India’s taxation system

India’s tax system includes a wide range of imposts on businesses and individuals, including income taxes (corporate income tax and individual income tax), taxes on property (capital gains tax), Goods and Services Tax, customs duties, turnover taxes and stamp duty.

This section provides an overview of the primary taxes Australian enterprises need to consider when establishing a business in India. It is important that they seek professional advice on the various taxes that may apply to their business and its specific situation.

Not all applicable taxes are covered in this starter pack and the information provided should be used only as a guide. Applicable tax laws and policies will vary depending on the city and province in which a business is operating, as there can be additional local charges that may apply.

For resident Indian companies, worldwide revenue is taxed. For non-resident Indian companies, only revenue generated in India is taxed.

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The Government has tightened its regulations to reduce both local and foreign companies avoiding taxes in India. From the 2018-19 financial year, the Government assesses applicable taxes by evaluating a company’s place of effective management (PoEM). PoEM is determined based on where key management and commercial decisions affecting business strategy and operations are made and put into effect.

In 2017 the Government issued final guidelines for the determination of the PoEM of a foreign company in India. These guidelines were a welcome development for foreign investors as they clarified a number of previously ambiguous applicability and procedural issues.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 has also come into force, with the aim of circumventing tax avoidance by those who may hold money overseas. Any undisclosed foreign income or assets detected are to be taxed at the rate of 30 per cent under the Black Money Taxation Act. Non-disclosure or inaccurate disclosure can attract fines and imprisonment.

Download a copy of the India Country Starter Pack to access detailed information including:

  • Corporate taxes
  • Indirect taxes
  • Tax incentives
  • Transfer pricing provisions
  • Individual (personal) income tax
  • New personal tax regime introduced in 2020
  • Compliance

 

Want to learn more? Explore our other India information categories or download the India Country Starter Pack.