Indian Tax Residence of Unincorporated Entities
In addition to individual and corporate taxation, unincorporated entities are also taxable in India. Few examples of unincorporated entities are limited liability partnerships (LLP), partnership firms and association of persons. Entities such as LLPs and firms are governed under the Indian law on LLPs and partnerships. The residence is determined on similar basis as of a trust, i.e. an unincorporated entity is an Indian resident where the management and control of the operations is located wholly or partly in India.
LLPs havebeen a preferred choice where foreign entities have a subsidiary or presence in India. The flexibility in its administration and remittance of profits is more attractivechoice than a corporate form of subsidiary with a comparatively lower cost of establishment and maintaining
Foreign entities investing in India should do a comparative analysis of the pros and cons of the various types of entities to determine the ideal structurefor their business in India. But the choice of entity may be restricted where the specific regulatory requirements or tax benefits are restricted to a specific form of entity.