Permanent Establishment (PE) In India – Broad Understanding

Over the past few years India has emerged as one of the fastest developing country and has witnessed upsurge in the economic activities on the back of significant influx of foreign investments coupled with technological collaborations. This increased cross border transactions have thrown open various challenges on the taxation front in India for such foreign entities.

Principally, if a Company is incorporated in India, its income is taxable in India. India has right to tax global income of this Company based on the principal of "Residential base" of taxation. India also has a right to tax the income of the foreign company to the extent to which the source of income is situated in India. As per the Indian Income Tax Act (The Act), if any income of a foreign company is received or deemed to be received in India OR is accrued/arised or deemed to have accrued/arised in India, the source of such income is said to be in India and by virtue of principal of "source base" of