Quick Summary
The Draft Income-tax Rules, 2026 introduce significant clarity on how the income of non-residents will be determined when the exact amount accruing or arising in India cannot be precisely computed. Rule 9 provides the Assessing Officer (AO) with structured methods to calculate taxable income in such
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FAQ :
Rule 9 applies when the Assessing Officer believes that the actual income of a non-resident cannot be definitively ascertained, often due to income derived from assets, property, or business connections in India.
The Assessing Officer can use the Percentage of Turnover Method, the Proportionate Profit Method (based on global profits and Indian receipts), or any other suitable method deemed appropriate.
This method involves calculating income based on a reasonable percentage of the turnover that accrues or arises in India, similar to presumptive taxation.
Income is determined by calculating the proportion of Indian receipts to total global receipts and applying this ratio to the non-resident's total profits.
Non-resident businesses may face greater scrutiny of their Indian business connections, increased documentation requirements, and potential overlaps with transfer pricing rules.
Yes, Rule 9 reflects international practices where tax authorities estimate profits attributable to a jurisdiction when data is incomplete, especially relevant with digital economy taxation.
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