As part of the Significant Economic Presence (SEP) principle, the Central Board of Direct Taxes (CBDT) has notified a revenue threshold for non-resident firms to pay tax in India under new or revised bilateral tax pacts. As per the notification, any non-resident whose revenue exceeds INR 2 crore for transactions in respect of goods, services or property, including transactions on download of data or software, with any person in India. The threshold for entities that systematically and continuously do business with users in India has been set at 300,000 users. Once an overseas entity hits either of these thresholds, it will be considered an entity that has a business presence in India.
Only entities belonging to non-treaty jurisdictions will be impacted by the SEP provisions. Enterprises belonging to countries with which India has entered into Double Taxation Avoidance Agreements will be excluded. The notification will come into effect from 01 April, 2021