A Singapore parent can sell the Indian subsidiary's shares, sell the Singapore holding company, buy back shares, merge or reorganise, or close the company by strike-off or voluntary liquidation. India taxes the gain on shares acquired on or after 1 April 2017 at domestic rates (12.5% for unlisted shares held more than 24 months, plus surcharge and cess), while shares acquired earlier are protected by the treaty if the seller is not a shell company. Singapore has no capital gains tax, so the Indian tax is usually the main cost.
← Back to the complete guide: How to Set Up a Subsidiary in India from Singapore
Key facts
| Gains on shares bought before 1 April 2017 | Taxable only in Singapore under the treaty, if the seller passes the shell and primary purpose tests |
|---|---|
| Gains on shares bought on or after 1 April 2017 | Taxable in India at domestic rates; 12.5% for unlisted shares held more than 24 months, plus surcharge and cess |
| Withholding on the sale | The buyer deducts tax under Section 393; a lower deduction certificate can reduce it |
| FEMA | Sale to an Indian resident follows pricing and reporting rules (Form FC-TRS) |
| Indirect transfers | Sale of the Singapore holdco can be taxed in India where it derives substantial value from Indian assets |
| Closure | Strike-off for a dormant company; voluntary liquidation for one with assets or liabilities |
| Singapore side | No capital gains tax; gains of an income nature can be taxed |
The exit routes
| Route | How it works | India tax | Main steps |
|---|---|---|---|
| Sell the Indian shares | Singapore parent sells to a buyer | Capital gains per treaty and acquisition date; buyer withholds | Valuation, SPA, FC-TRS, lower deduction certificate, treaty papers |
| Sell the Singapore holdco | Buyer purchases the holding company | Indirect transfer rules may apply | Test the substantial value and thresholds; get advice early |
| Buyback | Company repurchases shares | Taxed as capital gain or deemed dividend depending on the route | Companies Act procedure; solvency tests; FEMA reporting |
| Merger or demerger | Court-approved scheme or fast-track | Tax-neutral if conditions are met | NCLT or Regional Director route; valuation; stamp duty |
| Group reorganisation | Move shares between group companies | Exemptions may apply for intra-group transfers; conditions are strict | Test before moving; avoid triggering a gain |
| Strike-off | Dormant company applies to be struck off | Not a taxable sale | Clear liabilities and filings first |
| Voluntary liquidation | Solvent company wound up under the insolvency code | Gains on distribution can be taxed | Declaration of solvency, liquidator, creditor notice |
Tax on a sale
- Acquired before 1 April 2017: the treaty allocates the gain to Singapore, so India does not tax it if the seller is not a shell or conduit company and the primary purpose test is met. Keep the tax residency certificate and substance records.
- Acquired on or after 1 April 2017: India taxes the gain. For unlisted shares held more than 24 months the rate is 12.5% plus surcharge and cess; shorter holdings are taxed at higher rates.
- Withholding: the buyer must deduct tax on the payment to a non-resident. Apply for a lower deduction certificate where the treaty exempts the gain or the gain is small.
- Cost of acquisition: keep share certificates, FC-GPR acknowledgements and valuation papers; the cost base depends on them.
- Singapore: no capital gains tax on the sale, but a gain of an income nature, such as for a trader in shares, may be taxed.
The treaty position by acquisition date is in the tax treaty guide, and the substance tests are in Using a Singapore holding company for India.
FEMA on a sale
- A transfer from a non-resident to a resident is reported on Form FC-TRS within 60 days of the transfer or receipt of funds, whichever is earlier.
- Pricing and deferred consideration rules decide the permitted price and payment terms. Check the current rules before signing.
- Remittance of proceeds goes through an authorised dealer bank with the tax payment evidence and Form 145 and, where required, Form 146.
- A sale between two non-residents is outside the pricing rules but still has Indian tax consequences.
Closing the subsidiary
- Board and shareholders decide to close and appoint the people to manage the process.
- Complete the pending filings: audit, ROC, tax, GST, provident fund, ESI and RBI.
- Settle employees, creditors and tax liabilities; arrange for tax clearances where needed.
- Choose the route: strike-off if dormant with no liabilities, or voluntary liquidation if there are assets, contracts or disputes.
- Repatriate the funds through the banking channel with the tax and audit certificates.
- Close bank accounts, registrations and the FEMA record with the RBI.
Restructuring inside the group
A Singapore group may move the Indian shares to a different holding company, convert a branch into a subsidiary, or merge Indian entities after an acquisition. Each step has tax, FEMA and stamp duty effects, and the order matters. Do not move the Indian shares between group companies without testing the Indian tax result, the shell and primary purpose tests for the new holder and any indirect transfer exposure.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, IRAS, ACRA and the Singapore Academy of Law (apostilles).
Frequently asked questions
How is the sale of an Indian subsidiary taxed for a Singapore parent?
India taxes the gain on shares acquired on or after 1 April 2017, at 12.5% plus surcharge and cess for unlisted shares held more than 24 months. Shares acquired earlier remain taxable only in Singapore under the treaty if the seller is not a shell company.
Does Singapore tax the gain?
Singapore has no capital gains tax, but gains of an income nature, such as share trading, can be taxed.
What is Form FC-TRS?
The report to the RBI on a transfer of shares between a resident and a non-resident, filed within 60 days.
Can India tax the sale of my Singapore holding company?
It can, if the Singapore company derives substantial value from Indian assets and the thresholds are met. Test this before any sale.
How do I close an Indian subsidiary?
By strike-off if it is dormant with no liabilities, or by voluntary liquidation if it has assets, contracts or disputes, after clearing tax, employee and RBI matters.
Can the buyer withhold tax on the price?
Yes. The buyer must deduct tax on the payment to a non-resident. A lower deduction certificate can reduce or remove it.
Is a group reorganisation tax free?
Not automatically. Exemptions exist for certain intra-group transfers and mergers, but the conditions are strict and must be tested first.
Related guides
Using a Singapore Holding Company for Indian Investments: What the Treaty Gives, and What Substance Is Needed to Keep It
How a Singapore holdco is used to own Indian subsidiaries: treaty positions on dividends and gains, grandfathering, Article 24A limitation of benefits, principal purpose test, POEM, GAAR and indirect transfer risk.
Read the guide →The India-Singapore Tax Treaty (DTAA), Article by Article: India as Source State, Singapore as Residence State
The India-Singapore double taxation agreement explained article by article from the Singapore parent's point of view: rates table, permanent establishment, share gains, limitation of benefits and how to claim.
Read the guide →Contracts, Courts and Arbitration: Using Singapore as the Seat and Enforcing in India
How a Singapore parent protects its Indian subsidiary contracts: choice of law, SIAC arbitration, enforcing Singapore awards and judgments in India, stamping, interim relief and drafting points.
Read the guide →12 Common Mistakes Singapore Companies Make When Entering India, and How to Avoid Each
The twelve mistakes we see most often when a Singapore company sets up an Indian subsidiary: treaty assumptions, holdco substance, EPF for PRs, services PE, FEMA clocks, stamping, data transfers and year-end gaps.
Read the guide →Sources
Last updated 21 October 2026. General information only, not legal or tax advice. Indian and Singapore rules change often; confirm current requirements before acting.