Conversion of Foreign Bank Branch into Indian Subsidiary Co.: Draft CBDT Notification

CBDT’s Draft notification under IT Section 115JG(1) reg. Conversion of Indian Branch of Foreign Bank into Indian Subsidiary Company

CBDT has issued a Draft Notification regarding provisions under section 115JG(1) of the Income-tax Act, 1961 for conversion of Indian branch of a foreign bank into an Indian subsidiary company, for comments latest by 30 Nov. 2017 at the email address

It may be noted that the Finance Act, 2012 inserted a new Chapter XII-BB consisting of section 115JG in the Income-tax Act, 1961 (the Act) which contains “Special provisions relating to conversion of Indian Branch of a foreign bank into a subsidiary company”.

Section 115JG of the Act inter-alia provides that in case the conversion of Indian Branch of foreign bank fulfills the conditions notified by the Central Government, the capital gains arising from such conversion shall not be chargeable to tax and the provision relating to unabsorbed depreciation, set off or carry forward and set off of losses, tax credit in respect of tax paid on deemed income relating to certain companies and the computation of income in case of foreign company and Indian subsidiary shall apply with such modification, exception etc. as may be specified in the notification.

Besides, RBI has released the “Scheme for setting up of wholly owned subsidiaries (WOS) by foreign bank in India” on 6 Nov. 2013, which inter alia provides the procedure for conversion of existing branches of foreign bank in WOS. A foreign bank is required to set up a WOS in India and the Indian branch shall amalgamate with WOS as per the amalgamation scheme approved by the shareholder of foreign bank and WOS which is sanctioned by the RBI.

Accordingly, it is proposed to issue notification under section 115JG(1) of the Act specifying the conditions to be fulfilled by the conversion and also specifying modifications, exceptions, in applicability of certain provisions of the Act to such conversion.

CBDT’s Draft Notification dt. 17 Nov. 2017 on IT Provisions for Conversion of Indian Branch of Foreign Bank into Indian Subsidiary Co.

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