Section 44B of ITA, 1961 : Section 44B: Special Provision For Computing Profits And Gains Of Shipping Business In The Case Of Nonresidents

Explanation using Example

Imagine a foreign shipping company, Oceanic Transports Inc., which is not based in India but operates ships that regularly carry goods to and from Indian ports. According to Section 44B of the Income-tax Act, 1961, when Oceanic Transports Inc. earns income from the carriage of goods shipped from any port in India, they do not have to calculate their taxable income with the usual detailed provisions of the Income-tax Act that apply to most businesses.

Instead, Oceanic Transports Inc. can simply declare 7.5% of the gross receipts (including demurrage or handling charges) from the shipping services provided to and from Indian ports as their taxable income. So, if in a financial year, Oceanic Transports Inc. earned a total of $10 million from shipping operations related to India, they would declare $750,000 as their taxable income from Indian operations, without needing to account for actual expenses or depreciation.