SECTION 44DA OF INCOME TAX ACT – INCOME BY WAY OF ROYALTIES AND FEES FOR TECHNICAL SERVICES IN CASE OF NON-RESIDENTS
Section 44DA of Income Tax Act contains provision for taxation of royalty and Fee for Technical Services when such income is connected with Permanent Establishment of non-resident in India . Section 44DA of Income Tax Act is explained in detail as under : –
- ELIGIBLE ASSESSEE :
- Section 44DA, provides method of computation of “income by way of royalty or fees for technical services”when : –
- CONDITIONS : –
- Royalty or FTS arises from the agreement made by the non-resident with the Indian company or Government of India after 31.03.2003.
- Such non-resident carries on business in India through permanent establishment or profession in India through fixed base.
- The right, property or contract in respect of which the royalty or fees for technical services are paid is effectively connected with such permanent establishment or fixed base.
2. Expenses not allowed as deduction under Section 44DA :
While computing income under Section 44DA under Income Tax Act, following expenses are not allowed as deduction:
- Any expenditure or allowance which is not wholly and exclusively incurred for such permanent establishment or fixed place of service in India
- Any amount paid (otherwise than Reimbursement of actual expenses) by the permanent establishment to head office or to any of its other offices.
3. NON-APPLICABILITY OF SECTION 44BB : –
Non-resident cannot opt for presumptive taxation provision under Section 44BB of Income Tax Act, in relation to income from royalty or fees for technical services, for providing services in connection with extraction or production of oil, etc.
4. REQUIREMENT TO MAINTAIN BOOKS OF ACCOUNT AND GET THEM AUDITED : –
The non-resident is mandatorily required to keep and maintain the books of account under section 44AA, and get them audited and furnish a report of such audit under Section 44AB.