Foreign company said to be resident in India
[Section-220 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 220(1) of Income Tax Act 2025
220(1) Where a foreign company is said to be a resident in India in any tax year and such company has not been a resident in India in earlier tax years, then, irrespective of anything in this Act and subject to the conditions as notified by the Central Government in this behalf, the provisions of this Act relating to—
- (a) the computation of total income;
- (b) treatment of unabsorbed depreciation;
- (c) set off or carry forward and set off of losses;
- (d) collection and recovery; and
- (e) special provisions relating to avoidance of tax,
shall apply with such exceptions, modifications and adaptations as specified in that notification for such tax years;
Section 220(2) of Income Tax Act 2025
220(2) Where the determination regarding foreign company to be resident in India has been made in the assessment proceedings for any tax year, then, the provisions of sub-section (1) shall also apply to any other tax year succeeding such tax year, which ends on or before the date of completion of such assessment proceeding.
Section 220(3) of Income Tax Act 2025
220(3) Where, in a tax year, any benefit, exemption or relief has been claimed and granted to the foreign company as per the provisions of sub-section (1), and, subsequently, there is failure to comply with any of the conditions specified in the notification issued under the said sub-section, then,—
- (a) such benefit, exemption or relief shall be deemed to have been wrongly allowed;
- (b) the Assessing Officer may, irrespective of anything in this Act, re-compute the total income of the assessee for the said tax year and make the necessary amendment as if the exceptions, modifications and adaptation referred to in sub-section (1) did not apply; and
- (c) the provisions of section 287 shall, so far as may be, apply thereto and the period of four years specified in sub-section (8) of that section being reckoned from the end of the tax year in which the failure to comply with the condition referred to in sub-section (1) takes place.
Section 220(4) of Income Tax Act 2025
220(4) Every notification issued under this section shall be laid before each House of Parliament.
FAQs on Section 220 of Income Tax Act 2025
When is a foreign company considered a resident in India under Section 220?
A foreign company is considered resident in India in a tax year if it meets the criteria prescribed by the Central Government. If it was not a resident in previous tax years, special provisions apply from the year it becomes resident.
What happens when a foreign company becomes a resident for the first time?
If a foreign company is resident in a tax year for the first time, provisions related to total income computation, unabsorbed depreciation, set-off or carry forward of losses, collection and recovery, and anti-tax avoidance rules apply with specific exceptions, modifications, or adaptations as notified.
Who prescribes the conditions for the application of provisions to such foreign companies?
The Central Government issues notifications specifying conditions and necessary exceptions or adaptations for applying provisions of the Act to such foreign companies.
What does the notification issued under Section 220 affect?
It affects how certain provisions of the Act are applied to the foreign company for relevant tax years, with exceptions or modifications outlined in the notification.
What is the effect if the residency determination is made during assessment proceedings?
If it is determined during assessment proceedings that a foreign company is resident in a tax year, the same provisions apply to subsequent tax years that end before the completion of such proceedings.
Does the special treatment under Section 220 continue indefinitely?
No, the treatment continues only for those tax years ending before the completion of the assessment in which residency is determined.
What if the foreign company fails to meet conditions of the notification after getting benefits?
Any benefit, exemption, or relief granted under Section 220(1) is deemed to have been wrongly allowed, and the Assessing Officer can recompute the total income ignoring the exceptions or adaptations previously applied.
How is the recomputation done in case of non-compliance?
The Assessing Officer may recompute the income as if the exceptions, modifications, or adaptations did not apply and make necessary amendments.
Is there a time limit for the Assessing Officer to make such amendments?
Yes, under Section 220(3)(c), the reassessment can be made within four years from the end of the tax year in which the company failed to comply with the conditions of the notification.
What happens to notifications issued under Section 220?
Every notification issued under this section must be laid before each House of Parliament.
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