A Japanese parent receives money from its Indian subsidiary as dividends, service fees, royalties, interest and loan repayments. Each route has its own Withholding Tax, transfer pricing and documentation. Remittances abroad typically need Form 145 and, where required, a Chartered Accountant's Form 146 (previously Forms 15CA and 15CB), and the India-Japan treaty can reduce Withholding Tax.
← Back to the complete guide: How to Set Up a Subsidiary in India from Japan
Key facts
| Routes | Dividends, service fees, royalties, interest, loan repayment, buyback, capital reduction, sale proceeds |
|---|---|
| Remittance declaration | Form 145 (previously Form 15CA) |
| CA certificate | Form 146 (previously Form 15CB), where required, with a UDIN |
| Withholding Tax | Section 393 of the Income-tax Act, 2025 (previously Section 195 of the Income-tax Act, 1961) |
| Treaty support | Japanese certificate of residence and Form 41 (previously Form 10F) |
| Treaty rates | Dividends 15% (25% where the holding is under 10%); interest 10% (bank) or 15%; royalties and fees for included services 15% (10% for equipment) |
| Contract | A written agreement with the Japanese parent is the base for fees and royalties |
| Applies to | Payments on or after 1 April 2026 under the new forms |
The main routes
| Route | Basis | Tax and compliance points |
|---|---|---|
| Dividend | Distributable profits; board and shareholder approval | Withholding Tax at 15% under the India-Japan treaty where the Japanese parent holds at least 10% of the voting power (domestic rate: 20% plus surcharge and cess); Forms 145 and 146 where required |
| Service fees and management charges | Written intercompany agreement; evidence of services | Arm's length pricing; fees for included services are capped at 15% by the treaty, while other service fees are business profits taxable in India only through a permanent establishment; GST under reverse charge; Forms 145 and 146 |
| Royalties and license fees | License agreement defining the IP and rate | Withholding Tax at 15% under the treaty (10% for equipment royalties) against the domestic 20% plus surcharge and cess; transfer pricing; GST under reverse charge |
| Loan interest and repayment | ECB terms registered with the RBI | Withholding Tax on interest, capped by the treaty at 10% (bank lenders) or 15% (other lenders); repay only per the approved terms |
| Buyback or capital reduction | Companies Act procedure | Conditions on size, timing and solvency; tax treatment to be checked |
| Sale proceeds on exit | Share sale or business sale | Capital gains tax; FEMA pricing and reporting |
How a remittance is processed
- Confirm the basis: board approval for a dividend, or the agreement and invoice for a fee or royalty.
- Compute Withholding Tax at the domestic rate, or the treaty rate if the conditions are met.
- Collect the treaty documents: the parent's Japanese certificate of residence and Form 41 (previously Form 10F).
- Obtain a Chartered Accountant's certificate in Form 146 (previously Form 15CB) where required.
- File the remitter's declaration in Form 145 (previously Form 15CA) online.
- The bank processes the remittance. Deposit the Withholding Tax and file the related return, and account for GST under reverse charge where applicable.
Why a contract with the Japanese parent matters
An intercompany agreement supports the deduction in India, the transfer pricing position and the remittance. It should state the scope of services, the price or method, payment terms, IP ownership, confidentiality and termination, be signed before the services start, and match what actually happens. Without it, tax officers can disallow the payment.
Treaty relief and Japan credit
The India-Japan tax treaty (DTAA) can reduce Withholding Tax on dividends, interest, royalties and fees if the parent is a Japanese tax resident and meets the conditions. The Japanese parent may get relief for Indian tax withheld under Japanese rules: a foreign tax credit, or the 95% dividend exemption for a qualifying subsidiary. Confirm with a Japanese tax adviser. See tax treaty and PE risk and transfer pricing.
A note on the new forms
What this means for a Japanese parent
- Treasury and tax teams should agree the repatriation route early, because each route affects Japanese tax relief (the foreign tax credit and the dividend exemption), the transfer pricing position and the cash timing. Keep the agreement, Japanese certificate of residence and remittance forms with the intercompany file for your Auditors.
Mistakes to avoid
- Paying fees to the parent without an agreement or evidence of services.
- Applying the wrong Withholding Tax rate or missing the treaty documents.
- Remitting a dividend without checking distributable profits.
- Treating transfer pricing and remittance as separate exercises.
See also: Treaty rates and documents: India-Japan DTAA withholding rates and claiming treaty benefits with the certificate of residence and Form 41.
How AU Corporate handles this
We prepare the Forms 145 and 146, the Withholding Tax workings and the intercompany agreements.
Related services: Taxation and regulatory
Official sources
Rules on this page can be verified at the primary sources: Ministry of Corporate Affairs, Reserve Bank of India, Income Tax Department and the GST portal.
Frequently asked questions
What is Form 145 (previously Form 15CA)?
Form 145 (previously Form 15CA) is the online declaration the remitting party files before paying a non-resident, giving details of the payment and its tax position. Banks need it to process most foreign remittances. It applies to payments from 1 April 2026 under the Income-tax Rules, 2026.
What is Form 146 (previously Form 15CB)?
Form 146 (previously Form 15CB) is a Chartered Accountant's certificate on the nature of a foreign payment, its taxability and the Withholding Tax rate, including treaty relief. It is required for taxable payments above the prescribed limit, and each certificate carries a UDIN from the ICAI portal.
Can dividends be sent freely to Japan?
Dividends can be remitted through the authorized dealer bank from distributable profits after tax, with the Withholding Tax and documentation in place.
Does the treaty reduce Withholding Tax?
The India-Japan tax treaty can reduce Withholding Tax if the parent is a Japanese tax resident and satisfies the conditions, which requires a Japanese certificate of residence and treaty details in Form 41 (previously Form 10F).
How can profits be repatriated from India to Japan?
Profits can be repatriated from India to Japan through dividends, service fees, royalties and loan repayments. Each involves Indian Withholding Tax (Section 393 of the Income-tax Act, 2025, previously Section 195 of the Income-tax Act, 1961), which the India-Japan tax treaty can reduce, and fees and royalties must meet transfer pricing rules. Remittances abroad usually need Form 145 and, where required, Form 146 (previously Forms 15CA and 15CB).
What documents are needed to remit dividends?
Board and shareholder approvals, the audited accounts showing distributable profits, a Withholding Tax computation with treaty documents (Japanese certificate of residence and Form 41, previously Form 10F), and Form 145 and, where required, Form 146 (previously Forms 15CA and 15CB).
How are dividends paid and taxed?
The board recommends and shareholders approve a dividend out of distributable profits. Withholding Tax applies on payment to the Japanese parent under the Income-tax Act, 2025 (previously the Income-tax Act, 1961), with possible treaty relief. The parent may get Japanese relief for the Indian tax, through the foreign tax credit or, for a qualifying subsidiary, the 95% dividend exemption.
How are royalties and software license fees treated?
Royalty payments to the parent attract Withholding Tax at the applicable domestic or treaty rate, transfer pricing review and GST on reverse charge. The agreement should define the licensed IP, the rate and the basis for it, and the payment needs the same documents as other foreign remittances.
What is the India-Japan tax treaty (DTAA)?
The India-Japan tax treaty (DTAA) is an agreement that avoids double taxation between the two countries. It reduces withholding rates on dividends, interest, royalties and fees for included services (Articles 10 to 12) and defines when a permanent establishment exists (Article 5). Claiming its benefits needs a Japanese certificate of residence and treaty details in Form 41 (previously Form 10F).
What are Withholding Tax returns and when are they due?
Withholding Tax deducted on salaries and payments is deposited by the 7th of the following month. Quarterly statements are filed in Form 138 for salaries, Form 140 for resident payments and Form 144 for non-resident payments (previously Forms 24Q, 26Q and 27Q).
Related guides
The India-Japan Tax Treaty and Permanent Establishment Risk for Japanese Companies
How the India-Japan tax treaty applies to payments to your Japanese parent: 10% Withholding Tax rates, residence certificate, Form 41 and permanent establishment risk.
Read the guide →Transfer Pricing in India: A Guide for Japanese Parents and Their Indian Subsidiaries
How transfer pricing works for an Indian subsidiary of a Japanese company: arm's length pricing, documentation, Form 48, methods, safe harbour and audits.
Read the guide →Funding the Indian Subsidiary: FEMA Rules, Share Allotment and Form FC-GPR
How a Japanese parent invests in an Indian subsidiary: equity, CCPS, ECB, the 60-day allotment rule, pricing, and RBI reporting through Form FC-GPR on FIRMS.
Read the guide →Japanese Parent Obligations When You Own an Indian Subsidiary
Japanese reporting that follows when you own an Indian subsidiary: CFC rules, dividend exemption, transfer pricing documentation, J-SOX and overseas reporting.
Read the guide →India-Japan DTAA Withholding Tax Rates: Dividends, Interest, Royalties and Fees for Technical Services
Treaty rates for payments from India to Japan: 10% on dividends, interest, royalties and fees for technical services, against 20% domestic rates.
Read the guide →How to Claim India-Japan Treaty Benefits: Certificate of Residence, Form 41 and Beneficial Ownership
Documents a Japanese company needs to claim India-Japan treaty rates: certificate of residence, Form 41 (previously Form 10F) and no-PE declaration.
Read the guide →Sources
Last updated 20 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.