May 5 2021

India Sets Thresholds for Significant Economic Presence of Non-Residents

Source: IBFD Tax Research Platform News

The Central Board of Direct Taxes (CBDT) has specified the thresholds in determining significant economic presence (SEP) of a non-resident in India under section 9(1)(i) of the Income Tax Act (ITA) for the purpose of attributing income in India.

The thresholds, which will apply beginning 1 April 2022, are set as follows:

  • payment threshold: transactions involving goods, services or property carried out by a non-resident with any person in India, including data or software downloads in India, equivalent to INR 20 million or more of the prior year's total payments; or
  • user threshold: systematic and continuous soliciting of business activities or engaging in interaction with 300,000 or more users in India.

Under the ITA, the SEP of a non-resident constitutes a business connection in India, which in turn determines the non-resident's taxable income in India.

The thresholds are issued in Notification No. 41/2021 of 3 May 2021.