Profit Repatriation & Forex Laws

Moving Capital Out

India is a partially convertible currency regime. While current account transactions (dividends, trade) are generally free, capital account transactions are regulated by FEMA.

The Dividend Route

Since the abolition of the Dividend Distribution Tax (DDT) in 2020, dividends are taxed in the hands of the shareholder. For foreign parent companies, this means a base withholding tax of 20%, which can be reduced to 10% or 15% if a favorable DTAA exists.

Royalties & Management Fees

Often preferred over dividends as they are tax-deductible expenses for the Indian subsidiary. However, these are highly prone to Transfer Pricing audits. The Indian tax authorities will demand proof that services were actually rendered and benefited the Indian entity.