If your foreign company earns income from India, you need a qualified Indian tax consultant to handle income tax compliance, GST registration, Letter of Undertaking (LUT) filing, and FIRC documentation. Taxocity provides end-to-end tax and compliance support for foreign companies operating in India, with over 3 decades of experience and a 4.8/5 rating from 5,000+ clients.

• Foreign companies earning from Indian clients must comply with Indian Income Tax Act and GST laws
• LUT is mandatory for zero-rated GST exports; FIRC is proof of foreign inward remittance
• Non-compliance attracts penalties, TDS deductions, and blocked remittances

Why Foreign Companies Need an Indian Tax Consultant

India's tax framework for foreign entities is layered and technical. A foreign company providing services to Indian clients, or an Indian tech consultant billing a foreign company, must navigate multiple compliance requirements simultaneously: GST applicability, income tax obligations, withholding tax (TDS), and RBI-mandated documentation like FIRC.

Without proper guidance, foreign companies face TDS deductions at higher rates, blocked GST refunds, penalties for non-filing, and complications during fund repatriation. A dedicated Indian tax consultant eliminates these risks.

Key Services for Foreign Companies in India

1. Income Tax Compliance

Foreign companies with a business connection or Permanent Establishment (PE) in India are taxable under the Income Tax Act. Even without a PE, royalties, fees for technical services (FTS), and certain other payments are taxable in India at source.

• PAN (Permanent Account Number) application for the foreign entity
• Income Tax Return (ITR) filing in India
• TDS compliance and TDS certificate procurement (Form 16A)
• Assessment and representation before tax authorities
• Advance tax computation and payment

For foreign companies receiving royalty or Fees for Technical Services (FTS) from India, tax is applicable under Section 115A at 20% + applicable surcharge + cess. If a DTAA (Double Taxation Avoidance Agreement) benefit is claimed, the rate may be lower depending on the treaty country - for example, India-UAE DTAA provides a 10% rate, as does the India-Russia and India-China DTAA.

2. GST Registration and Compliance

Indian businesses providing services to foreign companies, or foreign companies supplying services to India, have specific GST obligations. GST registration is mandatory when aggregate turnover crosses the prescribed threshold, or when the nature of supply makes registration compulsory irrespective of turnover.

• GST registration for Indian service providers billing foreign clients
• Classification of services as export of services (zero-rated supply)
• Input Tax Credit (ITC) reconciliation
• GST return filing (GSTR-1, GSTR-3B, GSTR-9)
• GST refund claims on zero-rated supplies

Services exported outside India qualify as zero-rated supplies under GST, meaning no GST is charged on the invoice. However, this is subject to satisfying all six conditions under Section 2(6) of the IGST Act, including receipt of payment in convertible foreign exchange. GST filing must be done accurately to claim and maintain this zero-rated status.

3. Letter of Undertaking (LUT) Filing

A Letter of Undertaking (LUT) is a declaration filed by an Indian exporter of services or goods with the GST department. It allows the exporter to supply goods or services without payment of IGST. Without a valid LUT, the exporter either pays GST upfront (and later claims a refund) or suffers a cash flow burden.

Particulars	With LUT	Without LUT
GST on Export Invoice	Zero (no GST charged)	IGST paid upfront
Cash Flow Impact	Nil	High (refund process needed)
Refund Process	Not required	Mandatory; time-consuming
Compliance Burden	Low	High

LUT must be filed every financial year on the GST portal. Eligibility requires the taxpayer to have a clean compliance record (no prosecution for tax evasion exceeding Rs. 2.5 crore). Taxocity handles LUT filing end-to-end, ensuring it is filed before the first export invoice is raised each year.

4. FIRC: Foreign Inward Remittance Certificate

A Foreign Inward Remittance Certificate (FIRC) is a document issued by the bank when a foreign remittance is received in India. It serves as proof that payment for export of services has been received in foreign exchange, which is a critical condition for:

• Treating the supply as an "export of service" under GST (zero-rated)
• Claiming GST refund, where applicable
• Compliance with FEMA (Foreign Exchange Management Act) regulations
• RBI reporting requirements
• Maintaining audit trail and books of accounts

Without a valid FIRC, the export of service classification can be challenged by the GST department, exposing the taxpayer to demands, interest, and penalties. Taxocity guides clients through the FIRC procurement process and ensures it is properly linked to each export invoice in GST returns.

Who Needs This Service?

This service is most relevant for:

• Indian IT and tech consultants billing foreign companies for software development, consulting, or support services
• Indian SaaS founders receiving subscription income from foreign clients
• Foreign companies with Indian contractors or vendors requiring TDS and GST compliance
• Freelancers and agencies providing digital marketing, design, or content services to overseas clients
• Startups incorporated in India with international revenue streams

Income Tax vs GST: Key Obligations at a Glance

Compliance Area	Applicable Law	Frequency	Key Form/Document
Income Tax Return	Income Tax Act, 1961	Annual	ITR-3 / ITR-6
Advance Tax	Income Tax Act, 1961	Quarterly	Challan 280
TDS Deduction	Income Tax Act, 1961	Monthly/Quarterly	Form 26Q / 27Q
GST Registration	CGST Act, 2017	One-time	GSTIN
LUT Filing	IGST Act, 2017	Annual	Form RFD-11
GST Returns	CGST Act, 2017	Monthly/Quarterly/Annual	GSTR-1, GSTR-3B, GSTR-9
FIRC	FEMA, 1999	Per Transaction	Bank-issued FIRC

Common Mistakes That Lead to Penalties

• Filing LUT after raising the first export invoice (leads to GST being payable on that invoice)
• Not obtaining FIRC before claiming zero-rated status in GSTR-3B
• Incorrect HSN/SAC code on export invoices leading to misclassification
• Missing TDS deduction on payments made to foreign entities for technical services
• Not filing ITR in India despite having a taxable income or claiming a DTAA benefit
• Non-disclosure of foreign income or assets for Indian resident consultants

How Taxocity Helps Foreign Companies and Indian Consultants

Taxocity has been in the compliance and tax advisory space for over 3 decades, earning a 4.8/5 rating from more than 5,000 clients. Our approach is hands-on: real human experts, not automated dashboards, handle your filings and answer your questions.

For Indian tech consultants billing foreign companies, and for foreign businesses with Indian operations, we offer a complete compliance package:

• Initial Assessment: Review of business model, revenue streams, and applicable compliance obligations under GST and Income Tax
• GST Registration and LUT Filing: End-to-end GST registration followed by annual LUT filings before the start of each financial year
• FIRC Coordination: Guidance on obtaining FIRC from your bank and linking it correctly to invoices and GST returns
• Income Tax Filing: Accurate ITR preparation, advance tax computation, and timely filing with 100% compliance guarantee
• Ongoing Support: Dedicated relationship manager for queries, notices, and updates on regulatory changes

We also assist with related areas such as GST implications for Indian residents operating Dubai companies, ensuring no compliance gap across jurisdictions.

Key Takeaways

1. Indian tech consultants earning from foreign companies must register for GST and file LUT annually to export services without paying GST
2. FIRC is mandatory proof of foreign remittance receipt and must be linked to each export invoice
3. Income tax is payable in India on all income accrued or received in India; foreign companies may also have tax obligations depending on PE and treaty position
4. TDS under Section 115A applies at 20% + surcharge + cess on royalty/FTS payments to foreign companies, unless a lower DTAA rate applies
5. Claiming DTAA benefits requires TRC, Form 10F, No-PE Declaration, PAN, and income tax login for the foreign entity
6. Non-compliance with LUT, FIRC, or ITR filing can result in penalties, blocked refunds, and scrutiny

Disclaimer

This article is for informational purposes only and does not constitute tax advice. Tax laws and regulations are subject to change. Please consult a qualified tax advisor or compliance expert before making any decisions based on the information provided here.