Definition and Tax Status of Branch Offices

• A branch office is an extension of a parent company operating in another location.
  
• It is not a separate legal entity and operates under the control of the head office.
  
• For tax purposes, income earned by a branch in India is taxable in India.
  
• The branch is treated as a taxable unit under the parent company’s PAN.
  
• Foreign companies must register their Indian branch under FEMA and Company Law.
  

Taxation of Domestic Branches

• Branches within India of the same company are not taxed separately.
  
• Their income is consolidated in the company’s overall profit and taxed accordingly.
  
• Inter-branch transactions are eliminated for tax purposes.
  
• Books must reflect location-wise income and expense segregation.
  
• Internal transfer pricing between branches is not applicable.
  

Taxation of Foreign Branches of Indian Companies

• Income of foreign branches is included in the global income of the Indian company.
  
• Relief for double taxation may be claimed under section 90 or 91.
  
• Foreign tax credit is allowed for taxes paid abroad, subject to conditions.
  
• Disclosure of foreign branch details is mandatory in the income tax return.
  
• Profits repatriated to India are not taxed again if already included.
  

Taxation of Indian Branches of Foreign Companies

• Indian branches of foreign companies are treated as Permanent Establishments (PE).
  
• Profits attributable to the PE are taxed at 40 percent plus surcharge and cess.
  
• Income includes revenue from sales, services, and technical fees earned in India.
  
• Indian branches must file Form ITR-6 and maintain proper accounts.
  
• Transfer pricing rules apply to transactions between the branch and its head office.
  

Compliance and Reporting Requirements

• Branches must obtain PAN, TAN, and register for GST, if applicable.
  
• Maintain separate books of account for branch-level operations.
  
• File annual income tax return and tax audit report, if required.
  
• Report branch income, expenses, and tax liability in consolidated accounts.
  
• Adhere to RBI, FEMA, and regulatory filings for foreign company branches.