Section 44BBD applies to a non-resident engaged in the business of providing services or technology in India for setting up an electronics manufacturing facility, or in connection with manufacturing or producing electronic goods, article or thing in India. The services or technology must be provided to a resident company that is establishing or operating an electronics manufacturing facility, or a connected facility, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology, and that company must satisfy prescribed conditions.
Overriding ss. 28 to 43A, a sum equal to twenty-five per cent of the aggregate of the amounts paid or payable to the non-resident (or a person on its behalf), and received or deemed to be received by it or on its behalf, on account of providing the services or technology, is deemed to be its business profits.
Operative consequences
Sections 44DA and 115A do not apply to these amounts (proviso to sub-section (2)).
Where profits are declared under sub-section (1), unabsorbed depreciation and brought-forward loss cannot be set off for that year (sub-section (3)).
The computation applies only where the resident company meets both the notified-scheme test and the prescribed conditions.
Status
The section is operative for AY 2026-27, which is its only year under the 1961 Act. The Act’s note reads: “Following section 44BBD shall be inserted after section 44BBC by the Finance Act, 2025, w.e.f. 1-4-2026”. The Finance Act, 2026 does not amend this section.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the 2025 Act provision is s. 61 (Table: Sl. No. 6).
Case Laws & Commentary
SECTION 44BBD — Special provision for computing profits and gains of business of providing services or technology to a person in the business of electronics manufacturing in India
Important Case Laws — 1961 Treatise (FA 2026)
Provision in brief: Inserted by FA 2025 w.e.f. AY 2026-27. For a non-resident engaged in the business of providing services or technology in India, for setting up an electronics manufacturing facility or in connection with manufacturing or producing electronic goods, article or thing in India, to a resident company establishing or operating such a facility under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology (and satisfying prescribed conditions) — deemed PGBP at 25% of the amounts paid or payable, or received or deemed to be received, on account of such services or technology. Sections 44DA and 115A do not apply to those amounts. Designed to facilitate technology transfer for India's semiconductor / electronics manufacturing push (PLI scheme, SPECS).
Section 44BBD was inserted by FA 2025 to support India's electronics manufacturing push (PLI scheme, SPECS, semiconductor mission). For NON-RESIDENT providing services or technology — including pre-launch / commissioning support — to a RESIDENT COMPANY establishing or operating an electronics manufacturing facility under a scheme notified by the Ministry of Electronics and Information Technology — deemed PGBP at 25% of amount received / receivable on account of such services / technology.
Higher 25% rate — rationale
The 25% rate is higher than s. 44BB / 44BBA / 44BBB (5%-10%), reflecting the high-margin nature of technology / IP services. The proviso to s. 44BBD(2) provides that s. 44DA (net-basis) and s. 115A (gross-basis FTS / royalty taxation) shall not apply to the amounts covered. Likely uptake from foreign tech partners with chip-design / fab know-how / EPC for electronics fabs.
Likely interpretive issues
(i) Scope of 'services or technology' — will include IP licensing? Pure royalty? Pure FTS? The FA 2025 memorandum suggests bundled-receipt inclusion. (ii) 'Engaged in manufacturing / producing' — definitional question for resident downstream. (iii) Boundary with s. 44DA where PE exists. (iv) The notified MeitY scheme and the conditions prescribed for the resident company. Awaiting first-year disputes.
Likely guiding principles
Analogous principles from ONGC Ltd. (s. 44BB scope) likely apply — services 'in connection with electronics manufacturing in India' fall within s. 44BBD even if FTS character exists. Bundled IP + services + pre-commissioning support likely qualifies as integrated transaction.
CA practitioners — strategic
(i) For Indian semiconductor / display / EV-battery clients, identify foreign tech partners and structure contracts to be s. 44BBD-eligible. (ii) For foreign tech providers, where s. 44BBD applies, s. 115A and s. 44DA do not apply to the same amounts (proviso to s. 44BBD(2)). (iii) DTAA route remains parallelly available. (iv) Awaiting CBDT notification / FAQ for definitional clarity. (v) Section may become significant for India's growing semiconductor ecosystem.
FA 2026 impact: No FA 2026 amendment to s. 44BBD. FA 2025 had introduced this section.
Leading Decisions
1. Oil & Natural Gas Corpn. Ltd. v. CIT (analogous principles)
Citation: (2015) 376 ITR 306 (SC)
Forum: Supreme Court of India
Facts & Issue: Pre-s. 44BBD: principles on 'in connection with' tests for s. 44BB likely to apply to s. 44BBD.
Held / Ratio: Held (under s. 44BB above) that services 'in connection with' the specified activity fall within the special section. Likely to apply to s. 44BBD — services 'in connection with electronics manufacturing in India'.
Section relevance: Likely guiding principle for s. 44BBD scope.
Function in the statutory architecture
Section 44BBD applies to a non-resident engaged in the business of providing services or technology in India for setting up an electronics manufacturing facility, or in connection with manufacturing or producing electronic goods, article or thing in India. The services or technology must be provided to a resident company that is establishing or operating an electronics manufacturing facility, or a connected facility, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology, and that company must satisfy prescribed conditions.
Overriding ss. 28 to 43A, a sum equal to twenty-five per cent of the aggregate of the amounts paid or payable to the non-resident (or a person on its behalf), and received or deemed to be received by it or on its behalf, on account of providing the services or technology, is deemed to be its business profits.
Operative consequences
Status
The section is operative for AY 2026-27, which is its only year under the 1961 Act. The Act’s note reads: “Following section 44BBD shall be inserted after section 44BBC by the Finance Act, 2025, w.e.f. 1-4-2026”. The Finance Act, 2026 does not amend this section.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the 2025 Act provision is s. 61 (Table: Sl. No. 6).
Case Laws & Commentary
SECTION 44BBD — Special provision for computing profits and gains of business of providing services or technology to a person in the business of electronics manufacturing in India
Important Case Laws — 1961 Treatise (FA 2026)
Provision in brief: Inserted by FA 2025 w.e.f. AY 2026-27. For a non-resident engaged in the business of providing services or technology in India, for setting up an electronics manufacturing facility or in connection with manufacturing or producing electronic goods, article or thing in India, to a resident company establishing or operating such a facility under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology (and satisfying prescribed conditions) — deemed PGBP at 25% of the amounts paid or payable, or received or deemed to be received, on account of such services or technology. Sections 44DA and 115A do not apply to those amounts. Designed to facilitate technology transfer for India's semiconductor / electronics manufacturing push (PLI scheme, SPECS).
Section Commentary
Newly-inserted electronics manufacturing regime (FA 2025)
Section 44BBD was inserted by FA 2025 to support India's electronics manufacturing push (PLI scheme, SPECS, semiconductor mission). For NON-RESIDENT providing services or technology — including pre-launch / commissioning support — to a RESIDENT COMPANY establishing or operating an electronics manufacturing facility under a scheme notified by the Ministry of Electronics and Information Technology — deemed PGBP at 25% of amount received / receivable on account of such services / technology.
Higher 25% rate — rationale
The 25% rate is higher than s. 44BB / 44BBA / 44BBB (5%-10%), reflecting the high-margin nature of technology / IP services. The proviso to s. 44BBD(2) provides that s. 44DA (net-basis) and s. 115A (gross-basis FTS / royalty taxation) shall not apply to the amounts covered. Likely uptake from foreign tech partners with chip-design / fab know-how / EPC for electronics fabs.
Likely interpretive issues
(i) Scope of 'services or technology' — will include IP licensing? Pure royalty? Pure FTS? The FA 2025 memorandum suggests bundled-receipt inclusion. (ii) 'Engaged in manufacturing / producing' — definitional question for resident downstream. (iii) Boundary with s. 44DA where PE exists. (iv) The notified MeitY scheme and the conditions prescribed for the resident company. Awaiting first-year disputes.
Likely guiding principles
Analogous principles from ONGC Ltd. (s. 44BB scope) likely apply — services 'in connection with electronics manufacturing in India' fall within s. 44BBD even if FTS character exists. Bundled IP + services + pre-commissioning support likely qualifies as integrated transaction.
CA practitioners — strategic
(i) For Indian semiconductor / display / EV-battery clients, identify foreign tech partners and structure contracts to be s. 44BBD-eligible. (ii) For foreign tech providers, where s. 44BBD applies, s. 115A and s. 44DA do not apply to the same amounts (proviso to s. 44BBD(2)). (iii) DTAA route remains parallelly available. (iv) Awaiting CBDT notification / FAQ for definitional clarity. (v) Section may become significant for India's growing semiconductor ecosystem.
FA 2026 impact: No FA 2026 amendment to s. 44BBD. FA 2025 had introduced this section.
Leading Decisions
1. Oil & Natural Gas Corpn. Ltd. v. CIT (analogous principles)
Citation: (2015) 376 ITR 306 (SC)
Forum: Supreme Court of India
Facts & Issue: Pre-s. 44BBD: principles on 'in connection with' tests for s. 44BB likely to apply to s. 44BBD.
Held / Ratio: Held (under s. 44BB above) that services 'in connection with' the specified activity fall within the special section. Likely to apply to s. 44BBD — services 'in connection with electronics manufacturing in India'.
Section relevance: Likely guiding principle for s. 44BBD scope.
— End of Section 44BBD Case-Law Note —