Computing income by way of royalties, etc., in case of non-residents - Clause 59 of the Income Tax Bill, 2025 vs. Section 44DA of the Income Tax Act, 1961

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....ess or profession." The provision is particularly relevant in the context of increasing globalization and cross-border transactions involving intellectual property and technical services. This article will provide a comprehensive analysis of Clause 59 and compare it with the existing Section 44DA of the Income Tax Act, 1961, which deals with similar issues. Objective and Purpose The primary objective of Clause 59 is to ensure that income in the form of royalties and fees for technical services, received by non-residents from Indian sources, is taxed appropriately under the head of business profits. The provision aims to prevent tax avoidance by ensuring that such income is connected with a permanent establishment or a fixed place of profe....

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....ied assessee" as a non-resident (not being a company) or a foreign company, whereas Section 44DA applies to non-residents and foreign companies without this explicit definition. Conditions for Taxation: Both provisions require that the income be received from the Government or an Indian concern and that it be effectively connected with a permanent establishment or fixed place of profession in India. The conditions outlined in Clause 59 are similar to those in Section 44DA, indicating a continuity in the legislative approach. Deductions and Allowances: Both Clause 59 and Section 44DA disallow deductions for expenses not wholly and exclusively incurred for the business of the permanent establishment or fixed place of profession in India. ....