India: Government tax policy group recommends presumptive taxation regime for foreign taxpayers to mitigate disputes regarding PE and profit attribution

The tax policy group of the government’s public policy think tank NITI Aayog on October 3, 2025, released a paper titled “Enhancing Certainty, Transparency, and Uniformity in Permanent Establishment and Profit Attribution for Foreign Investors in India,” discussing how evolving views on permanent establishment (PE), challenges in profit attribution, and the impact on past years' taxation, may deter investment. Accordingly, the group recommends the introduction of an optional industry-specific presumptive taxation scheme for foreign taxpayers.

• The proposed presumptive taxation scheme would allow foreign taxpayers to pay tax on India-sourced gross receipts at prescribed industry-specific profit rates, avoiding disputes over PE status and profit attribution. Alternatively, they could opt out and file returns using audited financials if their actual India-related profits are lower.
• The paper proposes deemed profit rates for various sectors such as 10% for infrastructure, engineering procurement and construction (EPC) contracts, and engineering and oilfield services; 30% for digital and electronic commerce (e-commerce); 20% for consultancy services; and 15% for marketing and distribution support.

Read an October 2025 report prepared by the KPMG member firm in India