Turkish Companies in India: Construction, Textiles & DTAA Guide

Turkey-India Economic Relations: A Strategic Partnership

Turkey and India share a bilateral trade relationship that reached USD 8.71 billion in FY25, with India exporting USD 5.72 billion and importing USD 2.99 billion from Turkey. In February 2025, the World Trade Center Mumbai and the DEIK-Turkey-India Business Council signed an MoU to nearly double bilateral trade (from the FY24 level of USD 10.4 billion) to USD 20 billion within five years, targeting sectors including textiles, pharmaceuticals, agriculture, automotive, and metals. For Turkish companies, India represents both a massive domestic market and a strategic manufacturing base for serving South Asian and Middle Eastern markets.

Turkish companies have established a significant presence in India across construction and infrastructure, consumer goods, automotive components, aviation, and fashion. Understanding India's FDI framework, the India-Turkey DTAA, and sector-specific regulations is critical for Turkish businesses planning expansion or new market entry.

Turkish Construction Companies in India: Major Projects

Scale of Turkish Construction Presence

As of early 2025, nine major Turkish infrastructure companies were reported to be operating in India, including Dogus Construction, Limak Construction, and Fernas Construction. These firms were reported to be involved in 16 large-scale projects across the country, concentrated in pipeline and tunnel construction — sectors where Turkey has developed world-class capabilities. Limak Construction ranks among Turkey's largest international contractors, with active operations across South Asia.

Project Locations and Strategic Significance

Turkish construction firms are active at several strategically important locations including Jammu and Kashmir, Gujarat, and Rajasthan. Their expertise in tunnel engineering has made Turkish firms particularly valuable for India's ambitious infrastructure programme. Indian companies have been actively forming collaborations with Turkish firms for tunnel and pipeline projects, reflecting the complementary nature of Turkish construction expertise and India's infrastructure investment pipeline.

Construction Materials Trade

Turkey also supplies key construction materials to India. Turkish exports to India in this segment span salt, sulphur, soil, stone, plaster, lime, and cement. This construction material supply chain complements the project execution relationship, creating a vertically integrated presence for Turkish companies in India's infrastructure sector.

FDI Framework for Construction

India permits 100% FDI in the construction development sector (townships, housing, built-up infrastructure) under the automatic route, subject to specified conditions (the earlier minimum-area and minimum-capitalisation conditions were removed in 2015). For construction contracting (the primary activity of Turkish firms in India), there are no FDI restrictions — Turkish companies can operate through wholly owned subsidiaries or as project offices opened through an AD Category-I bank under RBI's general permission route. Project offices are particularly suited for time-bound construction contracts, as they are wound up upon project completion.

Turkish Textile Companies in India

Current Presence

The Turkish textile industry — among the largest globally, with exports exceeding USD 10 billion annually — has established notable connections with India's textile ecosystem. Soktas, a leading Turkish fabric manufacturer known for premium cotton shirting, sold its Indian operations to Grasim Industries (an Aditya Birla Group company) in a deal announced in 2019, bringing Turkish textile technology and design sensibilities into India's largest conglomerate. Sarar, a Turkish menswear brand, also operates in the Indian market.

Complementary Strengths

Turkey and India have complementary textile capabilities that make cross-border operations commercially attractive:

Textile FDI and PLI Schemes

India permits 100% FDI in textiles under the automatic route. Turkish textile companies establishing manufacturing units in India may benefit from the PLI Scheme for Textiles (with an outlay of INR 10,683 crore) covering man-made fibre (MMF) fabrics, MMF apparel, and technical textiles, subject to the application windows notified by the Ministry of Textiles. Under the GST rate rationalisation effective 22 September 2025, readymade garments and clothing accessories priced up to INR 2,500 attract 5% GST, while those priced above INR 2,500 attract 18%.

India-Turkey DTAA: Comprehensive Tax Guide

The India-Turkey Double Taxation Avoidance Agreement governs cross-border taxation and is a critical tool for Turkish companies to minimise their effective tax burden on Indian operations. Understanding and correctly applying DTAA provisions can result in significant tax savings.

Withholding Tax Rates

Domestic rates above are before applicable surcharge and 4% cess; the DTAA caps are all-in rates. A critical update: until 31 March 2023, India's domestic withholding rate on non-resident royalties and fees for technical services was 10% — lower than the DTAA's 15% — so paying under domestic law was the standard advice. The Finance Act 2023 raised that domestic rate to 20% (plus surcharge and cess), now section 207(2) (Table, Sl. Nos. 1 and 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961), so the DTAA cap of 15% is today the beneficial rate for royalties and FTS. Always compare DTAA rates with domestic provisions and apply whichever is more beneficial. For detailed guidance on royalty and FTS structuring, review the DTAA provisions carefully with your tax advisor.

Claiming DTAA Benefits

To claim reduced withholding rates under the India-Turkey DTAA, Turkish companies must:

1. Obtain a Tax Residency Certificate (TRC) from the Turkish tax authorities
2. Provide Form 41 (formerly Form 10F) to the Indian deductor (can be filed electronically on the income tax portal since 2022)
3. Furnish a self-declaration of beneficial ownership of the income
4. Ensure the income is not attributable to a permanent establishment in India (PE income is taxed differently)

For detailed procedures, see our guide on how to claim DTAA benefits in India.

Permanent Establishment Risks for Turkish Construction Companies

Construction companies face the highest PE risk among all business types operating across borders. Under the India-Turkey DTAA, a construction PE arises when a building site, installation or assembly project — including supervisory activities connected with it — continues for a period exceeding six months, counted together with other such sites, projects or activities (Article 5(2)(j) aggregates them). This is shorter than the twelve-month threshold in the OECD Model, and the built-in aggregation rule makes PE management particularly important for Turkish construction firms.

Practical PE Management Strategies

• Project structuring: Splitting a large project into separate contracts does not restart the six-month clock — Article 5(2)(j) of the DTAA counts a site "together with other such sites, projects or activities", so related contracts are aggregated under the treaty text itself
• Subcontracting: Using Indian subcontractors for portions of work can reduce the Turkish company's direct presence. The subcontractor's presence is generally not attributed to the foreign company unless the subcontractor acts exclusively for it
• No general service PE: Unlike several other Indian treaties, the India-Turkey DTAA has no general service-PE clause — but project or supervisory activities incidental to the sale of machinery or equipment create a PE even within six months if the charges for them exceed 10% of the sale price of the machinery or equipment (Article 5(2)(j)(ii))
• Supervisory activities count: Supervisory activities connected with a building site or installation project are expressly included in the construction PE clause — a Turkish company providing only supervision for more than six months still creates a PE

Turkish construction companies that do create a PE in India face a 35% corporate tax rate on profits attributable to the PE (reduced from 40% effective 1 April 2024, per the Finance (No.2) Act 2024), plus applicable surcharge and 4% health and education cess.

Entity Structures for Turkish Companies in India

Project Office

The most common structure for Turkish construction companies executing specific contracts. A project office is opened through an AD Category-I bank under RBI's general permission route (available where the foreign company has secured a contract from an Indian company for a project in India), can only perform activities related to the specific project, and is wound up upon project completion. Key advantages include:

• No minimum capital requirement
• Can repatriate profits after project completion and tax payment
• Simpler compliance compared to a subsidiary
• Does not require a resident director

Wholly Owned Subsidiary

For Turkish companies planning long-term presence across multiple projects, a Private Limited Company subsidiary offers the most operational flexibility. The subsidiary can bid on multiple projects, retain profits for reinvestment, and build a permanent organisational presence. Registration requires filing SPICe+ with the MCA, obtaining a Digital Signature Certificate, and appointing at least one resident director.

Branch Office

A branch office is suitable for Turkish companies that want to execute professional or consultancy contracts without full incorporation. Branch offices can render professional or consultancy services, carry out research, and undertake export/import trading. The branch office vs subsidiary comparison is critical for Turkish companies evaluating their long-term India strategy.

Compliance Framework for Turkish-Owned Entities

Turkish companies operating in India through subsidiaries or branch offices must comply with multiple regulatory requirements:

FEMA Compliance

All foreign investment must comply with FEMA regulations. Turkish companies must file FC-GPR within 30 days of share allotment, submit the Annual FLA Return to RBI by July 15, and ensure any external commercial borrowings from the Turkish parent comply with RBI's ECB framework — automatic-route limits, minimum average maturity, and monthly Form ECB-2 reporting through the AD Category-I bank.

Transfer Pricing

Intercompany transactions between Turkish parent companies and Indian entities — including equipment leasing, technical service fees, management charges, and cost allocations — are subject to India's transfer pricing regulations. Turkish construction companies frequently deploy heavy equipment owned by the parent company to Indian project sites. These equipment rental charges must be benchmarked at arm's length, and the Indian entity must maintain contemporaneous documentation.

GST for Construction

Works contract services (composite supplies of goods and services together, which is how most construction contracts are structured) attract 18% GST with input tax credit — the GST rate rationalisation effective 22 September 2025 standardised works contracts at 18% and removed the earlier 12% concessional entries. Turkish companies must register for GST in every state where they execute projects and file monthly returns.

The USD 20 Billion Trade Target: Opportunities Ahead

The February 2025 MoU between WTC Mumbai and DEIK identifies several growth sectors for Turkey-India economic cooperation:

• Infrastructure and construction: India's National Infrastructure Pipeline envisaged INR 111 lakh crore of investment over FY 2020-25, and successor infrastructure programmes create sustained demand for Turkish construction expertise
• Textiles and fashion: India's textile export target of USD 100 billion by 2030 creates partnership opportunities for Turkish textile technology providers
• Renewable energy: Turkish companies manufacturing solar panels, wind turbine components, and energy storage equipment can access India's target of 500 GW of installed non-fossil-fuel capacity by 2030
• Automotive: Turkey's automotive component manufacturing capabilities align with India's push for higher localisation in vehicle manufacturing
• Agriculture and food processing: Turkish expertise in processed foods, dried fruits, and confectionery complements India's growing processed food market

Companies exploring market entry should engage FDI advisory services to navigate sector-specific regulations and identify the optimal entry structure for their business model.

Common Mistakes Turkish Companies Make in India

Based on our experience advising companies from the Middle East and Mediterranean region, Turkish businesses frequently encounter these challenges in India:

• PE threshold miscalculation: The India-Turkey DTAA's 6-month construction PE threshold is shorter than the OECD Model's twelve months, and the treaty aggregates related sites and projects — companies that split contracts or fail to monitor cumulative timelines can inadvertently create a PE
• Project office vs subsidiary confusion: Turkish construction companies sometimes establish subsidiaries when project offices would be more tax-efficient for single contracts. Conversely, companies with multiple ongoing projects may use project offices when a subsidiary would provide better operational continuity and lower administrative overhead
• Equipment transfer pricing: Turkish construction firms commonly deploy heavy equipment from the parent company to Indian sites. The rental charges for this equipment must be benchmarked at arm's length prices. Indian tax authorities routinely scrutinise equipment leasing arrangements between related parties, and inadequate documentation can lead to transfer pricing adjustments and penalties
• Ignoring state-level regulations: Indian construction projects require permits and approvals from multiple state and local authorities. Turkish companies familiar with Turkey's relatively centralised construction permitting system often underestimate the time and cost required for Indian state-level approvals, particularly for environmental and labour clearances
• DTAA rate application errors: Relying on pre-2023 advice to apply the old 10% domestic rate on royalty and FTS payments — that rate was raised to 20% (plus surcharge and cess) from 1 April 2023, so failing to claim the DTAA's 15% cap with a TRC and Form 41 now causes unnecessary tax leakage. Every intercompany payment should be analysed against both treaty and domestic provisions

Turkish Consumer and Industrial Companies in India

Koc Holding and Arcelik

Koc Holding, Turkey's largest conglomerate, is present in India through Arcelik A.S., whose joint venture with Voltas (under the Voltas Beko brand) manufactures and sells home appliances. Arcelik's Indian presence demonstrates the viability of Turkish consumer goods companies in India's growing middle-class market. The home appliance sector permits 100% FDI under the automatic route, and Indian demand for refrigerators, washing machines, and air conditioners is growing strongly, driven by urbanisation, rising incomes, and increasing electrification.

Turkish Airlines

Turkish Airlines operates direct flights connecting Delhi and Mumbai to Istanbul and through it to European and African destinations. This aviation connectivity has facilitated business travel and trade flows between the two countries, supporting the commercial activities of Turkish construction and textile companies operating in India.

Emerging Sectors

Turkish companies are also exploring India's renewable energy sector (solar panel manufacturing and wind energy) and healthcare (hospital management and medical devices). Each of these sectors has specific FDI regulations and entry requirements that Turkish companies should evaluate with professional tax advisory support.

Key Takeaways

• Nine major Turkish construction companies were reported operating in India across 16 projects as of early 2025, with expertise concentrated in tunnel and pipeline engineering at strategically important locations in Jammu and Kashmir, Gujarat, and Rajasthan
• Turkey-India bilateral trade stands at USD 8.71 billion (FY25) with an ambitious target to reach USD 20 billion within five years, driven by construction, textiles, automotive, and renewable energy sectors
• The India-Turkey DTAA caps royalty and FTS withholding at 15% — below India's 20% domestic rate (plus surcharge and cess) in force since 1 April 2023 — so claim treaty relief with a TRC and Form 41 to avoid unnecessary tax leakage
• Construction PE is triggered after just 6 months under the India-Turkey DTAA — shorter than the OECD Model's twelve-month threshold — and related sites and projects are aggregated under the treaty
• Project offices are the most efficient structure for Turkish construction firms executing specific contracts, while subsidiaries suit companies planning multi-project, long-term presence in India
• Turkish consumer companies like Arcelik (Koc Holding) are successfully tapping India's growing appliance market, demonstrating the opportunity beyond construction and textiles