Digital Tax Threshold fixed at 2 Crores and 3 Lakh Users: CBDT Amends Rules relating to Indirect Transfer Provisions [Read Notification]

Digital Tax Threshold fixed at 2 Crores and 3 Lakh Users: CBDT Amends Rules relating to Indirect Transfer Provisions [Read Notification]

Digital Tax Threshold- CBDT Amends Rules - Indirect Transfer Provisions - Taxscan

The Central Board of Direct Taxes (CBDT), on Monday notified that the threshold for digital tax would be two crores and a limit of 300,000 users for non-resident technology firms.

A notification issued by the Boardon Monday inserted a new provision, Rule 11UD to the Income Tax Rules where a threshold has been fixed for the purposes of significant economic presence in order toapply the provisions.

As per Rule 11UD, “For the purposes of clause(a) of Explanation 2A to clause (i) of sub-section (1) of section 9, the amount of aggregate of paymentsarising from transaction or transactions in respect of any goods, services or property carried out by a nonresidentwith any person in India, including provision of download of data or software in India during theprevious year, shall be two crore rupees,” the notification said.

It further stated that “for the purposes of clause (b) of Explanation 2A to clause (i) of sub-section (1) of section 9, the numberof users with whom systematic and continuous business activities are solicited or who are engaged ininteraction shall be three lakhs.”

The provisions relating to indirect transfer has been introduced by the Government after the Vodafone case where a huge amount of tax have been allegedly evaded by the Company during its acquisition of Indian shares.

After the controversy, the Board in the year 2016, released the rules for determination of the fair market value (FMV) of assets (tangible or intangible) and the income attributable to assets located in India for the purpose of taxation of indirect transfer of assets under section 9(1)(i) of the Income-tax Act, 1961 (the Act).

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