Whether Indian Govt will levy tax on the Income earned by this Foreign Company will depend on whether the Company is being controlled and managed from India or not. In simple terms, it will depend on whether its Directors are residing in India or residing outside India.
If Directors are Residing outside India
If the Directors of the Dubai Company are residing outside India, then neither can the Indian Govt levy Tax on the Income of the Company and nor can they levy Tax on the Income of the Directors. In such a case, both the Company as well as its Directors would be considered as NRI.
If the Directors are Residing in India
Case I: If the Directors are residing in India and Turnover of the Dubai Company is more than Rs. 50 Crores
In such a case, the Company would be deemed to be Resident in India and Indian Govt will levy Tax on both the Income of the Directors as well as the Income of the Company.
Case II: If the Directors are Residing in India and Turnover of the Dubai Company is less than Rs. 50 Crores
A Foreign Company with turnover/gross receipts of less than Rs. 50 Crores p.a. cannot be considered to be a Resident in India (Circular No. 8/2017 dated February 23, 2017)
In other words, if the turnover of the Dubai company is expected to be less than Rs. 50 crores p.a., the Indian Govt considers the company a Non-Resident and therefore cannot levy any Income Tax or GST on this company. The Indian Govt cannot levy any Income Tax or GST on the foreign company even though the foreign company is being controlled by me from India as the provisions of Section 6(3)(ii) don’t get applicable in this case.
In such a case, the Indian Govt levies Tax on the Income of the Directors but not on the Income of the Foreign Company.
Thus, if you have a bank account in Dubai or US or Portugal etc. in your Individual Capacity, the income earned in that individual bank account would be taxable in India if you are residing in India from Rs. 1 onwards. However, if you own a Company outside India, Indian Govt cannot levy Tax on Income of such company which is registered outside India. And therefore, it is not recommended that you open a bank account in your Individual Name outside India and rather open a company outside India as in such a case the Indian Govt does not have the power to levy any tax.
If you are thinking how I know so much about taxes, then let me intimate you that we are CA’s by Qualification with more than 10 years of experience of helping Indian entreprenuers in setting up a company in Dubai. We ourselves have our offices in both India as well as Dubai and understand the law of both the regions and help our clients structure the UAE Company in accordance with laws of both countries.
