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India taxes foreign companies at 35%; domestic subsidiaries can elect 22%

The rate for foreign companies and branches fell from 40% to 35% from FY 2024-25; a domestic subsidiary can choose 22% under section 115BAA.

Where
India ↔ GCC · India ↔ UK & EU · US ↔ India · India
Published
Last reviewed
Prepared
Prepared by the Intelligence desk with AI-assisted research from the cited sources, checked on 12 November 2026.
Effective
1 April 2024
Version
1

What changed

The Finance (No. 2) Act 2024 reduced the income tax rate for companies other than domestic companies from 40% to 35%, applying from financial year 2024-25 (assessment year 2025-26). Domestic companies may elect the concessional 22% rate under section 115BAA (about 25.17% with surcharge and cess), giving up certain deductions; otherwise the regular rate is 30% (25% for some smaller companies).

Who is affected

Foreign companies operating in India through a branch, project office or permanent establishment, and groups choosing between a branch and a subsidiary.

Why it matters

The gap between a foreign company branch (35% plus surcharge and cess) and a domestic subsidiary electing 22% remains large, which usually favours a subsidiary for profitable Indian operations.

What to examine next

Compare branch and subsidiary tax on expected Indian profits.
Check whether the 115BAA election suits the business; it cannot be withdrawn.
Review withholding tax on dividends to the parent under the relevant treaty.
Compare vehicles in the Entering India Decision Map.

Sources

  1. Memorandum explaining the provisions in the Finance BillMinistry of Finance, Government of India · published 12 Nov 2026 · checked 12 Nov 2026 · secondary source
  2. Key highlights of Finance (No. 2) Bill, 2024Income Tax Department, Government of India · published 1 Jul 2024 · checked 12 Nov 2026 · secondary source
  3. India Highlights 2025Deloitte · published 12 Nov 2026 · checked 12 Nov 2026 · secondary source

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Original analysis by the UNBOUNDED Intelligence desk. Linked sources belong to their publishers. This briefing is information, not legal, tax, investment or other professional advice. Its appearance here is not an endorsement by UNBOUNDED or any institution of a transaction, jurisdiction, strategy or counterparty.