Section 44B Income Tax: Presumptive Taxation for Non-Resident Shipping Companies

Updated: 3 June 2026 | Income-tax Act 2025 | Non-Resident Taxation

Under Section 44B of the Income-tax Act 2025, 7.5% of gross freight receipts earned by a non-resident shipping company from carriage originating at Indian ports is deemed as taxable profits in India — no books of accounts required, no deductions allowed beyond this flat rate.

7.5%

Deemed profit rate on gross receipts — Section 44B
Applies to non-resident shipping companies; TDS collected under Section 172 before ship leaves Indian port

What Is Section 44B?

Section 44B of the Income-tax Act 2025 is a presumptive taxation provision for non-resident persons engaged in the business of operating ships. It applies when a non-resident shipping company carries passengers, livestock, mail, or goods from any port in India.

The taxable income is computed as 7.5% of the aggregate of amounts paid or payable (whether in India or outside India) to the non-resident or to any person on its behalf on account of such carriage. This deemed profit is the final taxable figure — the non-resident cannot claim deductions for actual expenses, depreciation, or losses against this income.

Tax collection is enforced through Section 172, which requires the master of the ship or the ship's agent to file a return and pay the applicable tax before the ship is granted permission to leave the Indian port. This mechanism ensures India's tax revenues are secured even before the non-resident departs.

All Non-Resident Presumptive Sections at a Glance

Section	Who It Applies To	Nature of Business	Deemed Profit Rate	Base for Computation
44B	Non-resident shipping companies	Carriage of passengers/goods from Indian ports	7.5%	Gross amounts paid/payable for carriage
44BB	Non-resident contractors in oil & gas	Services/facilities for prospecting, extraction, or production of mineral oils	10%	Aggregate amounts paid/payable to non-resident
44BBA	Non-resident foreign airline companies	Carriage of passengers/goods from any Indian place	5%	Gross amounts paid/payable for carriage from India
44BBB	Foreign companies in civil construction	Civil construction/erection/testing for power sector projects	10%	Amounts received/receivable in connection with such projects

Section 44BB: Non-Resident Oil & Gas Contractors

Section 44BB covers non-resident companies providing services, facilities, or supplying plant and machinery on hire in connection with mineral oil exploration (including petroleum, natural gas, and related activities). The deemed profit is 10% of gross amounts paid or payable to the non-resident for such services.

This section covers all upstream oil & gas activities: seismic surveys, drilling rigs, well completion, cementing, and other oilfield services. The non-resident may elect to be taxed under regular provisions if actual profits are lower, but this is subject to Assessing Officer's approval and requires proper audit of accounts.

Section 44BBA: Non-Resident Airlines

Section 44BBA provides the most favourable rate among non-resident presumptive sections — 5% of gross receipts from carriage of passengers, livestock, mail, or goods loaded from any place in India. This applies to foreign airline companies and covers domestic passenger tickets, cargo revenue from Indian exports, and freight charges.

Section 44BBB: Foreign Companies in Power Projects

Section 44BBB applies to foreign companies engaged in civil construction, erection, commissioning, or installation of plant, machinery, or equipment forming part of a power generation, transmission, or distribution project in India. The deemed profit rate is 10% of amounts received or receivable under such contracts.

TDS Mechanism Under Section 172

Section 172 is the enforcement mechanism for Section 44B. Before a ship carrying goods or passengers from an Indian port is allowed to depart, the master or agent of the ship must:

1. File a return of income for the voyage
2. Pay tax on 7.5% of the gross freight as computed under Section 44B
3. Obtain a tax clearance certificate from the Assessing Officer
4. Only after this clearance does the port authority release the ship

This pre-departure assessment ensures India collects its tax share even from transient non-resident shippers who have no permanent establishment in India.

DTAA Override of Presumptive Sections

Under Section 90 of the Income-tax Act 2025, if India has a Double Taxation Avoidance Agreement (DTAA) with the non-resident's country of residence, and the DTAA provides a more beneficial treatment — such as a lower tax rate or complete exemption for shipping/airline income — the non-resident may choose to be governed by the DTAA provisions instead of Sections 44B/44BBA. Many DTAAs exempt shipping and airline profits from source-country taxation entirely, relying instead on the principle of reciprocal exemptions.

Frequently Asked Questions

Who is required to use Section 44B of Income-tax Act 2025?

Section 44B applies exclusively to non-resident shipping companies. Any foreign shipping company earning income from carrying passengers, livestock, mail, or goods shipped at any Indian port must compute profits under this section — 7.5% of the aggregate amounts paid or payable (in India or outside India) for such carriage is deemed as the profit chargeable to tax in India.

How does TDS under Section 172 work on freight payments to non-resident shippers?

Section 172 of the Income-tax Act 2025 requires the master of the ship (or agent) to file a return and pay tax before the ship departs an Indian port. The Indian payer must deduct TDS on freight amounts paid to non-resident shipping companies. The tax is computed on 7.5% of gross receipts as deemed profit. This ensures tax collection before the ship leaves Indian jurisdiction.

What is Section 44BB and who does it apply to?

Section 44BB applies to non-resident companies engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire for, prospecting, extraction, or production of mineral oils (including petroleum and natural gas). Under this section, 10% of the aggregate amounts paid or payable to such non-resident is deemed as profits and gains from that business.

What rate applies to non-resident airlines under Section 44BBA?

Section 44BBA applies to non-resident foreign airlines operating aircraft. Under this section, 5% of the aggregate amounts paid or payable (whether in India or outside) to the airline in respect of carriage of passengers, livestock, mail, or goods from any place in India is deemed as profits and gains chargeable to tax in India. This is the lowest deemed profit rate among all non-resident presumptive sections.

Can a non-resident company opt out of presumptive taxation under Section 44B or 44BB, and does DTAA override these sections?

Generally, non-resident companies covered under Sections 44B, 44BB, 44BBA, and 44BBB cannot opt out of these presumptive provisions for their Indian-source income. However, if a Double Taxation Avoidance Agreement (DTAA) between India and the non-resident's country of residence provides a more beneficial rate or exemption, the non-resident can choose the DTAA provisions under Section 90 of the Income-tax Act 2025, as DTAA provisions override domestic law to the extent they are more beneficial.

Section 44AD Presumptive Tax Section 44ADA Professionals Section 44AE Transport Non-Resident Income Tax TDS on Non-Resident Payments DTAA with India Section 115A Non-Resident Tax Rates

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