Computing income by way of royalties, etc., in case of non-residents - Clause 59 of the Income Tax Bill, 2025 vs. Section 44DA of the Income Tax Act, 1961

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..... ness or profession." The provision is particularly relevant in the context of increasing globalization and cross-border transactions involving intellectual property and technical services. This article will provide a comprehensive analysis of Clause 59 and compare it with the existing Section 44DA of the Income Tax Act, 1961, which deals with similar issues. Objective and Purpose The primary objective of Clause 59 is to ensure that income in the form of royalties and fees for technical services, received by non-residents from Indian sources, is taxed appropriately under the head of business profits. The provision aims to prevent tax avoidance by ensuring that such income is connected with a permanent establishment or a fixed place of prof .....

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..... fied assessee" as a non-resident (not being a company) or a foreign company, whereas Section 44DA applies to non-residents and foreign companies without this explicit definition. Conditions for Taxation: Both provisions require that the income be received from the Government or an Indian concern and that it be effectively connected with a permanent establishment or fixed place of profession in India. The conditions outlined in Clause 59 are similar to those in Section 44DA, indicating a continuity in the legislative approach. Deductions and Allowances: Both Clause 59 and Section 44DA disallow deductions for expenses not wholly and exclusively incurred for the business of the permanent establishment or fixed place of profession in India. .....

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..... lause 59 may introduce updated compliance requirements and definitions that reflect changes in international tax norms and practices. The comparison highlights the need for stakeholders to stay informed about legislative changes and their implications for cross-border transactions. Conclusion Clause 59 of the Income Tax Bill, 2025, represents a continuation of the legislative framework established by Section 44DA of the Income Tax Act, 1961, with potential updates to reflect current international tax practices. The provision underscores the importance of ensuring that income from royalties and technical services is taxed appropriately in India, aligning with global standards. As the Bill progresses, stakeholders should closely monitor dev .....

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