However, if the concern does not have a permanent establishment in the source country, the business income is taxable in country of residence. Budget 2018 has picked this idea and incorporated the concept of “significant economic presence” in the definition of “business connection”. Impact on digital economy of IndiaThis new amendment in the Finance Act 2018 will not have any immediate impact on the digital economy in India. The concept of “significant economic presence” as a criterion to determine permanent establishment has not been included in any of the DTAAs signed by India with other countries. International opinion on taxation of digital economy is divided and amendments to DTAAs or multilateral instruments to introduce the concept of digital permanent establishment is not coming anytime soon.

Source: Mint February 21, 2018 19:18 UTC