Section 60
Section 60: deduction of head office expenditure in case of non-residents
Section 60 allows a non-resident assessee to deduct head office expenditure attributable to its Indian business or profession while computing income under "Profits and gains of business or profession," but caps that deduction at a fixed percentage of the assessee's adjusted total income, regardless of what any other provision of the Act would otherwise allow.
What Section 60 allows
Section 60(1) permits deduction of head office expenditure incurred by a non-resident assessee, to the extent it is attributable to the assessee's business or profession in India, in computing income chargeable under "Profits and gains of business or profession" - overriding the ordinary computation provisions in Sections 26 to 54 to the extent they are inconsistent, subject to the cap in Section 60(2).
The 5% cap
| Situation | Deduction ceiling |
|---|---|
| Assessee's adjusted total income is a loss | 5% of the assessee's average adjusted total income |
| Any other case | 5% of the assessee's adjusted total income |
Key definitions
Section 60(3) defines the terms used in the cap:
- "Adjusted total income" - total income computed under the Act, without giving effect to this section's allowance, the allowance under Section 33(11), the deduction under Section 32(i)(A), any loss carried forward under Section 111(1), 112(1), 113(2) or 115(2), or the deductions under Chapter VIII.
- "Average adjusted total income" - the arithmetic mean of adjusted total income over the three tax years immediately preceding the relevant tax year (or over however many of those three years the assessee was actually assessable, down to just the one year if assessable for only one).
- "Head office expenditure" - executive and general administration expenditure incurred by the assessee outside India, including rent/rates/taxes/repairs/insurance of premises outside India used for the business, salary and other employee-related payments for staff managing offices outside India, travelling by such staff, and other prescribed matters connected with executive and general administration.
Frequently asked questions
How much head office expenditure can a non-resident deduct in India?
Up to 5% of the assessee's adjusted total income (or 5% of average adjusted total income over the preceding years, if the current year's adjusted total income is a loss), as set out in Section 60(2).
What counts as "head office expenditure" under Section 60?
Executive and general administration expenditure incurred outside India - such as rent, rates, taxes, repairs or insurance for overseas premises used for the business, and salary, travelling and similar costs of staff managing offices outside India - as defined in Section 60(3)(c).
Related sections
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