NITI Aayog Tax Working Paper Targets Predictable Framework for Foreign Investors in India

The NITI Aayog has introduced its first paper in the NITI Tax Policy Working Paper Series to improve tax predictability for foreign investors by proposing reforms around Permanent Establishment and profit attribution rules, aiming to support India’s Vision 2047 growth goals.

Tax Framework Upgrade to Attract Sustainable FDI

NITI Aayog unveiled the inaugural paper in its newly launched NITI Tax Policy Working Paper Series. Titled “Enhancing Tax Certainty in Permanent Establishment and Profit Attribution for Foreign Investors in India,” the document outlines key reforms to strengthen India’s tax regime. It primarily targets longstanding investor concerns relating to the creation of Permanent Establishment (PE) and challenges around profit attribution.

The paper provides a roadmap for legislative clarity, introduces an optional presumptive taxation model, and recommends better dispute resolution to reduce litigation and attract high-quality FDI. It recognises that India’s continued FDI and FPI inflows showcase investor confidence driven by economic reform, market size, and demographic advantage.

Presumptive Taxation and Global Alignment

The document recommends rolling out industry-specific presumptive taxation schemes for foreign companies operating in India as a means to simplify both compliance and administration. It also stresses aligning India’s tax practices with international standards to avoid double taxation and enhance global competitiveness.

Stakeholder feedback was integrated during drafting, highlighting the importance of transparency in decision-making. Leading institutions and firms, including CBDT, DPIIT, ICAI, EY, and Deloitte, participated in the launch, ensuring a collaborative approach.

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Reducing Disputes and Boosting Investor Confidence

The proposed framework aims to tackle dispute frequency, which has been a major deterrent for investors. By clarifying PE criteria and profit attribution methods, the paper seeks to bring certainty to foreign firms concerned about retrospective taxation and excessive compliance. Streamlined administration is also expected to reduce time and cost spent on assessments and appeals.

Conclusion

NITI Aayog’s latest working paper is a forward-looking initiative designed to enhance tax policy for foreign investors. By proposing clear, simplified, and efficient tax measures, including an optional presumptive regime and dispute minimisation, India aims to boost foreign investor confidence and economic resilience in the lead-up to Vision 2047.

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