Threshold limits for Significant Economic Presence of non-resident to constitute business connection

Finance Act, 2018, inserted explanation to Section 9 so as to clarify that the “significant economic presence” (SEP) of a non-resident in India shall constitute “business connection” in India if (i) transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India and if value of transaction during the previous year is above prescribed limit OR (ii) systematic and continuous soliciting of business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means.

Vide Notification No. 41 /2021, threshold limit of Rs.2 crores is prescribed for transaction (i) above and threshold limit of 3 lakh is prescribed for transaction (ii) above.

Thus, said transactions or activities shall constitute significant economic presence in India, whether or not, the agreement for such transactions or activities is entered in India; or the non-resident has a residence or place of business in India; or the non-resident renders services in India. Accordingly, so much of income as is attributable to the transactions or activities mentioned above shall be deemed to accrue or arise in India.