Does our US subsidiary file anything if it made no income?
Yes. A US subsidiary of an Indian company files US information returns on its related-party transactions whether or not it has income, so a dormant or loss-making year is not an exempt year. The exposure attaching to those returns is per-form, which means the cost of missing them scales with the number of filings rather than with the size of the company. Groups that treat a first quiet year as nothing to report often accumulate several missed filings before anyone checks. The practical approach is to identify every related-party transaction in the opening year, however small, and file on that basis from the beginning.
What US tax applies when we send profits back to India?
Repatriation is taxed according to the form the payment takes, and that form is largely fixed by how the US company was funded. Entity choice and funding structure decide the US tax profile and the withholding on repatriation, so a company capitalised entirely with share capital has fewer routes home than one funded partly with debt, or one that genuinely pays for services it receives. The point to take from this is the timing. The decision is taken at formation, before there is anything to repatriate, and it is awkward to revisit once the structure has been operating and money has already moved between the two companies.
Do we keep reporting the US investment in India every year?
Yes. India's outbound-investment reporting continues annually for as long as the investment is held; it is not completed by the filing made when the US company is set up. It is an obligation of the Indian company rather than of the US one, which is why it slips. The US entity's own compliance calendar looks complete while the Indian side has nothing scheduled at all. Set the annual Indian reporting up at the same time as the US filings, in the same calendar, owned by a named person. Groups that do not usually find several years outstanding when someone eventually asks.
Which intercompany charges do the tax authorities look at first?
Service and software charges between the two companies are the transactions both authorities examine first. They are examined first because they are the easiest to assert and the hardest to evidence: nothing physical moves, the amount is often a round figure, and the supporting material is usually written after the charge rather than before it. If your Indian company supplies engineering, development or support to the US company, or licenses software to it, expect those charges to be the opening question in any review. The work that answers it is contemporaneous. What was supplied, by whom, over what period, and why the charge is the figure it is.
Should the US company be a subsidiary or a branch of our Indian company?
Settle it before any US activity begins, because the decision is much harder to revisit afterwards. A separate US company keeps the Indian company itself out of the US system, and turns the relationship between the two into a set of transactions that have to be priced, documented and reported. Operating directly puts the Indian company inside the US system, with filings of its own there and its results exposed to a second authority. Neither is universally better. What decides it is the shape of the US activity, how much administration the group can genuinely sustain in a second country, and how quickly cash is needed back in India. Deciding after trading has started narrows the options and usually settles the question by default.
Can we charge our US subsidiary for software developed in India?
You can, and it is an ordinary arrangement. What makes it hold up is that the charge describes something real: what is licensed, to whom, on what terms and for how long, with the basis of the amount settled before the first invoice rather than reconstructed afterwards. The agreement also has to reflect who actually developed the software and who maintains it, because that is what an examiner asks about. Related-party transactions of this kind feed the US information returns the subsidiary files whether or not it has income, so the arrangement is on the record on both sides from the first year, whether or not it produces any tax at all.
Can an NRI claim back TDS deducted on Indian income?
Yes, by filing an Indian return for the year. Withholding on rent, interest, dividends, professional fees or a property sale is an advance payment, not a final tax, so where the actual liability is lower — because of the treaty, because of the basic exemption, or because the deduction was computed on gross proceeds rather than gain — the excess comes back as a refund. It needs your PAN, a validated Indian bank account and the deductor's statement filed. See Indian filing and credit claims.
What is TCS on foreign remittance?
Tax collected at source. When a resident individual remits money abroad under the Liberalised Remittance Scheme — or buys an overseas tour package — the bank or seller collects an amount of tax on top and deposits it against your PAN. It is not a cost and it is not a final tax: it appears in your annual tax statement and is set off against the tax on your return, with the excess refunded. The rates and the purposes they attach to have been amended repeatedly, so we confirm them for the remittance year. See LRS limits and TCS.
