International taxation refers to the set of rules and regulations governing taxation on cross-border transactions, foreign income, and multinational entities operating in India. Businesses and individuals earning from foreign sources must comply with Indian tax laws and Double Taxation Avoidance Agreements (DTAA).
Why is International Taxation Important?
-
Avoid double taxation on foreign income
-
Ensure compliance with Indian tax laws
-
Optimize tax liabilities through DTAA benefits
-
Prevent legal penalties and interest charges
-
Streamline cross-border business transactions
Key Components of International Taxation in India
-
Tax Residency Status: Determines the tax liability on foreign income.
-
Double Taxation Avoidance Agreement (DTAA): Provides tax relief in two jurisdictions.
-
Foreign Tax Credit (FTC): Helps taxpayers offset taxes paid in foreign countries.
-
Transfer Pricing Regulations: Ensures fair taxation of cross-border transactions within multinational groups.
-
Withholding Tax (TDS) on Foreign Payments: Applies to payments made to non-residents.
Process for Filing International Tax Returns & Compliances
Step 1: Determine Residential Status
-
Residential status as per Income Tax Act, 1961.
-
Residential status affects taxation of global income.
Step 2: Identify Taxable Foreign Income
-
Salary earned abroad
-
Rental income from foreign properties
-
Business income from foreign operations
-
Capital gains from foreign assets
-
Dividend and interest income
Step 3: Claim DTAA Benefits & Foreign Tax Credit
-
Submit Form 67 to claim Foreign Tax Credit.
-
Provide proof of tax paid in the foreign country.
-
Avoid double taxation using DTAA provisions.
Step 4: File Income Tax Returns (ITR)
-
ITR-2 for individuals with foreign income
-
ITR-3 for professionals and business owners with foreign earnings
-
ITR-4 for presumptive taxation (small businesses/freelancers)
Step 5: Report Foreign Assets & Bank Accounts (Schedule FA)
-
Mandatory disclosure of foreign bank accounts, properties, and investments.
-
Non-disclosure leads to penalties under the Black Money Act.
Step 6: Compliance with Transfer Pricing Norms
-
For multinational companies with cross-border transactions.
-
Maintain documentation to justify arm’s length pricing.
Step 7: Filing of Form 15CA & 15CB for Foreign Remittances
-
Form 15CA: Declaration of payments made to non-residents.
-
Form 15CB: Certification from a Chartered Accountant for tax deduction.
Timeline for International Tax Compliance
Compliance | Due Date |
|---|---|
Income Tax Return (ITR) | 31st July (Individuals & HUF) / 31st October (Businesses requiring audit) |
Foreign Tax Credit (Form 67) | Before filing ITR |
Transfer Pricing Report | 31st October |
Form 15CA/15CB | Before making remittances abroad |
Advance Tax Payment | 15th June, 15th September, 15th December, 15th March |
Documents Required for International Taxation & Compliance
-
PAN Card
-
Aadhaar Card (for Indian residents)
-
Passport (for NRIs/foreign income earners)
-
Foreign bank statements
-
Form 67 (For Foreign Tax Credit)
-
Tax residency certificate (For DTAA claims)
-
Salary slips (for foreign employment income)
-
Rental agreements (for foreign rental income)
-
Investment proofs (foreign shares, mutual funds, real estate)
-
Form 15CA/15CB (for foreign remittances)
Frequently asked questions
