New Delhi: India is preparing a major revamp of its long‑pending tax framework for multinational corporations (MNCs) with India‑linked business. This is aimed at offering greater certainty while safeguarding its taxing rights.
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The proposed changes will focus on permanent establishment (PE) definitions and a clearer formula for profit attribution, especially for digital and technology companies with significant economic presence, but limited on‑ground operations.
A3ccording to finance ministry officials, the Central Board of Direct Taxes (CBDT) is scrutinising its expert committee recommendations to move towards a more rules‑based PE regime. This may define when non‑resident enterprises, including global capability centres (GCCs) and data centres, constitute a taxable presence in India, even if their key functions or servers are located overseas.
The framework under discussion includes formula‑based profit attribution to reduce disputes over how much income should be booked in India where sales, users or data are here, but core operations are elsewhere. Officials say the aim is to expand the tax base without repeated, long‑drawn litigation that has hit MNC assessments for over a decade.
Digital platforms, cloud service providers, online marketplaces and tech majors are likely to be among the most affected. GCCs and back‑office operations that service global groups from India but book profits abroad have also faced tax notices due to ambiguity around PE thresholds.
Official indicated that any revamped structure would likely be in line with India’s “significant economic presence” concept introduced earlier which was not fully operationalised, and may be brought in to avoid disruption.
While no final date has been announced, the proposals are expected to be reflected in the upcoming Union budget cycle or via subsequent Finance Bill amendments once internal consultations are completed. The move is seen as part of a broader push to make India a more predictable destination for global investment while retaining policy space in a fragmenting international tax landscape.
