3 min readNew DelhiFeb 3, 2025 10:20 PM IST
First published on: Feb 2, 2025 at 04:40 AM IST
In her budget speech Saturday, Finance Minister Nirmala Sitharaman announced a new presumptive taxation regime for non-residents providing services in India’s electronics manufacturing sector that experts said could significantly slash the tax burden on their income in India.
The move could give a fillip to foreign technicians and entities working in the electronics sector in India, and help the country’s aspirations of becoming a semiconductor manufacturing base. As companies move to set up manufacturing operations in the country, including in sectors like chips, it would require foreign companies and their technicians to stay in India for a prolonged period in order to install and run capital goods, like machinery.
“…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. 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 is establishing or operating electronics manufacturing facility…” the memorandum to the Union Budget 2025-26 stated.
It is proposed that a new section — 44BBD — in the Income Tax Act, which deems 25 per cent of the aggregate amount received on account of providing such services will result in an effective tax payable of less than 10 per cent on gross receipts, by a non-resident company. This amendment will take effect from the first day of April, 2026, and shall accordingly, apply in relation to the assessment year 2026-27 and subsequent assessment years
Sandeep Sehgal, partner, tax, AKM Global, a tax and consulting firm, said, “25 per cent of their revenue from their manufacturing facility in India shall be considered as income and shall be taxed at 35 per cent. Hence, their effective tax rate will be less than 10 per cent. This measure may serve as a significant boost for the industry, helping bring technology and qualified support to India.”
The Finance Minister has also proposed an amendment to a provision under Section 9 of the Income Tax Act so that the transactions or activities of a non-resident in India that are confined to the purchase of goods in India for the purpose of export shall not constitute significant economic presence of such non-resident in India.
Dwaraknath E N , Partner, Price Waterhouse & Co LLP, said: “…the proposal to exclude activities that are confined to the purchase of goods for purposes of export from the definition of ‘significant economic presence’ is also a step toward greater certainty for non-residents.”
The move could aid India's aspirations of becoming a semiconductor manufacturing base. (Reuters/File) 
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