Tax clarity for subsidiary model of foreign banks

A subsidiary structure provides various benefits, including the ability to grow inorganically through acquisitions

The government has proposed to make it clear which foreign banks converting their branches in India into subsidiaries would be exempt from capital gains tax. Experts said this would address the tax concerns of foreign banks planning to operate in India via the subsidiary route. But non-tax matters would still guide their plans.

After the RBI had issued a framework for converting foreign banks’ branches into subsidiaries in 2013, only DBS Bank and State Bank of Mauritius had received in-principle approval to adopt this route. The income-tax department recently came out with a draft notification that gave detailed operational conditions to