White Paper - Whether non-resident foreign companies are required to file Return of Income in India

Taxation of non-residents has been a vexed issue for a long time. Applicability of tax laws of different countries makes it difficult to ascertain taxability of non-residents who have global presence.

In case where non-residents are liable to tax in country other than their resident country, they may have to adhere to various compliances required by tax law of the other country. One of such important compliance is filing of Income Tax Return.

Generally, in India, any person earning income from India which is taxable in India has to file return of income in India. Nowadays, there are frequent transactions amongst the foreign companies and Indian companies related to various payments such as software, royalty, fees for technical services, management fees, reimbursements, etc. There may be withholding taxes being withheld by Indian entities while making payments to such foreign entities.

In most of the cases, Non-resident foreign companies in general do not file return of Income in India as taxes were withheld on their income in India. Recently, based on information collated from withholding tax returns (Form 27Q) filed by Indian entities, etc., the  Income Tax authorities have been issuing notices to foreign companies and asking them to file return of income in India. The purpose of this White Paper is to provide a brief overview of the whether non-resident Companies are required to file return of income in India as per Income Tax Act 1961.

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