The Income Tax Act, 1961, provides a simplified presumptive taxation scheme for non-resident entities under Sections 44B, 44BB, 44BBA, and 44BBB. This scheme is specifically tailored for non-residents engaged in certain business activities within India, allowing them to compute their taxable income based on a fixed percentage of their gross receipts, thus reducing the burden of detailed accounting and audit requirements.
Overview of Presumptive Taxation Provisions
Below is a summary of the key provisions under Sections 44B, 44BB, 44BBA, and 44BBB:
| Section | Business Activity | Presumptive Income Rate | Option for Lower Income Declaration | Set Off Brought Forward Losses |
|---|---|---|---|---|
| 44B | Shipping business | 7.5% | No | Yes |
| 44BB | Services related to mineral oil exploration | 10% | Yes, if books of accounts are maintained and audited | No (Amended) |
| 44BBA | Operation of aircraft | 5% | No | Yes |
| 44BBB | Civil construction in turnkey power projects | 10% | Yes, if books of accounts are maintained and audited | No (Amended) |
Detailed Explanation of Each Section
Section 44B: Taxation of Shipping Business for Non-Residents
- Applicability: This section applies to non-resident individuals and foreign companies engaged in the shipping business.
- Presumptive Income: Taxable income is presumed to be 7.5% of the specified sum.
- Specified Sum: This includes amounts paid or payable for the carriage of passengers, livestock, mail, or goods shipped from any place in India, and amounts received or deemed to be received in India for such carriage.
- Compliance Note: Non-residents opting for this section cannot declare a lower income than the specified rate and are allowed to set off brought forward losses.
Section 44BB: Taxation of Services Related to Mineral Oils
- Applicability: This section applies to non-resident individuals and foreign companies providing services or facilities related to the exploration or extraction of mineral oils.
- Presumptive Income: Taxable income is presumed to be 10% of the specified sum.
- Specified Sum: This includes amounts paid or payable for services provided in connection with mineral oil exploration within India and amounts received or deemed to be received in India for such services outside India.
- Compliance Note: Non-residents can declare a lower income if they maintain books of accounts and get them audited as per Sections 44AA and 44AB. However, they are not allowed to set off brought forward losses if they opt for presumptive taxation under this section.
Section 44BBA: Taxation of Aircraft Operations for Non-Residents
- Applicability: This section applies to non-resident individuals and foreign companies engaged in the operation of aircraft.
- Presumptive Income: Taxable income is presumed to be 5% of the specified sum.
- Specified Sum: This includes amounts paid or payable for the carriage of passengers, livestock, mail, or goods shipped from any place in India, and amounts received or deemed to be received in India for such carriage.
- Compliance Note: Non-residents opting for this section cannot declare a lower income than the specified rate but are allowed to set off brought forward losses.
Section 44BBB: Taxation of Foreign Companies in Turnkey Power Projects
- Applicability: This section is applicable only to foreign companies involved in civil construction, erection, testing, or commissioning related to turnkey power projects approved by the Central Government.
- Presumptive Income: Taxable income is presumed to be 10% of the specified sum.
- Specified Sum: This includes amounts paid or payable for civil construction, erection, testing, or commissioning related to power projects.
- Compliance Note: Non-residents can declare a lower income if they maintain books of accounts and get them audited as per Sections 44AA and 44AB. However, they cannot set off brought forward losses if they opt for presumptive taxation under this section.
This professional guide aims to provide non-residents with a clear understanding of the presumptive taxation scheme under the Income Tax Act, 1961, helping to ensure smooth tax compliance and optimized tax liabilities.
