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Introduction of disclosure requirement related to Significant Economic Presence “SEP” in “ITR”

October 16, 2022

For Non-resident any Income accrues or arise from business connection in India is taxable in India. Business connection develop on carrying of business operations by Non-Resident in India through fixed establishment, physical presence of its employees or agent etc.

Due to technology revolution any entity can carry out its business at any location without its physical presence through digital platform. To bring such Non-resident under the ambit of Indian Tax law the concept of Significant Economic presence was introduced in Finance Act,2018.

The significant economic presence of Non-Resident “NR” shall constitute if the Non-Resident having the transactions exceeds the following thresholds:

  1. Limit of revenue exceeding INR 2 crores for transactions in respect of any goods, services or property with any person in India including provision of download of data or software in India, or
  2. Where the “NR” is engaged in soliciting of business activities or engaging in interaction with users in India and number of User exceeds 3 Lakh.

      A new disclosure requirement has been introduced in terms of providing information for Significant Economic Presence of NR in India for determining business connection in India. The “NR”is required to input data mentioning (a) The amount of transactions executed as aforesaid, and (b) number of users with whom the NR interacted for business activities.

Last updated: 17/10/2022

Article contributed by:

Nitin Sahni

Associate Director - Taxation Advisory & Compliance Services

MBG Corporate Services

 


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