The authorities suppose tank Niti Aayog on Friday (October 3, 2025) steered the introduction of a presumptive taxation scheme for foreign firms to offer certainty and ease.
The Aayog, in a working paper, stated the non-compulsory presumptive taxation scheme would assist in resolving disputes regarding PE (everlasting institution), simplifying compliance and defending income.
“The proposed presumptive taxation scheme is a proactive and pragmatic solution to a long-standing problem.
“It balances India’s sovereign proper to tax with the necessity to present certainty and ease to foreign investors,” the working paper stated.
The paper famous that regardless of India’s inherent attraction and noteworthy FDI development, structural impediments equivalent to ambiguous PE rules introduce tax uncertainty and dampen investments.
“Codify PE and attribution rules into home legislation, aligned with international norms, whereas avoiding retrospective amendments.
“…by adopting a presumptive taxation scheme, India can transform its tax regime from a ‘minefield’ into a ‘well-lit path’, significantly improving its standing in global business indices,” it stated.
The presumptive taxation scheme works to offer aid to taxpayers from the tedious work of sustaining common books of account underneath sure circumstances.
An organization opting for this scheme can declare revenue at a prescribed price; in lieu of that, it’s relieved from sustaining books of accounts for audit by tax authorities.
The paper emphasised that this daring reform would align tax coverage with the bigger financial imaginative and prescient.
It steered that the presumptive taxation scheme ought to have completely different deemed revenue charges for varied sectors.
“A foreign company can opt for certainty. However, it can also opt out and file a regular return if its actual profits are lower than the presumptive rate,” the working paper steered.
It additionally really helpful that tax authorities mustn’t individually litigate the existence of a PE for that exercise, offering a vital protected harbour.
The paper stated the federal government ought to practice tax officers to use guidelines constantly, significantly on advanced digital and cross-border instances, lowering subjectivity.