Rule 13 of the Draft Income-tax Rules, 2026 prescribes thresholds for determining significant economic presence under section 9(8)(d). A non-resident will meet the transaction-based threshold if aggregate payments from transactions with any person in India for goods, services, property, or download of data or software during a tax year amount to ₹2 crore. Additionally, a user-based threshold is triggered if systematic and continuous business activities are solicited from, or interaction is carried out with, three lakh users in India.
Rule 14 lays down the method for computing expenditure relating to income not includible in total income. Such expenditure includes direct expenses attributable to exempt income and an additional amount equal to 1% of the annual average of monthly averages of opening and closing investment balances yielding exempt income. However, the total disallowance cannot exceed the total expenditure claimed by the assessee.
Extract of Rule No. 13 and 14 of Draft Income-tax Rules, 2026
Rule 13
Threshold for the purposes of significant economic presence.
(1) For the purposes of section 9(8)(d)(i) the aggregate amount of payments from transactions carried out by a non-resident with any person in India, in respect of any goods, service or property including provision of download of data or software in India during the tax year, shall be two crore rupees.
(2) For the purposes of section 9(8)(d)(ii), the number of users with whom systematic and continuous business activities are solicited or who are engaged in interaction shall be three lakhs.
Rule 14
Method for determining amount of expenditure in relation to income not includible in total income.
(1) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:-
a) the amount of expenditure directly relating to income which does not form part of total income; and
b) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income.
(2) The amount referred to in sub-rule (1)(a) and (b) shall not exceed the total expenditure claimed by the assessee.
