Tell us more about your equity investments in India: Taxman tell multinationals

MUMBAI: Multinationals that had invested in Indian equity assets, particularly in unlisted companies or had remitted money overseas have come under the income tax department’s lens.

Over the past few weeks, the income tax department has reached out to multinationals and sought clarity on several transactions and asked them to file returns.

Most of the transactions under question include remittances to foreign entities or investments in Indian entities.


While no formal notices have been issued yet, in most cases the tax department has sent formal communication through emails or messages.

“Dear Taxpayer, Income Tax Department has received information about outward foreign remittance (company name withheld) relating to account number for FY 2018-19. However, as per records available, ITR (income tax returns) for AY 2019-20 has not been filed,” one such message sent to a multinational read.

In other cases, the tax department has raised questions over equity investments, mainly in unlisted companies or in special purpose vehicles (SPVs).

Questions have also been asked in cases where investments have been made in listed entities, say people in the know.

Tax experts say that this is the first time the tax department is seeking information from multinationals over such transactions.

“Many multinationals are not comfortable filing income tax returns in India as they fear harassment at a later stage and they avoid if the filing is not mandatory. Many of the multinationals do not have a permanent establishment in India and the shares they have bought are in either investment entities or SPVs," said Paras Savla, a partner at tax advisory firm KPB & Associates, Chartered Accountants.