You run a US LLC. Or a Delaware C-Corp. You live in Gurgaon, Bengaluru, or Hyderabad — and your entire operation, your team, your clients, your invoices are run from India. The US entity is a shell with a registered agent in Delaware and a Stripe account.
This is more common than you think. And the tax position of most of these founders is a mess — not because they are doing anything wrong, but because nobody sat them down and explained how the two tax systems interact.
Here is what a CA who understands US-India cross-border taxation actually needs to track for you.
The Fundamental Problem: Two Countries, Two Systems, One You
The United States taxes its citizens and residents on worldwide income, regardless of where they live. India taxes residents on worldwide income too — the definition of “resident” is based on days spent in India, not citizenship.
If you are an Indian citizen living in India, running a US LLC: India has the right to tax your share of the LLC profits as if they were Indian income. The LLC is a pass-through entity for US tax purposes — its profits flow to you personally. From India’s perspective, those profits are your income.
The India-USA Double Taxation Avoidance Agreement (DTAA) determines how to handle the overlap. But it does not eliminate the overlap — it just tells you which country gets priority. You still have to file in both.
US LLC vs. C-Corp: The Choice That Changes Your India Tax Bill
Most Indian founders choose an LLC because it is simple, cheap to maintain, and has no double tax at the entity level. That is true for US tax purposes. But for an India-resident founder, the picture is different.
An LLC is a pass-through entity. Its profits are taxed at your personal rate — in the US and in India. If your LLC makes ₹50 lakh in profit, that entire ₹50 lakh flows to your personal Indian income tax return as foreign income. Taxed at your slab rate: up to 30% in India, plus whatever you owe in the US (after treaty credit).
A C-Corp pays corporate tax in the US first (21% federal rate). When it pays you a dividend, that dividend is taxed again — in the US (0%–20% depending on your bracket) and in India. Double tax, but at lower rates per layer.
Here is the counterintuitive reality: for India-resident founders with significant LLC profits, a C-Corp structure sometimes results in a lower total tax bill across both countries — despite the double-tax reputation. The calculation depends on your income level, treaty credits, and the timing of dividend payments.
This needs to be modelled before you make the entity choice. Most founders make it without modelling it.
The Permanent Establishment Risk Nobody Talks About
If your US company’s management and control is exercised from India — and for most Indian founders running US companies from India, it is — the Indian income tax authorities may argue that the US company has a Permanent Establishment (PE) in India.
A PE means the US company is subject to Indian corporate tax on its India-attributable profits, even though it is incorporated in the US. The rates are higher for foreign companies (40% versus 25% for domestic companies).
The triggers for PE: a fixed place of business in India (your home office counts), a person in India who habitually concludes contracts on behalf of the company, or employees in India who are economically dependent on the foreign company.
Most Indian founders running US companies from India have at least one PE trigger. Most do not know this. This is why a proper review of your setup — before the tax authority raises it — is worth doing.
RBI Compliance for Indian Residents with Foreign Companies
If you are an Indian resident who holds shares in a foreign company — including your own US LLC or C-Corp — you are required to report this under the Foreign Exchange Management Act (FEMA).
The specific obligation: if you acquired the foreign shares through an Overseas Direct Investment (ODI), the initial remittance must be reported to the RBI within 30 days via Form FC-1 (through your bank). Every year thereafter, you file an Annual Performance Report (APR) with the RBI by December 31.
Missing the APR is a FEMA violation. The penalty is up to three times the amount involved, or ₹2 lakh per day, whichever is higher. Most founders who started US companies without proper structuring advice have never filed an APR.
Your India Income Tax Return When You Have a US Company
As an Indian resident, you file an ITR (Income Tax Return) every year. If you have foreign income or assets, you must use ITR-2 or ITR-3 — not ITR-1.
The Schedule FA (Foreign Assets) section requires you to disclose: all foreign bank accounts, all interests in foreign entities, all foreign trusts, and any signing authority on foreign accounts. The penalty for non-disclosure under the Black Money Act is ₹10 lakh per undisclosed asset, per year. This is not a technicality — the tax department has been using this provision actively.
In addition: if you receive salary or distributions from your US company, that income must be shown in your Indian return. The DTAA credit for US taxes already paid reduces your Indian liability — but only if you claim it correctly and file the right documentation (Form 67 before filing your ITR).
The Compliance Calendar You Actually Need
Running a US company from India means two compliance calendars running simultaneously, with deadlines that do not align:
- January 31: US 1099-NEC filing deadline (if you paid US contractors)
- March 15: US S-Corp and partnership estimated tax payment (if applicable)
- March 31: India financial year closes
- April 15: US federal tax return due (Form 1040 / 1065 / 1120)
- June 15: US extended filing deadline (if Form 4868 filed — automatic for US persons abroad)
- July 31: India income tax return due (if no audit required)
- October 31: India income tax return due (if audit required)
- November 30: Transfer pricing audit (Form 3CEB) due in India, if applicable
- December 31: RBI Annual Performance Report due; Form 10F and 67 due in India
Missing any one of these does not just trigger a penalty on that filing. It often cascades: a missed US filing triggers an IRS notice, which requires a response, which reveals the India filing was also inconsistent, which opens an Indian scrutiny assessment. These things connect.
What Most Founders Actually Have (And What They Should Have)
Most Indian founders running US companies have: a US accountant who files the US return, and a local Indian CA who files the ITR and has no idea about the US company. Nobody checks whether the two returns are consistent. Nobody manages the FEMA obligations. Nobody documents the PE risk analysis.
What you should have: a CA firm that understands both jurisdictions and coordinates the compliance across both — or at minimum, a firm with deep US-India treaty expertise that can sit in the middle and direct the US accountant on what they need to know about the India-side position.
If you are running a US company from India and you have not had a proper cross-border tax review in the last 12 months, there is a reasonable chance your current position has exposure you are not aware of. WhatsApp us with a brief description of your setup — entity type, revenue range, India vs. US team split — and we will tell you where the risks are.