A US company that owns an Indian subsidiary generally reports it to the IRS, usually on Form 5471 with its US tax return, and may also need to report foreign bank accounts (FBAR and Form 8938) and consider international tax regimes that tax foreign income. These are US requirements, so your US CPA should confirm them; we coordinate the Indian side so the numbers match.
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Key facts
| Form 5471 | Information return for US persons with an interest in a foreign corporation, filed with the US income tax return |
|---|---|
| FBAR (FinCEN Form 114) | Report of foreign financial accounts whose combined value exceeds $10,000 at any time in the year; due 15 April with an automatic extension to 15 October; up to $10,000 penalty for a non-willful failure |
| Form 5471 penalty | $10,000 per foreign corporation per year, plus $10,000 for each 30 days of continued failure beyond 90 days after IRS notice, up to $50,000 more |
| Form 8938 | Statement of specified foreign financial assets, where thresholds are met |
| International tax regimes | Rules that can tax a foreign subsidiary's income in the US currently; review with a US adviser |
| Who advises | Your US CPA or tax counsel; AU Corporate provides the Indian financial data in the required form |
| Our role | Indian books, tax computations and the information your US team asks for |
Why the US side matters
India and the US each tax and report separately. A subsidiary that is fully compliant in India can still create US filing duties for its parent. Penalties for missing US information returns can be significant, so it is worth setting the process up at the start.
The main US filings to discuss with your CPA
| Filing | What it covers | Input from India |
|---|---|---|
| Form 5471 | Information about the foreign corporation, its shareholders, income statement and balance sheet, and certain transactions | Financial statements in US GAAP or as the form requires, shareholding and related-party transactions |
| FBAR (FinCEN Form 114) | Foreign financial accounts held or controlled by a US person | Indian bank account details and peak balances |
| Form 8938 | Specified foreign financial assets above thresholds | Value of the shareholding and accounts |
| Transfer pricing alignment | Pricing of intercompany transactions on the US side | Indian benchmarking and Form 48 (previously Form 3CEB) |
International tax regimes that can apply
The US taxes some foreign subsidiary income on a current basis through regimes such as Subpart F and the global intangible low-taxed income rules (recently renamed and amended). Whether and how they apply to a service-based Indian subsidiary depends on the structure and the year. Your US adviser should model this before the subsidiary starts earning.
Keeping the two sides aligned
- Use the same financial year data, or agree a bridge between the Indian year (April to March) and the US year.
- Share Indian books and trial balances with your US CPA on an agreed calendar.
- Make sure intercompany balances agree on both sides at each reporting date.
- Use one set of intercompany agreements and invoices as the source for both tax filings.
What this means for a US parent
- The Indian financial year runs from 1 April to 31 March, while many US groups report on a calendar year. Plan the reporting bridge early.
- Ask your US CPA to review the structure before you invest, not after the first return is due.
Mistakes to avoid
- Assuming Indian compliance covers US reporting.
- Learning about Form 5471 only after the first US return is due.
- Mismatched intercompany balances between the Indian and US books.
- Not planning for the different financial years.
See also: US-side social security: FICA for Americans working in India. Treaty background: India-US tax treaty explained.
How AU Corporate handles this
We provide Indian financial statements, tax computations and reconciliations in a format your US CPA can use, and we work with your US advisers.
Related services: USA accounting and tax
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
Does a US company have to report its Indian subsidiary to the IRS?
A US company generally has to report its Indian subsidiary to the IRS, commonly on Form 5471 under Section 6038 of the Internal Revenue Code, filed with the US tax return. This should be confirmed with a US CPA.
Who prepares Form 5471?
Form 5471 is prepared by the US parent's CPA, because US filings are outside the scope of the Indian adviser. The Indian financial information the CPA needs is supplied by the subsidiary's accountants.
Is an FBAR required for the Indian bank account?
A US person with a financial interest in or signature authority over foreign accounts must file an FBAR if the combined value exceeds $10,000 at any time in the year. It is due on 15 April with an automatic extension to 15 October, and a non-willful failure can attract a penalty of up to $10,000.
Will the Indian financial year cause problems?
The Indian financial year needs planning, because the Indian year ends 31 March and a US parent often reports on a different year-end. A reporting bridge solves this.
Does an Indian subsidiary create US tax obligations for the parent?
An Indian subsidiary can create US tax obligations for the parent. A US company that owns a foreign subsidiary may have US reporting such as Form 5471, and its income may be affected by US international tax rules. These depend on the structure, so the position should be confirmed with a US tax adviser.
Does the US parent need its board's approval first?
A US parent usually needs its board's approval before setting up an Indian subsidiary. The board passes a resolution approving the investment, naming the authorized signatory and directors, and authorizing documents to be signed for India. The charter, shareholder agreements and any investor consent rights should be checked before the resolution is drafted.
Who controls the Indian subsidiary: the board or the US parent?
The Board of Directors manages the company, and the parent controls the board by appointing and removing directors as its shareholder. Matters that need parent approval can be written into the Articles or an intercompany agreement. Directors still owe legal duties to the Indian company.
Can a US LLC set up a subsidiary in India?
A US LLC can set up a subsidiary in India as the shareholder of an Indian company, with its formation documents and authorizations apostilled. The LLC's US tax classification (disregarded entity, partnership or corporation) affects US reporting and treaty access, so it should be confirmed with a US tax adviser before choosing the holding entity.
What is ICOFR and does the India subsidiary need it?
ICOFR is internal control over financial reporting, which a US-listed parent must assess under the Sarbanes-Oxley Act. Material subsidiaries are often brought into scope, so the Indian entity may need documented controls and testing. Indian company law also has its own internal financial controls reporting by the Auditor.
What is the India-US tax treaty (DTAA)?
The India-US 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 Tax Residency Certificate and treaty details in Form 41 (previously Form 10F).
What is the penalty for not filing Form 5471?
The penalty for not filing Form 5471 is $10,000 per foreign corporation for each year, plus $10,000 for each 30 days the failure continues beyond 90 days after IRS notice, up to $50,000 more.
Related guides
Transfer Pricing in India: A Guide for US Parents and Their Indian Subsidiaries
How transfer pricing works for an Indian subsidiary of a US company: arm's length pricing, documentation, Form 48, methods, safe harbour and audits.
Read the guide →The India-US Tax Treaty and Permanent Establishment Risk for US Companies
How the India-US tax treaty applies to payments to your US parent: Withholding Tax rates, Tax Residency Certificate, Form 41 and permanent establishment risk.
Read the guide →Audit and Internal Controls for an Indian Subsidiary of a US Group
Statutory audit, tax audit, GST audit and internal controls over financial reporting for an Indian subsidiary of a US group. What to expect and how to prepare.
Read the guide →Compliance Calendar for an Indian Subsidiary: What Is Due and When
The recurring compliance of an Indian subsidiary: monthly, quarterly, annual and event-based filings under company, tax, GST, FEMA and labour law.
Read the guide →US Social Security and FICA for Americans Working in India: Who Pays and When
When Social Security and Medicare tax apply to Americans working in India: US employer, Indian subsidiary, Section 3121(l) agreements and self-employment.
Read the guide →The India-US Tax Treaty (DTAA) Explained: Scope, Residency and Relief from Double Tax
How the India-US tax treaty works: who qualifies, which taxes it covers, how treaty and domestic law interact, residency, relief from double tax and disputes.
Read the guide →Sources
Last updated 14 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.