Section 59 — Computation of royalty and fee for technical services in hands of non-residents
Old Act equivalent: Section 44DA of IT Act 1961 Sub-part: D.—Profits and gains of business or profession
Statutory Text
-
(1) Income in the nature of royalty or fees for technical services received
by a specified assessee during a tax year, shall be computed under the
head “Profits and gains of business or profession” under this Act, if the following conditions are satisfied:—
(a) income is received from the Government or an Indian concern;
(b) income is in pursuance to an agreement made by the specified assessee with the Government or the Indian concern;
(c) the specified assessee carries on business in India through a permanent establishment, or performs professional services from a fixed place of profession, situated in India; and
(d) the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession. (2) No deduction shall be allowed against the income computed under sub-section (1) in respect of the following amounts:—
- Omitted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its omission, sub-clause (i) read as under :
“(i) has not claimed any deduction under section 144;”
(a) any expenditure or allowance which is not wholly and exclusively incurred for the business of such permanent establishment or fixed place of profession in India; or
(b) amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to its head office or to any of its other offices. (3) The provisions of section 61 in so far as it relates to business referred to in section 61(2) (Table: Sl. No. 5), shall not apply in respect of the income referred to in this section. (4) The specified assessee shall keep and maintain books of account and other documents as per the provisions of section 62, get his accounts audited on or before the specified date referred to in section 63 by an accountant, and furnish report of audit in the prescribed form, duly signed and verified by the accountant. (5) For the purposes of this section, the expression “specified assessee” means a non-resident (not being a company) or a foreign company. Deduction of head office expenditure in case of non-residents.
Sub-sections
Sub-section (1)
-
(1) Income in the nature of royalty or fees for technical services received
by a specified assessee during a tax year, shall be computed under the
head “Profits and gains of business or profession” under this Act, if the following conditions are satisfied:—
(a) income is received from the Government or an Indian concern;
(b) income is in pursuance to an agreement made by the specified assessee with the Government or the Indian concern;
(c) the specified assessee carries on business in India through a permanent establishment, or performs professional services from a fixed place of profession, situated in India; and
(d) the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession.
Sub-section (2)
(2) No deduction shall be allowed against the income computed under sub-section (1) in respect of the following amounts:—
- Omitted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its omission, sub-clause (i) read as under :
“(i) has not claimed any deduction under section 144;”
(a) any expenditure or allowance which is not wholly and exclusively incurred for the business of such permanent establishment or fixed place of profession in India; or
(b) amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to its head office or to any of its other offices.
Sub-section (3)
(3) The provisions of section 61 in so far as it relates to business referred to in section 61(2) (Table: Sl. No. 5), shall not apply in respect of the income referred to in this section.
Sub-section (4)
(4) The specified assessee shall keep and maintain books of account and other documents as per the provisions of section 62, get his accounts audited on or before the specified date referred to in section 63 by an accountant, and furnish report of audit in the prescribed form, duly signed and verified by the accountant.
Sub-section (5)
(5) For the purposes of this section, the expression “specified assessee” means a non-resident (not being a company) or a foreign company. Deduction of head office expenditure in case of non-residents.
Provisos
None.
Explanations
None.
Tables
Table present in statutory text above — refer to Statutory Text section.
Key Structure
- Applies to: Non-resident (not being a company) and foreign companies receiving royalty or FTS.
- Scope: Income by way of royalty or fee for technical services from Government or Indian concern, computed on receipt or accrual basis.
- Conditions: Must maintain books of account; must get accounts audited.
- Key rule: Specified assessee means non-resident (not company) or foreign company.
Cross-References
- Section 61 - Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents
- Section 62 - Maintenance of books of account
- Section 63 - Tax audit
- Section 144
Amendment Notes
None noted from the extracted pages.