The Finance Bill, 2025 introduces Section 44BBD, a presumptive taxation scheme aimed at non-resident companies assisting with the setup or support of electronics manufacturing facilities in India. The key provisions are as follows:

1. Taxable Profits for Non-Residents

• 25% of earnings from services or technology provided for electronics manufacturing in India will be deemed as taxable profits.

2. Presumptive Taxation Rate

• The income will be taxed at 8.75%, calculated as 25% of 35%, leading to a 6.25% tax saving compared to existing tax treaty provisions.

3. Previous Tax Treatment

• Previously, income earned by non-residents for such services was taxed as royalty or fees for technical services, with applicable rates under tax treaties (e.g., the India–USA treaty rate of 15%).

4. Objective of the New Scheme

• This scheme aims to reduce the tax burden and facilitate foreign participation in India’s growing electronics manufacturing sector.

5. Scope of Taxation

• The taxation applies to:
  • Amounts paid or payable to the non-resident.
  • Amounts received by the non-resident for services or technology provided.

6. Restrictions on Deductions

• Non-residents opting for this scheme will not be allowed to:
  • Carry forward unabsorbed depreciation (under Section 32).
  • Set off brought forward losses (under Section 72).

7. Implementation Timeline

• The new rule will take effect from April 1, 2026 and apply from Assessment Year 2026-27 onwards.

8. Simplified Taxation to Encourage Foreign Investment

• The scheme simplifies the tax process and encourages more non-residents to contribute to India’s electronics manufacturing ecosystem.