The Finance Bill 2025 introduces a new provision under Section 44BBD of the Income-tax Act, aimed at promoting India’s electronics manufacturing sector. This provision targets non-resident entities providing services or technology to resident companies setting up or operating electronics manufacturing facilities. The scheme will apply to companies involved in manufacturing or producing electronic goods in India. Under the new section, 25% of the aggregate amount received by the non-resident for these services will be deemed as their profits, subject to tax. This results in a tax liability of less than 10% on gross receipts. However, no set-off for unabsorbed depreciation or carried-forward losses will be allowed. The amendment is intended to ensure clarity and encourage investment in India’s electronics sector and will take effect from April 1, 2026, for the assessment year 2026-2027 and beyond.
Budget 2025: Scheme of presumptive taxation extended for non-resident providing services for electronics manufacturing facility
In order to position India as the global hub for Electronics System Design and Manufacturing, a comprehensive program for the development of semiconductors and display manufacturing ecosystem in India was approved by Government of India. Ministry of Electronics and Information Technology has notified Schemes for setting up of such facilities in India.
2. In this context, it has been represented that non-residents will be providing support in setting up of such electronics manufacturing facilities by deploying the technology and providing support services.
3. In order to ensure certainty and promotion of this industry, it is proposed to provide a presumptive taxation regime for non-residents engaged in the business of providing services or technology, to a resident company which are establishing or operating electronics manufacturing facility or a connected facility for manufacturing or producing electronic goods, article or thing in India, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology and satisfies such conditions as prescribed in the rules.
4. It is, therefore, proposed, to insert a new section 44BBD, which deems twenty-five per cent of the aggregate amount received/ receivable by, or paid/ payable to, the non-resident, on account of providing services or technology, as profits and gains of such non-resident from this business. This will result in an effective tax payable of less than 10% on gross receipts, by a non-resident company.
5. This amendment will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the assessment year 2026-27 and subsequent assessment years.
[Clause 11]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 11 of the Bill seeks to insert a new section 44BBD in the Income-tax Act relating to special provision for computing profits and gains of non-residents engaged in business of providing services or technology, for setting up an electronics manufacturing facility or in connection with manufacturing or production of electronic goods, article or thing in India.
Sub-section (1) of the proposed section seeks to provide that notwithstanding anything to the contrary contained in sections 28 to 43A, where an assessee, being a nonresident, engaged in the business of providing of services or technology in India, for the purposes of setting up an electronics manufacturing facility or in connection with manufacturing or production of electronic goods, article or thing in India,–
(a) to a resident company which is establishing or operating electronics manufacturing facility or a connected facility for manufacturing or production of electronic goods, article or thing in India, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology; and
(b) the resident company satisfies the conditions prescribed in this behalf,
a sum equal to 25% of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business of the non-resident assessee chargeable to tax under the head “Profits and gains of business or profession”.
Sub-section (2) of the proposed section seeks to provides that the amounts referred to in sub-section (1) shall be the following:––
(a) the amount paid or payable to the non-resident assessee or to any person on his behalf on account of providing services or technology; and
(b) the amount received or deemed to be received by the non-resident assessee or on behalf of non-resident assessee on account of providing services or technology.
Sub-section (3) of the proposed section seeks to provides that notwithstanding anything in sub-section (2) of section 32 and sub-section (1) of section 72, where a nonresident assessee declares profits and gains of business for any previous year under subsection (1), no set off of unabsorbed depreciation and brought forward loss shall be allowed to the assesse for such previous year.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
11. Insertion of new section 44BBD.
After section 44BBC of the Income-tax Act, the following section shall be inserted, with effect from the 1st April, 2026, namely:––
Special provision for computing profits and gains of nonresidents engaged in business of providing services or technology for setting up an electronics manufacturing facility or in connection with manufacturing or producing electronic goods, article or thing in India.
‘44BBD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, where an assessee, being a non-resident, engaged in the business of providing services or technology in India, for the purposes of setting up an electronics manufacturing facility or in connection with manufacturing or producing electronic goods, article or thing in India––
(a) to a resident company which is establishing or operating electronics manufacturing facility or a connected facility for manufacturing or producing electronic goods, article or thing in India, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology; and
(b) the resident company satisfies the conditions prescribed in this behalf, a sum equal to twenty-five per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business of the non-resident assessee chargeable to tax under the head “Profits and gains of business or profession”.
(2) The amounts referred to in sub-section (1) shall be the following: ––
(a) the amount paid or payable to the non-resident assessee or to any person on his behalf on account of providing services or technology; and
(b) the amount received or deemed to be received by the non-resident assessee or on behalf of non-resident assessee on account of providing services or technology.
(3) Notwithstanding anything in sub-section (2) of section 32 and sub-section (1) of section 72, where a nonresident assessee declares profits and gains of business for any previous year under sub-section (1), no set off of unabsorbed depreciation and brought forward loss shall be allowed to the assessee for such previous year.’.
