Direct Tax Amicus, February 2026

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Article

Decoding Home-Office PE: OECD’s 2025 Framework and India’s Reservations 

By Venkat Ramanan and J V L Tanya

With the rise of remote working arrangements across organizations, it becomes pertinent to determine whether such arrangements by employees in India would result in the creation of a Permanent Establishment (‘PE’) of the MNCs in the Indian soil. The article maps what has been laid down by the Organization of Economic Cooperation and Development (‘OECD’) and India’s position and the distinction between the two in determination of a PE in context of remote working arrangements. The authors note that India’s refusal to adopt the OECD’s objective time based test means that remote work from India may still trigger a PE even while it would not be so in other jurisdictions, and hence there is possibility of double taxation and interpretational conflict under DTAAs. According to the authors, as remote work becomes permanent, this divergence underscores the need for careful planning and, potentially, future policy recalibration.

Notifications & Circulars
 

• Board/Trust/Commission notified by Government – Specified income exempt
   
• Board/Trust, etc. notified by Central Government – Eligible entities under Section 10(46A)
   
• Investments in India – Exemption under Section 10(23FE) to specified entity
   
• Scientific Research – Exemption under Section 35 to specified entities
   

Ratio decidendi
 

• Flipkart co-founder’s ‘non-resident’ claim rejected – Treaty benefit denied – ITAT Bengaluru
   
• Interest on income tax refund taxable at DTAA rate where no PE exists in year of receipt – ITAT Dehradun
   
• Automatic re-investment of dividends does not create ‘undisclosed assets’ – ITAT Mumbai
   
• Conversion of Optionally Convertible Cumulative Redeemable Preference Shares into equity shares – Section 56(2)(x) an anti-abuse shield, not tool to tax natural accretion – ITAT Mumbai
   
• Negative capital balance does not automatically imply diversion of borrowed funds – ITAT Mumbai
   
• Income towards furnishing of plans, drawings & designs, being preparatory, is not FTS under India-Germany DTAA – ITAT New Delhi