India market entry · Branch office tax and GST
Tax, GST and Transfer Pricing for Branch Offices in India
Prepared by S U and Company's CA-led advisory team · Published 27 October 2026 · About S U and Company
A branch office pays more tax than an Indian subsidiary doing the same work, and it runs on its own set of GST rules once the head office enters the picture. Getting the income tax rate, the GST distinct-person treatment, and the remittance paperwork right from the first return avoids both overpaying and the kind of mismatch that draws a notice later.
Quick answer
How is a branch office of a foreign company taxed in India?
A branch office is taxed as a foreign company at 35% plus surcharge and cess on profits attributable to its Indian business — an effective rate of roughly 36.4% to 38.22%. It must deduct TDS, pay advance tax in four instalments, file a return and tax audit, register for GST where applicable, and treat its head office as a distinct person under GST.
1. The income tax rate
| Taxable income | Base tax | Surcharge | Cess | Effective rate |
|---|---|---|---|---|
| Up to ₹1 crore | 35% | None | 4% | 36.4% |
| ₹1 crore to ₹10 crore | 35% | 2% | 4% | 37.128% |
| Above ₹10 crore | 35% | 5% | 4% | 38.22% |
Rates apply under the Income-tax Act, 2025 and can change in each Budget, so the current year's rate should always be confirmed rather than carried over from a prior filing. A tax treaty may reduce the rate on specific categories of income.
2. Permanent establishment and profit attribution
A branch office is a fixed place of business, so it is generally a permanent establishment of the foreign company, and profits attributable to it are taxed in India under both the domestic law and the applicable treaty. Profits are worked out from the branch's own audited accounts, with deductions for the expenses of the Indian business, while head office expenses allocated to the branch are allowed only within the limit the income tax law sets — not simply whatever the group chooses to allocate.
3. Filing obligations through the year
- Income tax return and tax audit. Filed every year, with a tax audit report where turnover exceeds the applicable limit.
- Advance tax. Paid in four instalments — by 15 June, 15 September, 15 December and 15 March — based on estimated income for the year.
- TDS compliance. Deducted on salaries, rent, fees to professionals and vendors, and payments abroad, deposited with the government and reported in quarterly returns.
- Transfer pricing. A Form 3CEB report and supporting documentation for dealings with group companies above the applicable thresholds.
4. GST and the head office as a distinct person
A branch office generally registers for GST if its turnover is above the registration threshold or it makes certain types of supplies, filing returns monthly or quarterly. The point most often missed: under GST, a branch office and its head office abroad are treated as distinct persons. Services between them are therefore usually not treated as zero-rated exports, and services the branch receives from the head office can instead be an import of services, taxed on a reverse-charge basis, with input credit available where the branch is otherwise eligible to claim it. Each arrangement should be reviewed on its own facts rather than assumed to follow the export-of-services treatment a standalone Indian company might get.
5. Remittance tax paperwork
Payments to the head office — service fees, royalties, interest — need tax analysis, a withholding rate confirmed under the applicable tax treaty where one applies, and Forms 15CA and 15CB prepared before the payment goes out. A profit remittance (as opposed to a fee or royalty payment) separately needs a Chartered Accountant's certificate confirming the underlying tax position. See our treaty benefits documentation guide for the US-specific document set.
6. Expat taxation and dispute representation
An expat working in the branch office is taxed in India on salary for work done here, regardless of who pays it, with the person's residence status, treaty position, and social security position all affecting the final result — see our expat tax residency guide. Where a tax or GST notice arrives, representation runs through the Assessing Officer, the Transfer Pricing Officer, the Dispute Resolution Panel, the Commissioner (Appeals), and the Income Tax Appellate Tribunal as applicable — see our tax notices and disputes guide.
Frequently asked questions
What is the income tax rate for a branch office in India?
A branch office pays tax as a foreign company: 35% on its India profits, plus a 2% surcharge where income is between ₹1 crore and ₹10 crore or 5% above ₹10 crore, plus 4% cess — an effective rate of roughly 36.4% to 38.22%. Rates apply under the Income-tax Act, 2025 and can change in each Budget.
Is a branch office a permanent establishment in India?
Generally yes. A branch office is a fixed place of business, so it is a permanent establishment of the foreign company, and profits attributable to it are taxed in India under both the domestic income tax law and the applicable tax treaty.
Does a branch office need to register for GST?
Generally yes, if its turnover is above the registration threshold or it makes certain types of supplies, with returns filed monthly or quarterly depending on the scheme chosen.
Can a branch office claim GST export benefits on services to its head office?
Usually not. Under GST, a branch office and its head office abroad are treated as distinct persons, so services between them are generally not treated as zero-rated exports — each arrangement should be reviewed before invoicing on that assumption.
Does GST apply on services received from the head office?
Often yes. Services a branch office receives from its head office abroad can be an import of services, taxed on a reverse-charge basis, with input credit available where the branch is otherwise eligible to claim it.
Does transfer pricing apply to a branch office?
It can. Dealings between the branch office and other group companies are tested at arm’s length, and a Form 3CEB report is required above the applicable thresholds. Profit attribution between the head office and the branch is also a distinct question reviewed separately from intercompany transfer pricing.
What tax paperwork is needed to remit money to the head office?
Payments to the head office — fees, royalties, interest — need tax analysis, a withholding rate confirmed under the applicable treaty, and Forms 15CA and 15CB. A profit remittance separately needs a Chartered Accountant’s certificate.
How S U and Company can help
We prepare and file the branch office's income tax return, tax audit, GST returns and transfer pricing report, and represent it in tax and GST proceedings where needed. See our FEMA and RBI compliance guide and accounting and audit guide, or explore the US-to-India entry guides.
Sources and further reading
- Income Tax Department — rates, forms and tax treaty resources.
- GST portal — registration and returns.