Desi branches of foreign companies to take deeper roots
Writer Admin
It is good news for foreign companies operating in India as branches or project offices. Corporate tax is to be cut from 40% to 35%.

'Foreign companies' denotes branches of foreign companies - such as branches of foreign banks who are not permitted to operate as a subsidiary. It also includes project offices such as an infrastructure project office set up by a foreign company for a particular project. It does not include Indian subsidiaries of foreign companies.

At times, foreign companies test the waters in India before setting up a full-fledged subsidiary. "The rate reduction signals a strong play for foreign investment in India," Jiger Saiya, partner and tax leader at MSKA & Associates, said.

Withdrawal of the 2% equalisation levy provides relief to digital companies as the consideration received or receivable for e-commerce supply or services on or after Aug 1, 2024 will not be subject to this tax. For example, a foreign entity selling music or a book to a customer online will now not have to pay this tax.



However, there is a catch. Sandeep Jhunjhunwala, partner at Nangia Andersen, said, "Non-resident players in the space of e-commerce supply and services with Indian client base would surely stand benefited with the discontinued 2% equalisation levy regime. The 6% equalisation levy on digital advertisements would continue."

 

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