New Section 44BBD: Taxation of Non-Residents in India’s Electronics Manufacturing Sector

Key Highlights of Section 44BBD

1. Who is Covered?

   • Non-residents engaged in the business of providing services or technology related to electronics manufacturing in India.
   • The services must be provided to a resident company operating under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology (MeitY).

2. How is Income Computed?

   • 25% of the total receipts from providing services or technology will be considered as taxable business income for non-residents.

3. What are the Considered Receipts?

   • Any amount paid or payable to the non-resident for providing services or technology.
   • Any amount received or deemed to be received by the non-resident for such services.

4. Restriction on Set-off of Losses

   • If a non-resident chooses to declare profits under Section 44BBD, they cannot claim set-off of unabsorbed depreciation or brought forward losses for that financial year.

Why is Section 44BBD Introduced?

The Indian government is actively promoting electronics manufacturing under initiatives like ‘Make in India’ and PLI Schemes. By introducing this special tax regime, the aim is to:
Encourage foreign investment in India’s electronics sector.
Simplify taxation for non-resident service providers.
Boost local manufacturing by attracting global technology players.

Implications for Non-Resident Taxpayers

Lower Taxable Income: Instead of being taxed on actual profits, non-residents will pay tax on 25% of total receipts, which may reduce their tax burden.
No Complex Deductions: No need to maintain detailed expense records, as profits are computed on a presumptive basis.
No Loss Adjustments: Non-residents cannot carry forward losses or unabsorbed depreciation for the year in which they opt for Section 44BBD.

Conclusion

The introduction of Section 44BBD is a positive move for India’s electronics manufacturing industry. It makes taxation predictable and transparent for foreign technology and service providers, encouraging more global players to participate in India’s booming electronics sector.

If you are a non-resident service provider in the electronics industry, consult a tax expert to understand how this new section impacts your business in India.