Presumptive taxation provisions for non-residents and NRI taxation
Prepared by Baskar P
Presumptive tax provisions framework
Section | Framework |
Section 44B | Shipping business |
Section 44BB | Business of exploration, etc., of mineral oil |
Section 44BBA | Operation of aircraft |
Section 44BBB | Civil construction business etc., in turnkey projects |
Section 44DA | Royalty and fees for technical services |
Section 44B -For non-resident engaged in business of operation of ships.
Deemed income under PGBP shall be 7.5% of
- Amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf, on account of carriage of passengers, livestock, mail or goods shipped at any port in India.
- Amount received or deemed to be received in India to the assessee or to any person on his behalf, on account of carriage of passengers, livestock, mail or goods shipped at any port outside India.
Amount includes handling charges, demurrage charges and any other charges of similar nature.
Section 172 of the Act- Occasional shipping
Applicability
Levy and recovery of tax in case of ships belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India.
Purpose
To make summary assessment and collect/ recover tax before the ship leaves Indian territory. Section 172(3) of the Act deals with procedural formalities. Overriding Provision Starts with a non obstante clause i.e., Overriding other provisions of the Act.
Deemed Income under PGBP shall be 7.5% of
Amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, w here a ship carries passengers, livestock, mail or goods shipped at a port in India includes demurrage charges, handling charges and other charges similar to demurrage or handling charges.
Procedure– Before departure, master shall furnish return of full amount paid to the owner or charterer of that ship.
Section 44BB- For non-resident engaged in business of prospecting for or extraction or production of mineral oils.
Deemed income under PGBP shall be 10% of in case of provision of services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils.
- In India amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf.
- Outside India amount received or deemed to be received in India to the assessee or to any person on his behalf.
Amount includes handling charges, demurrage charges and any other charges of similar nature.
Section 44BBA- For non-resident engaged in business of operation of aircraft.
Deemed Income under PGBP shall be 5% of
- Amount paid or payable (whether in or out of to the assessee or to any person on his behalf on account of carriage of passengers, livestock, mail or goods from any place in India.
- Amount received or deemed to be received in India to the assessee or to any person on his behalf on account of carriage of passengers, livestock, mail or goods from any place outside India.
Section 44BBB- For non-resident engaged in business of the Act civil construction or business of testing or commissioning or erection of plant & machinery in connection with turnkey power projects approved by the central government.
Foreign company engaged in the business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project approved by the central government.
Deemed income shall be 10%of amount paid or payable (whether in or out of India) to the said assessee or to any person on his behalf on account of such activities.
Assessee may claim lower PGBP if books of accounts are maintained and audited, and Assessing Officer shall make assessment.
Section 44DA of the Act royalty and fee for technical services.
The income by way of royalty or FTS received in pursuance of an agreement made by a NR (not being a company) or a FC with Govt or an Indian concern after 31 March 2003.
- For carrying on business in India through a PE or performs professional services from a fixed place, the right, property or contract in respect of which the royalties or FTS are paid is effectively connected with such PE or fixed place; shall be computed under the head PGBP in accordance with the provisions of this Act.
- No deduction shall be allowed for following: Any expenditure or allowance which is not wholly and exclusively incurred for the business or Profession; Amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the PE to its head office or to any of its other offices.
Taxability Section 44DA and Section 115A of the Act royalty and FTS
- If effectively connected to a PE in India Under Sec 44DAof the Act, net basis taxable at rate applicable to foreign companies.
- If not effectively connected to a PE in India Whether the agreement with an Indian concern is after 31 March 1976, approved by the central government or relates to a matter included in the Industrial Policy
- If yes under Sec 115A of the Act, rates of taxes 10% Royalty, 10% Fees for technical services.
- If no at the rate applicable to foreign companies (40%*) / non-residents on a net basis.