International Tax
Cross-border tax turns on two questions asked in order: does India have the right to tax this income at all, and if so, has the treaty reduced that right. Getting the sequence wrong is what produces both over-withholding and unexpected demands.
How Cross-Border Taxation Works in India
India taxes residents on worldwide income and non-residents on income that accrues, arises, or is deemed to accrue or arise in India. The deeming provisions in Section 9 do most of the work in practice — they bring business connection, interest, royalty and fees for technical services within the Indian net even where the recipient never sets foot in the country.
Where a tax treaty applies, Section 90 lets the taxpayer choose whichever of the Act or the treaty is more beneficial, provision by provision. That choice is conditional: a Tax Residency Certificate from the other state is mandatory, and Form 10F must be furnished electronically alongside it. The practical failure point is rarely the substantive treaty analysis — it is that the TRC is obtained late, or does not cover the relevant period, and treaty relief is denied on that ground alone.
Permanent establishment is where most cross-border disputes actually live. A fixed place of business, a dependent agent habitually concluding contracts, a service PE arising from personnel present beyond the treaty threshold, or a construction site exceeding the specified duration will each create a taxable presence. Once a PE exists, profits attributable to it are taxable in India, and the attribution exercise is itself frequently contested.
Residence for a company turns on place of effective management under Section 6(3). A company incorporated abroad becomes an Indian resident, taxable on worldwide income, if its key management and commercial decisions are in substance made in India. Board minutes recording meetings held overseas carry limited weight where the decisions were actually taken elsewhere.
Payments to non-residents attract withholding under Section 195 at the rates in force, read with the treaty where beneficial. The obligation arises on any sum chargeable to tax, and the payer who under-deducts becomes an assessee in default with the disallowance and interest consequences that follow. Form 15CA and, where required, a Form 15CB certificate from an accountant must accompany the remittance.
Beyond the treaty framework sit a set of unilateral measures: equalisation levy on specified digital transactions, the General Anti-Avoidance Rules, and the treaty modifications introduced through the Multilateral Instrument, including the principal purpose test that can deny treaty benefits where obtaining them was a principal purpose of the arrangement.
What We Handle
Treaty positions & relief
Article-by-article analysis under the relevant DTAA, TRC and Form 10F compliance, and documentation of the beneficial ownership position where the treaty requires it.
Section 195 withholding
Determining whether a sum is chargeable to tax, the correct rate read with the treaty, lower deduction certificates under Section 197, and Form 15CA/15CB certification for the remittance.
Permanent establishment analysis
Assessing fixed place, agency, service and construction PE exposure against the specific treaty, and profit attribution where a PE is found to exist.
POEM & residence
Testing where key management and commercial decisions are substantively made, and structuring governance so the residence position matches the documentation.
Expatriate & secondment
Residence determination, salary sourcing, tie-breaker analysis under the treaty, social security agreements, and the service PE risk that secondment arrangements frequently create.
BEPS, MLI & GAAR
Principal purpose test exposure, treaty modifications flowing from the Multilateral Instrument, and anti-avoidance analysis for holding and financing structures.
Cross-Border Compliance Calendar
| Form | What it covers | Due |
|---|---|---|
| Form 15CA / 15CB | Declaration and accountant's certificate for a foreign remittance | Before the remittance is made |
| Form 10F | Electronic filing alongside the Tax Residency Certificate | Before claiming treaty relief |
| Form 27Q | Quarterly TDS return for payments to non-residents | Quarterly, per the TDS calendar |
| Form 3CEB | Where the non-resident is an associated enterprise | 31 October |
| Form 67 | Foreign tax credit claim | On or before the return due date |
| Section 197 certificate | Application for lower or nil withholding | In advance of the payment |
Dates are the ordinary statutory positions and are frequently extended by notification. Confirm the current position before relying on any of them.
Where Cross-Border Positions Fail
Claiming treaty relief without a valid TRC covering the relevant period, or without filing Form 10F — relief is denied on the procedural failure regardless of the merits.
Treating Section 195 as applying only to the taxable portion, when the obligation arises on any sum chargeable and a Section 195(2) application is the correct route to reduce it.
Seconding personnel to India without testing service PE exposure under the applicable treaty threshold.
Recording board meetings abroad while the commercial decisions are in fact taken in India, leaving the POEM position unsupported.
Missing Form 67 for foreign tax credit, which is a condition of the claim rather than a formality.
Assuming the treaty as originally signed still applies, without checking how the Multilateral Instrument has modified it.
Frequently Asked Questions
When is a Tax Residency Certificate required?
Whenever treaty relief is claimed under Section 90. The TRC must be issued by the tax authority of the other contracting state and must cover the period for which relief is sought. Form 10F must be furnished electronically alongside it. Obtaining the TRC after the assessment has begun is a common and usually fatal sequencing error.
What creates a permanent establishment in India?
It depends on the specific treaty, but broadly: a fixed place of business through which the enterprise operates, a dependent agent habitually exercising authority to conclude contracts, the presence of personnel furnishing services beyond the treaty's day threshold, or a building site or installation project exceeding the specified duration. Preparatory and auxiliary activities are generally excluded.
How does POEM affect a foreign company?
Under Section 6(3), a company incorporated outside India is resident in India if its place of effective management — where key management and commercial decisions necessary for the conduct of the business as a whole are in substance made — is in India. The consequence is significant: the company becomes taxable in India on its worldwide income rather than only on Indian-source income.
Do I need Form 15CB for every foreign remittance?
No. Form 15CB, the accountant's certificate, is required where the remittance is chargeable to tax and exceeds the prescribed threshold. Certain categories of remittance listed in the rules are exempt from the 15CA/15CB process entirely, and a Part A declaration suffices below the threshold. The exemption list should be checked before commissioning a certificate.
What is the principal purpose test?
A treaty anti-abuse rule introduced through the Multilateral Instrument. It denies a treaty benefit where, having regard to all relevant facts, obtaining that benefit was one of the principal purposes of the arrangement, unless granting it would be in accordance with the object and purpose of the relevant provisions. It applies alongside domestic GAAR.
Can I take credit for tax paid abroad?
Yes, under Section 90 where a treaty applies or Section 91 where it does not, subject to Rule 128. The credit is limited to the Indian tax attributable to the doubly taxed income. Form 67 must be filed, and the courts have divided on whether late filing is fatal — the safe course is to file it on or before the return due date.
How is equalisation levy different from income tax?
It is a separate levy outside the Income-tax Act, charged on specified digital transactions and collected from the payer. Because it sits outside the Act, it generally falls outside the scope of tax treaties, so treaty relief is not available against it and foreign tax credit in the recipient's home country is often unavailable too.
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General guidance only, current to the Income-tax Act 1961 numbering that governs assessment years up to and including the year ending 31 March 2026. The Income-tax Act 2025 applies from 1 April 2026. Thresholds, rates and due dates change frequently — verify the position and take advice before acting.