advance tax, profit remittance,

“Tax isn’t just about money.

It’s about showing you know how to stay.”

When the Paperwork Doesn’t Pause for Anyone

You don’t get a warm-up lap after setting up your company in India as a foreigner.

The moment you’re registered, the system expects you to know the whole calendar—income tax, GST returns, TDS deposits, advance tax, every other required compliance.

No alarms ring. No one chases you.

If you miss something, it doesn’t collapse overnight.

It builds up—as silent penalties, interest charges, notices you didn’t see coming.

It’s not dramatic at first.

It’s just quiet.

Until it isn’t.

This guide isn’t about tax theory or compliance gibberish.

It’s about the practical tax moves you need to make, month after month, to keep your company alive, credible, and growing in India.

Your Business Structure Sets the Rules You Follow

Before we dive into filings and payments, a quick reality check:

Not every foreign company is treated the same here.

Depending on your model, India offers multiple options—but not every structure fits every company. Knowing the company types & restrictions for foreigners is critical before choosing your legal setup.

Options Foreign Entrepreneurs Typically Choose:

Wholly Owned Subsidiary (WOS): A private limited company in which 100% of the shares are held by a foreign parent company.
Branch Office: A direct concern of a foreign company that’s allowed to earn revenue in India.
Liaison Office: For communication and branding—cannot earn revenue.
Project Office: Temporary presence tied to specific contracts.

Each comes with its own tax rates, filing duties, and compliance timelines.

Annual Taxation Checklist for Foreign-Owned Businesses

Among the top legal requirements for foreign entrepreneurs is the need to file timely corporate returns, maintain GST compliance, and meet FEMA obligations.

Here’s what every foreign-owned company in India must handle:

Corporate Tax: Where It All Starts

Whether you’re running a wholly owned subsidiary or a branch office, once you start earning, you’re on the Central Board of Direct Taxes (CBDT) radar.

All companies are required to file annual income tax returns, even if they haven’t earned any income.
No “first-year free” rule.
Form used: ITR-6

Entity Type	Base Rate	Effective Tax Rate
Foreign Company	40%	~41.6%–43.68%
Indian Subsidiary (Pvt. Ltd.)	22%	~25.17%
New Manufacturing Unit (Sec 115BAB)	15%	~17.16%

Minimum Alternate Tax (MAT)

If you’re showing profits in your books but not paying taxes through deductions/exemptions, India imposes MAT:

MAT Rate: 15% on book profits, plus applicable surcharge and cess.

Advance Tax: Pay Before You File

India doesn’t wait patiently until the end of the year.

If your expected total tax liability exceeds ₹10,000 after TDS, you must pay Advance Tax quarterly.

Installment Date	% of Total Tax Payable
June 15	15%
September 15	45% cumulative
December 15	75% cumulative
March 15	100% cumulative

Skip an installment?

You’ll owe 1% monthly interest until you pay up.

GST: The Filing That Never Sleeps

GST registration is mandatory if:

Your turnover crosses ₹20 lakh for services or ₹40 lakh for goods.
You deal in interstate supplies.

Once registered, you must:

File GSTR-1 (sales) monthly/quarterly.
File GSTR-3B (summary + payment) monthly.
File GSTR-9 annually if turnover is more than ₹2 crore.
File the GSTR-9C audit return if your annual turnover is more than ₹5 crore.

Even if your business hasn’t made any sales, the government still expects you to file.

Penalties for Skipping GST

₹50/day for late GSTR-1 and GSTR-3B
₹20/day for nil returns
18% interest per annum on late tax payments

TDS: The Quiet Requirement

Whenever you pay salaries, contractors, rent, or professional fees, you’re expected to deduct Tax Deducted at Source (TDS).

Deposit Deadline: 7th of next month after deduction.
Quarterly Returns: Use Form 24Q for salary payments and Form 26Q for all other payments.

Skipping TDS deduction or late deposit triggers heavy interest and penalties—even if it wasn’t intentional.

Profit Repatriation: Sending Money Home

When you want to repatriate profits, India checks two things:

Have you cleared your corporate taxes?
Have you filed RBI/FEMA reports correctly?

Branch offices pay a 20% remittance tax on outbound profits (post-corporate tax).

Subsidiaries remit dividends, which are taxed as per DTA treaties in the shareholders’ home country.

Plan early—repatriation paperwork isn’t overnight.

Monthly and Quarterly Tax Compliance for Foreign Entrepreneurs

The compliances for foreign entrepreneurs in India aren’t once-a-year rituals.

They are alive—monthly, quarterly, yearly.

Tax Compliance	Due Date
GST Monthly Returns	11th (GSTR-1), 20th (GSTR-3B)
TDS Deposits	7th of every month
TDS Quarterly Filings	April, July, October, January
Advance Tax Installments	June, September, December, March

Missing these adds unnecessary costs, stress, and reputational damage.

Common Mistakes Foreign Entrepreneurs Make

Assuming first-year companies get tax holidays (they don’t automatically).
Missing advance tax deadlines (leads to silent interest charges that quietly add up over time).
Ignoring GST nil returns (penalties apply even for zero sales).
Failing to deduct and deposit TDS properly.
Forgetting that FEMA and RBI filings are annual, not one-off.
Blindly trusting advisors without personal oversight.

Tax Breaks You Might Be Eligible For

15% corporate tax rate for new manufacturing units (Sec 115BAB).
3-year tax holiday for DPIIT-recognized startups under Startup India.
SEZ-based tax exemptions (for export-focused businesses).

Reminder: None of these apply automatically. You must claim and prove eligibility.

Final Thought: Stay in Rhythm or Pay for Silence

India doesn’t test how prepared you are. It tests how consistent you can be.

From the outside, the tax system seems like a simple checklist. But from the inside, it’s a rhythm—filings, payments, deposits—each with its own beat.

And when you miss one? The system doesn’t yell. It just notes it.

And then the fines, the interest, and the warnings follow—without emotion, without delay.

You don’t need to know everything. You just need to know when. When to file, when to pay, when to review. Because in India, businesses that grow aren’t just bold. They’re the ones that respect the beat.

FAQ

Do I need to pay corporate tax in India if my company didn’t make a profit?

Yes. Even if your company earns nothing, you still need to file a return.

And if you’ve booked accounting profits but avoided tax through deductions, MAT (Minimum Alternate Tax) might still apply.

In short: silence isn’t an excuse; Indian authority expects you to show up, even for zeroes.

Is Advance Tax compulsory for new or small companies?

Yes. But only if your total tax due for the year is more than ₹10,000.

Even in your first year, if you’re expected to cross that threshold, you’ll need to pay it in four installments.

Miss it, and interest quietly starts piling up, whether you meant to skip it or not.

Can I delay GST filings if I didn’t make any sales?

Nope. If you’re GST-registered, you have to file returns every month (or quarter), even with zero activity.

Late filings invite per-day penalties and system flags. And trust me, you don’t want your GSTIN suspended over a nil return.

What happens if I forget to deduct TDS from payments?

You’re still liable, and more than just the missed deduction.

You’ll pay interest, penalties, and possibly face disallowance of that expense for tax purposes. It’s one of the quietest ways foreign founders lose money without realizing it.

Can I repatriate profits freely after paying tax in India?

Yes, but it’s not a simple wire transfer.

You need to ensure:

All tax filings are clean
RBI and bank procedures are followed
Documentation is in place

For branch offices, a 20% remittance tax applies. For subsidiaries, dividends are distributed after corporate tax, and DTA rules apply in your home country.