Section 44BBD of the Income Tax Act: Presumptive Taxation for Non-Residents

Section 44BBD of the Income Tax Act: Presumptive Taxation for Non-Residents. The Indian government has introduced several reforms over the years to boost ease of doing business and improve tax compliance. One of the latest initiatives in this direction is the introduction of Section 44BBD of Income Tax Act. This section has been introduced through the Finance Act, 2025 and will be effective from 1st April 2026, i.e., from the assessment year 2026-27. The purpose of Section 44BBD is to offer a presumptive taxation scheme specifically for non-residents who are engaged in providing services or technology related to electronics manufacturing in India. This move aims to make India a favorable destination for electronics manufacturing and to attract global participation in the sector.
What is Presumptive Taxation?
Presumptive taxation is a simplified method of income calculation where the taxpayer's income is presumed to be a fixed percentage of their gross receipts. Under this method, taxpayers are not required to maintain books of accounts or get their accounts audited. Instead, the income is calculated on a presumed basis, reducing both the compliance burden and administrative costs.
For example, if the presumptive rate is fixed at 25%, then 25% of the total gross receipts are treated as taxable income. This system is already available to small businesses and professionals under Sections 44AD, 44ADA, and 44AE of the Income Tax Act. With the introduction of Section 44BBD, this benefit is extended to non-residents providing services or technology in India for electronics manufacturing.
What is a Section 44BBD of Income Tax Act?
Section 44BBD of Income Tax Act is a newly inserted section aimed at non-residents who offer their expertise, services, or technology for electronics manufacturing in India. This includes services like setting up manufacturing units, providing technical support, consultancy, and supplying proprietary technologies.
This section provides a presumptive basis for calculating income of non-residents, where 25% of the total gross receipts will be considered as income chargeable to tax. This provision is expected to reduce the complexities faced by foreign service providers while ensuring that India remains attractive for technology collaborations.
Objective of Introducing Section 44BBD of Income Tax Act
The primary objective of introducing Section 44BBD is to promote India as a global hub for Electronics System Design and Manufacturing (ESDM). The government intends to attract foreign technology companies and experts who can provide high-quality services and solutions to Indian companies in the electronics sector.
This provision removes the ambiguity in determining taxable income for non-residents and promotes tax certainty. By simplifying taxation, the government aims to encourage more non-resident entities to participate in India's growing electronics manufacturing sector.
Who is Eligible Under Section 44BBD of Income Tax Act?
Section 44BBD applies only to non-residents who are engaged in providing services or technology for:

Setting up an electronics manufacturing facility in India; or

Providing services or technology in connection with the manufacturing or production of electronic goods, articles, or things in India.

However, the resident company that receives these services must be operating under a scheme notified by the Ministry of Electronics and Information Technology (MeitY). Additionally, the resident company must also comply with certain conditions as prescribed under the notified scheme. In essence, this section applies only if both parties; the non-resident and the resident company; meet the eligibility conditions.
How is Income Calculated Under Section 44BBD of Income Tax Act?
Under Section 44BBD, the presumptive income is calculated as 25% of the total gross receipts. The term "aggregate gross receipts" includes:

Amounts paid or payable to the non-resident directly by the resident company.

Amounts paid to any person on behalf of the non-resident.

Amounts received or deemed to be received by the non-resident.

All these payments must be made in connection with providing technology or services related to electronics manufacturing in India. The total of these amounts will be considered as gross receipts, and 25% of that amount will be treated as the presumptive income. This deemed income will then be taxed as per the applicable rates for non-residents under the Income Tax Act or under the applicable Double Taxation Avoidance Agreement (DTAA).
Benefits of Section 44BBD for Non-Residents
Section 44BBD offers multiple benefits to eligible non-residents:

No need to maintain detailed books of accounts or undergo tax audits.

Reduces the risk of litigation and assessments.

Encourages non-residents to engage more confidently in India’s electronics manufacturing sector.

Many countries offer similar presumptive schemes for specific sectors.

Restrictions Under Section 44BBD of Income Tax Act
Though Section 44BBD provides a simplified taxation route, there are certain restrictions:

The non-resident opting for this scheme will not be allowed to claim unabsorbed depreciation under Section 32.

Brought forward business losses under Section 72 cannot be set off against the presumptive income.

This means once a taxpayer chooses the presumptive scheme, they must forego the benefit of adjusting previous years’ losses or depreciation against their current year’s income. These restrictions are placed to ensure that only those non-residents who truly seek a simplified mechanism opt for this scheme and not those trying to minimize tax through set-offs.
Applicability of Section 44BBD of Income Tax Act
Section 44BBD will be applicable starting from the Financial Year 2026-27 (i.e., Assessment Year 2027-28). Therefore, any income received by non-residents on or after 1st April 2026 for providing eligible services or technology will be eligible for presumptive taxation under this section.
This prospective implementation provides ample time for stakeholders to understand the provisions, make necessary adjustments to contracts, and ensure they are in compliance with the notified scheme of the Ministry of Electronics and Information Technology.
Administrative Provisions and Compliance
Although Section 44BBD simplifies income calculation, certain compliances must still be adhered to. The non-resident must file their income tax return in India if their income exceeds the taxable limit. Further, they must ensure that all invoices and receipts are properly documented to support the gross receipts figure declared in the return.
It is also expected that the CBDT will notify rules and issue clarifications on the implementation of Section 44BBD, especially regarding the definition of eligible services, scope of technology, and format of documentation.
Impact on India's Electronics Manufacturing Sector
The introduction of Section 44BBD is expected to significantly boost the electronics manufacturing sector in India. With the ease of doing business increasing, more foreign companies are likely to collaborate with Indian manufacturers.
This will not only bring in advanced technology but also generate employment and foster innovation in the country. India aims to become a global leader in ESDM, and simplified tax regimes like Section 44BBD will be instrumental in achieving that goal.
Conclusion
Section 44BBD of Income Tax Act is a progressive step towards attracting foreign expertise in the electronics manufacturing sector. It offers a simple and effective way for non-residents to compute their taxable income without undergoing the traditional complexities of taxation. By offering presumptive taxation, the government has sent a clear message: India is open for business and is ready to work with global partners to strengthen its industrial base. For non-residents engaged in technology and service delivery to India’s electronics sector, this section opens new avenues of cooperation with tax clarity and reduced compliance burden.
As we approach FY 2026-27, it is important for non-resident taxpayers, legal advisors, and tax consultants to familiarize themselves with the provisions of Section 44BBD of Income Tax Act and ensure readiness for its implementation.
If you have any queries regarding Income Tax or need any assistance in filing ITR, connect with Compliance Calendar LLP Experts through mail at info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs
Q1. What is Section 44BBD of Income Tax Act?
Ans. Section 44BBD of Income Tax Act is a newly introduced provision that offers a presumptive taxation scheme for non-residents. It applies to those who provide services or technology to Indian companies involved in electronics manufacturing. Under this scheme, 25% of the gross receipts is deemed to be the taxable income, thereby simplifying tax compliance for non-residents.
Q2. Who is eligible to opt for presumptive taxation under Section 44BBD?
Ans. Only non-resident entities or individuals are eligible under Section 44BBD if they provide services or technology to a resident company that is operating under a scheme notified by the Ministry of Electronics and Information Technology (MeitY). The scheme must relate to setting up or operating an electronics manufacturing facility in India.
Q3. How is the presumptive income calculated under Section 44BBD?
Ans. The presumptive income is calculated as 25% of the aggregate gross receipts of the non-resident. These receipts include amounts received, receivable, or paid on their behalf by the Indian resident company in return for services or technology related to electronics manufacturing.
Q4. What is the benefit of opting for Section 44BBD of Income Tax Act?
Ans. The main benefit of opting for Section 44BBD is reduced compliance. Non-residents are not required to maintain detailed books of accounts or undergo tax audits. It also ensures tax certainty and minimizes the risk of litigation or assessment-related complications in India.
Q5. Are there any restrictions if one opts for the presumptive scheme under Section 44BBD?
Ans. Yes, there are two major restrictions. First, the non-resident cannot claim unabsorbed depreciation under Section 32. Second, they cannot set off brought forward business losses under Section 72. These restrictions are designed to keep the scheme simple and straightforward.
Q6. From when is Section 44BBD applicable?
Ans. Section 44BBD will come into effect from 1st April 2026. This means it will be applicable from the Financial Year 2026-27 (Assessment Year 2027-28). Non-residents earning eligible income from that date onward can avail of this presumptive scheme.
Q7. Does opting for Section 44BBD exempt non-residents from filing income tax returns in India?
Ans. No, non-residents are still required to file income tax returns in India if their taxable income exceeds the basic exemption limit. However, under Section 44BBD, they can report 25% of their gross receipts as deemed income, thus simplifying the return filing process.

The Indian government has introduced several reforms over the years to boost ease of doing business and improve tax compliance. One of the latest initiatives in this direction is the introduction of Section 44BBD of Income Tax Act. This section has been introduced through the Finance Act, 2025 and will be effective from 1st April 2026, i.e., from the assessment year 2026-27. The purpose of Section 44BBD is to offer a presumptive taxation scheme specifically for non-residents who are engaged in providing services or technology related to electronics manufacturing in India. This move aims to make India a favorable destination for electronics manufacturing and to attract global participation in the sector.

What is Presumptive Taxation?

Presumptive taxation is a simplified method of income calculation where the taxpayer's income is presumed to be a fixed percentage of their gross receipts. Under this method, taxpayers are not required to maintain books of accounts or get their accounts audited. Instead, the income is calculated on a presumed basis, reducing both the compliance burden and administrative costs.

For example, if the presumptive rate is fixed at 25%, then 25% of the total gross receipts are treated as taxable income. This system is already available to small businesses and professionals under Sections 44AD, 44ADA, and 44AE of the Income Tax Act. With the introduction of Section 44BBD, this benefit is extended to non-residents providing services or technology in India for electronics manufacturing.

What is a Section 44BBD of Income Tax Act?

Section 44BBD of Income Tax Act is a newly inserted section aimed at non-residents who offer their expertise, services, or technology for electronics manufacturing in India. This includes services like setting up manufacturing units, providing technical support, consultancy, and supplying proprietary technologies.

This section provides a presumptive basis for calculating income of non-residents, where 25% of the total gross receipts will be considered as income chargeable to tax. This provision is expected to reduce the complexities faced by foreign service providers while ensuring that India remains attractive for technology collaborations.

Objective of Introducing Section 44BBD of Income Tax Act

The primary objective of introducing Section 44BBD is to promote India as a global hub for Electronics System Design and Manufacturing (ESDM). The government intends to attract foreign technology companies and experts who can provide high-quality services and solutions to Indian companies in the electronics sector.

This provision removes the ambiguity in determining taxable income for non-residents and promotes tax certainty. By simplifying taxation, the government aims to encourage more non-resident entities to participate in India's growing electronics manufacturing sector.

Who is Eligible Under Section 44BBD of Income Tax Act?

Section 44BBD applies only to non-residents who are engaged in providing services or technology for:

Setting up an electronics manufacturing facility in India; or
Providing services or technology in connection with the manufacturing or production of electronic goods, articles, or things in India.

How is Income Calculated Under Section 44BBD of Income Tax Act?

Under Section 44BBD, the presumptive income is calculated as 25% of the total gross receipts. The term "aggregate gross receipts" includes:

Amounts paid or payable to the non-resident directly by the resident company.
Amounts paid to any person on behalf of the non-resident.
Amounts received or deemed to be received by the non-resident.

Benefits of Section 44BBD for Non-Residents

Section 44BBD offers multiple benefits to eligible non-residents:

No need to maintain detailed books of accounts or undergo tax audits.
Reduces the risk of litigation and assessments.
Encourages non-residents to engage more confidently in India’s electronics manufacturing sector.
Many countries offer similar presumptive schemes for specific sectors.

Restrictions Under Section 44BBD of Income Tax Act

Though Section 44BBD provides a simplified taxation route, there are certain restrictions:

The non-resident opting for this scheme will not be allowed to claim unabsorbed depreciation under Section 32.
Brought forward business losses under Section 72 cannot be set off against the presumptive income.

Applicability of Section 44BBD of Income Tax Act

Section 44BBD will be applicable starting from the Financial Year 2026-27 (i.e., Assessment Year 2027-28). Therefore, any income received by non-residents on or after 1st April 2026 for providing eligible services or technology will be eligible for presumptive taxation under this section.

This prospective implementation provides ample time for stakeholders to understand the provisions, make necessary adjustments to contracts, and ensure they are in compliance with the notified scheme of the Ministry of Electronics and Information Technology.

Administrative Provisions and Compliance

Although Section 44BBD simplifies income calculation, certain compliances must still be adhered to. The non-resident must file their income tax return in India if their income exceeds the taxable limit. Further, they must ensure that all invoices and receipts are properly documented to support the gross receipts figure declared in the return.

It is also expected that the CBDT will notify rules and issue clarifications on the implementation of Section 44BBD, especially regarding the definition of eligible services, scope of technology, and format of documentation.

Impact on India's Electronics Manufacturing Sector

The introduction of Section 44BBD is expected to significantly boost the electronics manufacturing sector in India. With the ease of doing business increasing, more foreign companies are likely to collaborate with Indian manufacturers.

This will not only bring in advanced technology but also generate employment and foster innovation in the country. India aims to become a global leader in ESDM, and simplified tax regimes like Section 44BBD will be instrumental in achieving that goal.

Conclusion

Section 44BBD of Income Tax Act is a progressive step towards attracting foreign expertise in the electronics manufacturing sector. It offers a simple and effective way for non-residents to compute their taxable income without undergoing the traditional complexities of taxation. By offering presumptive taxation, the government has sent a clear message: India is open for business and is ready to work with global partners to strengthen its industrial base. For non-residents engaged in technology and service delivery to India’s electronics sector, this section opens new avenues of cooperation with tax clarity and reduced compliance burden.

As we approach FY 2026-27, it is important for non-resident taxpayers, legal advisors, and tax consultants to familiarize themselves with the provisions of Section 44BBD of Income Tax Act and ensure readiness for its implementation.

If you have any queries regarding Income Tax or need any assistance in filing ITR, connect with Compliance Calendar LLP Experts through mail at info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs

Q1. What is Section 44BBD of Income Tax Act?

Ans. Section 44BBD of Income Tax Act is a newly introduced provision that offers a presumptive taxation scheme for non-residents. It applies to those who provide services or technology to Indian companies involved in electronics manufacturing. Under this scheme, 25% of the gross receipts is deemed to be the taxable income, thereby simplifying tax compliance for non-residents.

Q2. Who is eligible to opt for presumptive taxation under Section 44BBD?

Ans. Only non-resident entities or individuals are eligible under Section 44BBD if they provide services or technology to a resident company that is operating under a scheme notified by the Ministry of Electronics and Information Technology (MeitY). The scheme must relate to setting up or operating an electronics manufacturing facility in India.

Q3. How is the presumptive income calculated under Section 44BBD?

Ans. The presumptive income is calculated as 25% of the aggregate gross receipts of the non-resident. These receipts include amounts received, receivable, or paid on their behalf by the Indian resident company in return for services or technology related to electronics manufacturing.

Q4. What is the benefit of opting for Section 44BBD of Income Tax Act?

Ans. The main benefit of opting for Section 44BBD is reduced compliance. Non-residents are not required to maintain detailed books of accounts or undergo tax audits. It also ensures tax certainty and minimizes the risk of litigation or assessment-related complications in India.

Q5. Are there any restrictions if one opts for the presumptive scheme under Section 44BBD?

Ans. Yes, there are two major restrictions. First, the non-resident cannot claim unabsorbed depreciation under Section 32. Second, they cannot set off brought forward business losses under Section 72. These restrictions are designed to keep the scheme simple and straightforward.

Q6. From when is Section 44BBD applicable?

Ans. Section 44BBD will come into effect from 1st April 2026. This means it will be applicable from the Financial Year 2026-27 (Assessment Year 2027-28). Non-residents earning eligible income from that date onward can avail of this presumptive scheme.

Q7. Does opting for Section 44BBD exempt non-residents from filing income tax returns in India?

Ans. No, non-residents are still required to file income tax returns in India if their taxable income exceeds the basic exemption limit. However, under Section 44BBD, they can report 25% of their gross receipts as deemed income, thus simplifying the return filing process.