Residency Reclassification and Tax Implications for Foreign Companies : Clause 220 of the Income Tax Bill, 2025 Vs. Section 115JH of the Income Tax Act, 1961

Place of Effective Management residency reclassification brings foreign companies within domestic tax regime subject to notified transitional exceptions.

Clause 220 subjects foreign companies that become Indian residents under the Place of Effective Management test to the domestic tax code while allowing the Central Government, by notification, to prescribe exceptions, modifications and adaptations to computation of income, treatment of unabsorbed depreciation, carry forward and set off of losses, collection and anti-avoidance provisions; notifications may apply to succeeding years during assessment, benefits may be withdrawn for non-compliance with prescribed conditions with recomputation and a specified limitation period, and every notification must be laid before Parliament.