§ 1
Taxing the profits of a branch
The branch's taxable profit is the profit attributable to its activities in India. Where it earns from Indian customers, the attribution is usually direct. Where it serves the head office, for example as a support or IT centre, the branch should charge the head office an arm's length fee, documented as a transfer pricing transaction.
Deductions for head office expenditure are capped by a statutory limit linked to the branch's adjusted income. Treaty provisions may modify the computation. Once tax is paid, profits can be remitted to the head office without further withholding, which is one of the branch structure's advantages.
On GST, the branch is a distinct person from its head office. Services it provides to the head office can qualify as exports if the conditions are met, and services the head office provides to the branch can trigger reverse-charge GST.
§ 2
The law that applies
| Income-tax Act, 2025 | Taxation of foreign companies, head office expenditure limit, TDS and transfer pricing. |
|---|---|
| Tax treaty with the head office country | Permanent establishment profit attribution and non-discrimination. |
| CGST and IGST Acts, 2017 | Branch and head office as distinct persons; exports and reverse charge. |
§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
Head office costs are deducted in full and disallowed in assessment.
Our approach
We compute the statutory limit each year, support allocated costs with invoices and an allocation key, and disclose the treatment clearly in the return.
Issue 2
Services between the branch and head office are not invoiced.
Our approach
We set up intercompany invoicing with a documented pricing basis, consider GST reverse charge on head office services, and include the transactions in the transfer pricing report.
§ 4
Process and timeline
- 1
Monthly
MonthlyTDS, GST returns and reverse-charge computation.
- 2
Annual
September–NovemberTax audit, transfer pricing documentation and accountant's report, return of income.
- 3
Remittance
After taxCertificates for remittance of branch profits to the head office.
§ 5
Our scope of work
Included
- Branch tax computation
- Head office expense limit
- TDS and GST
- Transfer pricing documentation
- Remittance certificates
- Assessment support
§ 6
Questions
Is branch profit remittance taxed again?
No. Once the branch has paid tax on its profits, remittance to the head office is not subject to dividend withholding.
Does transfer pricing apply to a branch?
Yes. The branch and its head office are treated as associated enterprises for transfer pricing, so transactions between them must be at arm's length and reported.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.