Section 60 — Head Office Expenditure Cap for Non-Residents | ITA 2025

Section 60 — HEAD OFFICE EXPENDITURE — CAP FOR NON-RESIDENTS

Section 60 is the substantive equivalent of 1961 s. 44C. It caps the deduction of HO-expenditure (executive / administrative / general overheads incurred by NR's HO outside India) attributable to India business / profession at 5% of 'adjusted total income' or actual HO-expenditure-attributable to India, whichever is lower. The provision is non-obstante to ss. 26-54 to the extent of the cap.

Statutory text — Income-tax Act, 2025

Marginal note — Deduction of head office expenditure in case of non-residents

(1) Irrespective of anything to the contrary contained in sections 26 to 54, in the case of a non-resident assessee, deduction of head office expenditure incurred by such assessee as is attributable to his business or profession in India, shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession” subject to provisions of sub-section (2).

(2) The deduction allowable under sub-section (1) shall be restricted—

(a) if the adjusted total income of the assessee is a loss, to an upper monetary limit of 5% of the average adjusted total income of the assessee; or

(b) in any other case, to an upper monetary limit of 5% of the adjusted total income of the assessee.

(3) For the purposes of this section,—

(a) “adjusted total income” means the total income computed under this Act, without giving effect to the allowance referred to in this section or in section 33(11) or the deduction referred to in section 32(i)(A) or any loss carried forward under section 111(1) or 112(1) or 113(2) or 115(2) or the deductions under Chapter VIII;

(b) “average adjusted total income” means,—

(i) if the assessee is assessable for each of the three tax years imme- diately preceding the relevant tax year, the arithmetic mean of his adjusted total income over those three tax years;

(ii) if the assessee is assessable only for two of the said three tax years, the arithmetic mean of his adjusted total income over those two tax years;

(iii) if the assessee is assessable only for one of the said three tax years, his adjusted total income for that tax year;

(c) “head office expenditure” means executive and general administration expenditure incurred by the assessee outside India, including expendi- ture incurred in respect of—

(i) rent, rates, taxes, repairs or insurance of any premises outside India used for the business or profession;

(ii) salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or profits in lieu of, or in addition to, salary, whether paid or allowed to any employee or other person employed in, or managing the affairs of, any office outside India;

(iii) travelling by any employee or other person employed in, or man- aging the affairs of, any office outside India; and

(iv) such other matters connected with executive and general admin- istration, as may be prescribed. Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 60	INCOME-TAX ACT, 1961 — s. 44C
5% cap on HO expenditure attributable to India	1961 s. 44C(1) — same formula
'Head office expenditure' definition — executive / general overheads	1961 s. 44C Explanation (iv)
'Adjusted total income' — pre-HO computation	1961 s. 44C Explanation (ii)
Audit certification (Form 3CD / 3CE)	1961 s. 44C(2) read with Rules

STATUTORY ARCHITECTURE

Sub-section (1) is the cap mechanism: HO-expenditure attributable to India is allowed only up to the 5%-cap of adjusted total income (or actual, whichever lower). 'Adjusted total income' is total income BEFORE: (a) HO-expenditure deduction itself; (b) depreciation u/s 33 and amortisation u/s 51-52 (specific carve-outs vary); (c) adjustment for losses brought forward. The provision targets allocation-of-overhead disputes between HO and India branch — a frequent transfer-pricing / domestic-tax litigation area.

CASE LAW

CIT v. Wipro Ltd / Standard Chartered Bank — HO-expenditure must be wholly and exclusively incurred for India business; mere allocation by HO is not deductible. Sumitomo Mitsui Banking Corporation (Mum ITAT) — HO-expenditure cap applied to Indian branch of foreign bank; treaty-override of 5% cap not available unless DTAA explicitly so provides.

PLANNING NOTES

(i) For Indian branches / liaison offices of foreign banks / consultancies / engineering firms, prepare HO-expenditure attribution working paper annually. (ii) Maintain Form 3CE (HO-expenditure certificate) — auditor certification mandatory. (iii) Treaty Article 7(3) sometimes permits unrestricted HO-expenditure deduction — check applicable DTAA. (iv) Distinguish HO-expenditure (capped at 5%) from arm's-length costs of services rendered by HO to India branch (deductible at FAR-tested arm's length under TP).

CROSS-REFERENCES

Section 59 — Royalty / FTS PGBP computation (interaction).
Form 3CE — HO-expenditure certificate.
Income-tax Rules, 2026 — adjusted-total-income definition.
Article 7(3) of applicable DTAA.

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