USA to India: questions US companies ask

For US tax, an Indian private limited company can be treated either as a corporation or as a disregarded entity by filing Form 8832, which affects how its results show up in the US return. An Indian public company has no such choice. Branches and liaison offices flow straight into the US company's own return, which many US groups find unattractive.

Delaware corporations and LLCs are the usual parents. An LLC provides its certificate of formation and operating agreement instead of a charter and bylaws, and the Indian forms must describe it accurately. With India 9.5 to 13.5 hours ahead, digital signature video calls and bank KYC are scheduled for the US evening or early morning.

Each US state apostilles its own documents through its Secretary of State, and federal documents go to the Department of State. The trap is notarised papers: they are apostilled by the state where the notary is commissioned, so a Delaware company whose director signs in California needs a California apostille for that page. A fresh certificate of good standing avoids most queries.

Few US executives spend 182 days a year in India, so US parents usually appoint an Indian employee or a professional resident director. A US citizen who does relocate and meets the test becomes Indian resident but stays taxable in the US on worldwide income, so the move needs planning in both countries.

On the US side, budget for notarisation and state apostilles, courier, and the US tax work the investment triggers, such as Form 5471 and possibly Form 926. These are often overlooked in the India budget but are real first-year costs.

US documents usually take one to three weeks depending on the states involved; multi-state apostilles take longest. Running director signatures and the Indian name application alongside the apostilles keeps the overall plan close to two months.

The parent remits dollars and the Indian bank credits rupees, so the exchange rate on the day decides how many shares can be issued at fair value. Allow a small buffer in the dollar amount. Cash contributions to a foreign corporation above US thresholds can require Form 926 at the parent.

US groups often need a separate fair value for US GAAP or ASC 718 purposes. That exercise does not replace the FEMA valuation certificate, which must be in rupees and issued for the Indian transaction.

The India–US treaty is less generous than many: 15% on dividends to a 10%+ holder and 15% on royalties and fees for included services. Fees count as included services only if they make technical knowledge available or are ancillary to a royalty, so many routine service fees are business profits instead. The treaty leaves capital gains to domestic law.

A US corporate parent with at least 10% can usually deduct the foreign-source dividend under Section 245A but cannot credit the Indian withholding on it, so that tax is a final cost. Royalties and service fees are taxable in the US, with Indian tax generally creditable, which can make them more efficient where substance supports them.

The same intercompany charge is examined by India and by the IRS under Section 482, often reaching different answers. India and the US conclude bilateral advance pricing agreements, which can fix the method for five future years with roll-back, and are worth considering for large captive centres.

Services furnished through employees in India for more than 90 days in a 12-month period create a service permanent establishment under the India–US treaty. US managers who spend long periods at the Indian office, or who negotiate customer contracts from India, are the usual concern.

Indian profits can be taxed in the US before any dividend through Subpart F and net CFC tested income. The Indian effective tax rate of about 25% usually clears the high-tax exception, but the calculation needs Indian figures each year, along with Form 5471 and FBAR data.

Most US parents report on a calendar year, so the Indian January–March quarter falls in a different Indian year. US deadlines that depend on Indian numbers include Form 5471 with the parent's return and FBAR, due 15 April with an automatic extension to 15 October.

India has no at-will employment, so US-style offer letters must be rewritten with notice, cause and gratuity terms. Teams working US hours need shift allowances, transport arrangements and state permission for night work, which are easy to miss.

There is no India–US totalization agreement, so a US national on the Indian payroll can owe Indian provident fund and US Social Security at the same time. US citizens also remain taxable in the US and use the foreign earned income exclusion or foreign tax credits.

A US executive moving to India needs an employment visa and, for stays over 180 days, FRRO registration within 14 days of arrival. US tax continues because of citizenship-based taxation, so a shadow payroll and a dual-country tax calendar are part of the move.

US privacy law is sectoral and state-based, so the contract with the Indian company sets most transfer terms. Where Indian teams process data of US residents under a contract with the US company, some DPDP Act duties are relaxed, but security obligations stay.

US court judgments cannot be executed in India directly; a new suit is needed. Awards from US-seated arbitration are enforceable as foreign awards. Agreements signed in the US and brought into India must be stamped in India within the prescribed time.

No comprehensive trade agreement is in force between India and the US. US investors are active in technology, life sciences, financial services and electronics manufacturing, where production-linked incentive schemes can support local production.

US groups run more capability centres in India than any other country. Safe harbour margins are available for some IT and IT-enabled services, and IP created by the centre should be assigned to the US parent in writing.

Because the treaty leaves gains to domestic law, a sale of the Indian shares by the US parent is taxable in India. US elections such as Section 338(g) and check-the-box changes should be agreed before signing so the Indian and US steps line up.