Section 44D of Income Tax Act for AY 2023-24

Section 44D of Income Tax Act 1961 amended by Finance Act and IT Rules. Computing income by way of royalties in case of foreign companies.

Amended and updated notes on section 44D of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to special provisions for computing income by way of royalties, etc., in the case of foreign companies.

Chapter IV (Sections 14 to 59) of the Income Tax Act 1961 deals with the provisions related to computation of total income. Section 44D of IT Act 1961-2022 provides for special provisions for computing income by way of royalties, etc., in the case of foreign companies.

Recently, we have discussed in detail section 44C (deduction of head office expenditure in the case of non-residents) of IT Act 1961. Today, we learn the provisions of section 44D of Income-tax Act 1961. The amended provision of section 44D is effective for financial year 2022-23 relevant to the assessment year 2023-24.

In this article, you will learn detail of the provisions of section 44D of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.

Section-44D: Special provisions for computing income by way of royalties in the case of foreign companies

Notwithstanding anything to the contrary contained in sections 28 to 44C, in the case of an assessee, being a foreign company,—

(a) the deductions admissible under the said sections in computing the income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or with the Indian concern before the 1st day of April, 1976, shall not exceed in the aggregate twenty per cent of the gross amount of such royalty or fees as reduced by so much of the gross amount of such royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property;

(b) no deduction in respect of any expenditure or allowance shall be allowed under any of the said sections in computing the income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or with the Indian concern after the 31st day of March, 1976 but before the 1st day of April, 2003;

(c) – (d) [Omitted]

Explanation: For the purposes of this section,—

  • (a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
  • (b) “foreign company” shall have the same meaning as in section 80B;
  • (c) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
  • (d) royalty received from Government or an Indian concern in pursuance of an agreement made by a foreign company with Government or with the Indian concern after the 31st day of March, 1976, shall be deemed to have been received in pursuance of an agreement made before the 1st day of April, 1976, if such agreement is deemed, for the purposes of the proviso to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 1976.


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