Non-resident Indians (NRIs) undertaking transactions with Indian parties will trigger taxability under the domestic law in India even if they do not have physical presence in the country and operate digitised businesses.
The central board of direct taxes (CBDT) has notified new rules for operation of business by NRIs under which any transaction over Rs2 crore (approx $27,100) in respect of any goods, services or property carried out by them with any person in India including provision of download of data or software in India, will attract tax in India.
The provisions of 'significant economic presence' (SEP) that becomes the base for taxability of NRIs in India will also apply if the number of users with whom systematic and continuous business activities are solicited (or who are engaged in interactions) exceeds 300,000.
The provisions of of SEP were introduced in the legislation in 2018 with an intent to tax NRIs operating digitised businesses which function without a physical presence. It meant that SEP of an NRI in India shall constitute a 'business connection' in India.
These provisions were further amended vide Finance Act, 2020 which defined SEP as transaction in respect of any goods, services or property carried out by an NRI with any person in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the year exceeds a threshold or systematic and continuous soliciting of business activities or engaging in interaction with a defined number of users in India.
The new provisions are applicable with effect from financial year 2021-22 (FY21-22). . It had become fully functional now with CBDT notifying the thresholds for triggering SEP and consequently tax liability in India.
According to PwC(PricewaterhouseCoopers), the Central government has now made it clear that economic presence in India by NRIs is not limited only to the physical presence in India but also includes a virtual establishment. But NRIs could offset the taxability under these provisions by exploring taking relief under Double taxation avoidance agreements.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
FM does quick follow up of IGST exemption on Covid relief material
04 May 2021
In an attempt to speed up clearances of goods received free of cost for distribution for Covid relief, Finance Minister Nirmala Sitharaman on Monday undertook a quick follow up action by briefing the chief secretaries of the states...
Govt relaxes several compliance timelines under GST
03 May 2021
As the Covid crisis and the resultant lockdowns impact business, the Centre has come up with several relaxations regarding timelines for GST compliance norms.
Among the relaxations, the government has extended the deadline...
Govt Extends Tax Compliance Timelines till 30th June for Issuing Orders and Notices in Certain Cases
Moneylife Digital Team
28 April 2021
After receiving several representations from taxpayers, tax consultants and other stakeholders and to address the hardship being faced by various stakeholders, the Indian government has decided to extend the time limits to 30 June...
GST return verification allowed through OTP, no more physical visits
27 April 2021
The government has provided relief to GST taxpayers from a physical visit to tax office for verification of digital signature required on return forms.
The Central Board of Indirect Taxes and Customs has allowed taxpayers...