Desi branches of foreign companies to take deeper roots

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.”