{"id":29050,"date":"2025-03-28T01:37:13","date_gmt":"2025-03-27T20:07:13","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=29050"},"modified":"2025-03-28T01:58:33","modified_gmt":"2025-03-27T20:28:33","slug":"section-44bbd-new-presumptive-tax-regime-for-non-residents","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/","title":{"rendered":"Section 44BBD: New Presumptive Tax Regime for Non-Residents"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e1291dc3f2d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e1291dc3f2d\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Complete_Understanding_of_Section_44BBD_of_the_Income-tax_Act_1961_%E2%80%93_New_Presumptive_Tax_Regime_for_Non-Residents\" title=\"Complete Understanding of Section 44BBD of the Income-tax Act, 1961 &#8211; New Presumptive Tax Regime for Non-Residents\">Complete Understanding of Section 44BBD of the Income-tax Act, 1961 &#8211; New Presumptive Tax Regime for Non-Residents<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Introduction\" title=\"Introduction\u00a0\">Introduction\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Applicability_of_Section_44BBD\" title=\"Applicability of Section 44BBD:\">Applicability of Section 44BBD:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Presumptive_Taxation_Basis-%E2%80%94Restrictions_on_Deductions\" title=\"Presumptive Taxation Basis-\u2014Restrictions on Deductions:\">Presumptive Taxation Basis-\u2014Restrictions on Deductions:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Benefits_Implications_of_Section_44BBD\" title=\"Benefits &amp; Implications of Section 44BBD\">Benefits &amp; Implications of Section 44BBD<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Proposed_Amendment_Interplay_with_Other_Sections\" title=\"Proposed Amendment &amp; Interplay with Other Sections\u00a0\">Proposed Amendment &amp; Interplay with Other Sections\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Section_44DA_Income_from_RoyaltiesFTS_with_PE_in_India\" title=\"Section 44DA (Income from Royalties\/FTS with PE in India) \">Section 44DA (Income from Royalties\/FTS with PE in India) <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Section_115A_Income_from_Dividends_Interest_Royalties_and_FTS_without_PE_in_India\" title=\"Section 115A (Income from Dividends, Interest, Royalties, and FTS without PE in India) : \">Section 115A (Income from Dividends, Interest, Royalties, and FTS without PE in India) : <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Clarification_on_Tax_Treatment_on_Key_Amendment_in_Finance_Bill_2025\" title=\"Clarification on Tax Treatment on Key Amendment in Finance Bill, 2025 \">Clarification on Tax Treatment on Key Amendment in Finance Bill, 2025 <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Potential_issues_with_the_deemed_taxation_regime_for_non-residents\" title=\"Potential issues with the deemed taxation regime for non-residents \">Potential issues with the deemed taxation regime for non-residents <\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Non-resident_subcontractors%E2%80%94\" title=\"Non-resident subcontractors\u2014\u00a0\">Non-resident subcontractors\u2014\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Composite_contracts_Supply_Service\" title=\"Composite contracts (Supply + Service) \">Composite contracts (Supply + Service) <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Compliance_Risks_for_Resident_Companies\" title=\"Compliance Risks for Resident Companies \">Compliance Risks for Resident Companies <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Limitation_to_Resident_Companies_Only\" title=\"Limitation to Resident Companies Only \">Limitation to Resident Companies Only <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Potential_Conflict_with_RoyaltyFTS_Provisions\" title=\"Potential Conflict with Royalty\/FTS Provisions : \">Potential Conflict with Royalty\/FTS Provisions : <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Other\" title=\"Other\u00a0\">Other\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/carajput.com\/blog\/section-44bbd-new-presumptive-tax-regime-for-non-residents\/#Way_Forward_%E2%80%93_Key_Clarifications_Needed_from_Tax_Authorities\" title=\"Way Forward \u2013 Key Clarifications Needed from Tax Authorities\">Way Forward \u2013 Key Clarifications Needed from Tax Authorities<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-29051\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/03\/Deduction-.jpg\" alt=\"Section 44BBD of the Income-tax Act, 1961\" width=\"1036\" height=\"528\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/03\/Deduction-.jpg 816w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/03\/Deduction--300x153.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/03\/Deduction--768x392.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/03\/Deduction--800x408.jpg 800w\" sizes=\"(max-width: 1036px) 100vw, 1036px\" \/><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"Complete_Understanding_of_Section_44BBD_of_the_Income-tax_Act_1961_%E2%80%93_New_Presumptive_Tax_Regime_for_Non-Residents\"><\/span><span style=\"color: #000080;\"><strong>Complete Understanding of Section 44BBD of the Income-tax Act, 1961 &#8211; New Presumptive Tax Regime for Non-Residents<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Introduction\"><\/span><span style=\"color: #000080;\"><strong>Introduction\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Finance Bill, 2025, introduces Section 44BBD, which establishes a presumptive taxation regime for non-resident entities providing technology and services to Indian companies operating in the electronics manufacturing sector. This move simplifies tax compliance for foreign entities supporting India\u2019s Electronics System Design and Manufacturing (ESDM) ecosystem, particularly in semiconductor and display manufacturing. \u00a0Key Features of Section 44BBD<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Applicability_of_Section_44BBD\"><\/span><strong><span style=\"color: #000080;\">Applicability of Section 44BBD:<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Non-resident entities providing technology or services to Indian electronics manufacturing companies. The recipient Indian company must be operating under a government-notified scheme by the Ministry of Electronics and Information Technology (MeitY). Effective Date : Applies from AY 2026-27 (i.e., from April 1, 2026, onwards). These services must be related to either:<\/p>\n<ul>\n<li>Setting up an electronics manufacturing facility or<\/li>\n<li>Manufacturing or producing electronic goods, articles, or related items in India.<\/li>\n<\/ul>\n<p><span style=\"color: #000080;\"><strong>Target Audience : <\/strong><\/span>Applies to non-resident companies supplying services or technology to resident companies in India. These resident companies must be engaged in setting up or operating electronics manufacturing facilities.<\/p>\n<p><span style=\"color: #000080;\"><strong>Government-Notified Scheme : <\/strong><\/span>The electronics manufacturing facilities must be covered under a scheme notified by the Ministry of Electronics and Information Technology (MeitY). They must also fulfill prescribed conditions to be eligible.<\/p>\n<ul>\n<li>The non-resident must provide services to a resident company that is:<\/li>\n<li>Establishing or operating an electronics manufacturing facility or a connected facility.<\/li>\n<li>Operating under a scheme notified by the Central Government, specifically under the Ministry of Electronics and Information Technology<\/li>\n<\/ul>\n<p><strong><span style=\"color: #000080;\">Presumptive Taxation Framework :<\/span> <\/strong>25% of total payments received or receivable by the non-resident for such technology\/services is deemed as taxable business income in India. Overrides usual business income provisions under Sections 28 to 43A of the Income-tax Act. These amounts include:<\/p>\n<ul>\n<li>Payments are made to the non-resident directly or to any person on their behalf.<\/li>\n<li>Amounts received or deemed to be received by the non-resident in relation to these services.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Presumptive_Taxation_Basis-%E2%80%94Restrictions_on_Deductions\"><\/span><span style=\"color: #000080;\"><strong>Presumptive Taxation Basis-\u2014Restrictions on Deductions:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Non-residents opting for this scheme cannot claim set-off of:<\/p>\n<ul>\n<li>Unabsorbed depreciation under Section 32(2): No deductions are allowed for unabsorbed depreciation or carried forward losses.<\/li>\n<li>Brought forward business losses under Section 72(1): No set-off of unabsorbed depreciation and brought-forward losses. And also ensures fixed and simplified taxation without additional adjustments.<\/li>\n<\/ul>\n<p>This means that even if a non-resident incurs losses or lower profits, they will still be taxed on 25% of gross receipts, ensuring tax certainty and a fixed percentage of gross receipts (to be prescribed) is deemed as taxable income. So we can say that Effective tax liability for non-residents under this scheme will be less than 10% of their gross receipts, providing a simplified and predictable tax framework.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Benefits_Implications_of_Section_44BBD\"><\/span><span style=\"color: #000080;\"><strong>Benefits &amp; Implications of Section 44BBD<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Simplifies compliance for foreign companies by eliminating complex calculations.<\/li>\n<li>Provides clarity on taxation and avoids disputes over applicability of different tax sections.<\/li>\n<li>Promotes foreign investment in India\u2019s electronics manufacturing sector.<\/li>\n<li>Ensures certainty by excluding the applicability of Sections 44DA and 115A, preventing tax overlap.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Proposed_Amendment_Interplay_with_Other_Sections\"><\/span><span style=\"color: #000080;\"><strong>Proposed Amendment &amp; Interplay with Other Sections<\/strong><\/span><strong>\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Another change is that in newly introduced s. 44BBD for electronics manufacturing ( 25% presumptive income ) a proviso has been inserted that s. 44DA and 115A shall not be applicable. Hence no controversy like on 44BB where Revenue still contesting provision of Section 44DA to override section 44BB of the Act. The amendment clarifies that income under Section 44BBD will not be taxed under Sections 44DA or 115A, preventing double taxation. Impact of the amendment ensures that non-resident service providers are not taxed twice under multiple sections. and Removes uncertainty about whether income would fall under presumptive taxation (44BBD) or be assessed under 44DA\/115A. also Provides simplified tax compliance for non-residents dealing with India\u2019s electronics sector.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Section_44DA_Income_from_RoyaltiesFTS_with_PE_in_India\"><\/span><span style=\"color: #000080;\"><strong>Section 44DA (Income from Royalties\/FTS with PE in India) <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Applies to Non-residents earning royalties or fees for technical services (FTS) that are effectively connected to a Permanent Establishment (PE) in India.<\/li>\n<li>Taxation: Income is taxed at applicable slab rates, and deductions for expenses are allowed.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Section_115A_Income_from_Dividends_Interest_Royalties_and_FTS_without_PE_in_India\"><\/span><span style=\"color: #000080;\"><strong>Section 115A (Income from Dividends, Interest, Royalties, and FTS without PE in India) : <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Applies to Non-residents earning income from dividends, interest, royalties, or FTS where no PE exists in India.<\/li>\n<li>Taxation: Taxed at concessional rates (10%-20%), but no deductions are allowed for expenses.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Clarification_on_Tax_Treatment_on_Key_Amendment_in_Finance_Bill_2025\"><\/span><span style=\"color: #000080;\"><strong>Clarification on Tax Treatment on Key Amendment in Finance Bill, 2025 <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Finance Bill, 2025, now explicitly states that income assessed under Section 44BBD will not be subject to additional taxation under Section 44DA or Section 115A, ensuring no double taxation. Prevents overlapping taxation under 44DA and 115A, ensuring clarity and tax certainty for non-resident service providers.<\/p>\n<table>\n<thead>\n<tr>\n<td><span style=\"color: #000080;\"><strong>Section<\/strong><\/span><\/td>\n<td><span style=\"color: #000080;\"><strong>Applicability<\/strong><\/span><\/td>\n<td><span style=\"color: #000080;\"><strong>Tax Treatment<\/strong><\/span><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><span style=\"color: #000080;\"><strong>44BBD<\/strong> <em>(New)<\/em><\/span><\/td>\n<td>Non-residents providing technology\/services to India\u2019s electronics manufacturing sector<\/td>\n<td>Presumptive taxation (25% of gross receipts deemed taxable income)<\/td>\n<\/tr>\n<tr>\n<td><span style=\"color: #000080;\"><strong>44DA<\/strong><\/span><\/td>\n<td>Royalties\/Fees for Technical Services (FTS) connected to a Permanent Establishment (PE) in India<\/td>\n<td>Taxed as business income, deductions allowed<\/td>\n<\/tr>\n<tr>\n<td><span style=\"color: #000080;\"><strong>115A<\/strong><\/span><\/td>\n<td>Royalties, FTS, dividends, interest (without PE in India)<\/td>\n<td>Concessional tax rates (10%-20%), no deductions allowed<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The Finance Bill, 2025, has introduced Section 44BBD to establish a presumptive taxation regime for non-resident entities engaged in providing services or technology to India\u2019s electronics manufacturing sector. This marks a pro-business tax reform aimed at making India an attractive destination for foreign technology providers in the electronics sector. With a simplified taxation framework and clarity on double taxation concerns, the regime is set to boost investment and ease compliance for non-residents.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Potential_issues_with_the_deemed_taxation_regime_for_non-residents\"><\/span><span style=\"color: #000080;\"><strong>Potential issues with the deemed taxation regime for non-residents <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Potential issues with the deemed taxation regime for non-residents in the electronics manufacturing sector. Here are some key points to consider for each concern:<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Non-resident_subcontractors%E2%80%94\"><\/span><span style=\"color: #000080;\"><strong>Non-resident subcontractors\u2014\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"padding-left: 40px;\">The provision seems to focus on direct service or technology providers to an Indian company. If a foreign company engages a subcontractor, the subcontractor&#8217;s revenue would come from the foreign company, not the Indian entity. This could mean they fall outside the deemed taxation regime. Clarification is needed on whether subcontractors can qualify or if their income remains taxable under regular international tax principles.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Composite_contracts_Supply_Service\"><\/span><span style=\"color: #000080;\"><strong>Composite contracts (Supply + Service) <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"padding-left: 40px;\">The exclusion of supply revenue from the deemed taxation regime creates challenges for contracts involving both goods and services. Since many electronics manufacturing projects involve bundled contracts, this could lead to complexities in tax treatment. The government may need to provide specific guidance on how such contracts should be split for taxation purposes.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Compliance_Risks_for_Resident_Companies\"><\/span><span style=\"color: #000080;\"><strong>Compliance Risks for Resident Companies <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"padding-left: 40px;\">The non-resident&#8217;s eligibility for the deemed taxation regime depends on the Indian company&#8217;s compliance with MEITY conditions. If the resident entity fails to meet these conditions, the foreign company may lose the deemed taxation benefit, causing tax uncertainty. Clearer guidelines or safeguards would help mitigate this risk.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Limitation_to_Resident_Companies_Only\"><\/span><span style=\"color: #000080;\"><strong>Limitation to Resident Companies Only <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>By restricting applicability to services or technology provided to a \u201cresident company,\u201d LLPs and other entities may be unintentionally excluded. This could either be a deliberate policy choice or an oversight requiring amendment.<\/li>\n<li>Key Concern: Will tax authorities insist on separating supply and service revenue, or will a composite contract be taxed under a single provision?<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Potential_Conflict_with_RoyaltyFTS_Provisions\"><\/span><span style=\"color: #000080;\"><strong>Potential Conflict with Royalty\/FTS Provisions : <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Typically, payments for services or technology are classified as Royalty or Fees for Technical Services\u00a0 under the IT Act and DTAA. Tax Treatment Under Existing Law:<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>No PE in India: Taxed on a gross basis at 20% (plus surcharge and cess) or at DTAA rates (usually 10%-15%).<\/li>\n<li>With PE in India: Taxed on a net basis under Section 44DA at the applicable foreign company tax rate (40% + surcharge &amp; cess).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>Ambiguity under Section 44BBD: Since 25% of gross receipts are deemed as profits, it results in an effective tax rate of 9.56%, potentially conflicting with 44DA (net basis) and 44D (gross basis) taxation. Will Section 44BBD override these provisions, or will tax authorities assess non-residents under provisions that lead to higher tax liability?<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Other\"><\/span><span style=\"color: #000080;\"><strong>Other\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Section 44BBD does not offer this flexibility, potentially resulting in an overstatement of profits for service providers with low-margin operations.<\/li>\n<li>If the goal is to simplify taxation, 44BBD does not explicitly provide relief from Tax audits u\/s 44AB and Maintaining books of accounts u\/s 44AA. Audit or Compliance Relief exemptions should ideally be extended to Section 44BBD taxpayers.<\/li>\n<li>Whether taxpayers can opt out of Section 44BBD if they have a PE or if tax authorities will apply the more stringent provision.<\/li>\n<\/ul>\n<h3 class=\"\" data-start=\"2856\" data-end=\"2922\"><span class=\"ez-toc-section\" id=\"Way_Forward_%E2%80%93_Key_Clarifications_Needed_from_Tax_Authorities\"><\/span><span style=\"color: #000080;\"><strong data-start=\"2860\" data-end=\"2920\">Way Forward \u2013 Key Clarifications Needed from Tax Authorities<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul data-start=\"2923\" data-end=\"3481\">\n<li class=\"\" data-start=\"2923\" data-end=\"3029\">\n<p class=\"\" data-start=\"2925\" data-end=\"3029\">Interaction with Sections 44DA &amp; 44D\u2014Will 44BBD override existing rules for royalty\/FTS taxation?<\/p>\n<\/li>\n<li class=\"\" data-start=\"3030\" data-end=\"3147\">\n<p class=\"\" data-start=\"3032\" data-end=\"3147\">Flexibility to Declare Lower Profits\u2014Can taxpayers opt for net taxation if they maintain books of accounts?<\/p>\n<\/li>\n<li class=\"\" data-start=\"3148\" data-end=\"3247\">\n<p class=\"\" data-start=\"3150\" data-end=\"3247\">Compliance Relief\u2014Will 44BBD taxpayers be exempt from audit and bookkeeping requirements?<\/p>\n<\/li>\n<li class=\"\" data-start=\"3248\" data-end=\"3348\">\n<p class=\"\" data-start=\"3250\" data-end=\"3348\">PE Considerations\u2014Will the provision apply equally to non-residents with and without a PE?<\/p>\n<\/li>\n<li class=\"\" data-start=\"3349\" data-end=\"3481\">\n<p class=\"\" data-start=\"3351\" data-end=\"3481\">Treatment of Composite Contracts\u2014Will supplies be completely excluded, or will guidance be issued on contract structuring?<\/p>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Complete Understanding of Section 44BBD of the Income-tax Act, 1961 &#8211; New Presumptive Tax Regime for Non-Residents Introduction\u00a0 The Finance Bill, 2025, introduces Section 44BBD, which establishes a presumptive taxation regime for non-resident entities providing technology and services to Indian companies operating in the electronics manufacturing sector. This move simplifies tax compliance for foreign entities &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[120],"tags":[10252],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/29050"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=29050"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/29050\/revisions"}],"predecessor-version":[{"id":29055,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/29050\/revisions\/29055"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=29050"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=29050"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=29050"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}