Section 44BB: Presumptive Tax on Oil and Gas Services for Non-Residents

Section 44BB of the Income-tax Act, 1961 provided a special 10% presumptive profit computation for qualifying non-resident businesses supplying services, facilities or hired plant and machinery connected with prospecting, extraction or production of mineral oils. It is a profit-computation rule, not a flat tax rate.

What is Section 44BB and who qualifies?

The provision addresses a non-resident assessee engaged in a business of providing services or facilities in connection with mineral oil exploration, extraction or production, or supplying plant and machinery on hire used or intended for use in those activities. Whether a contract qualifies depends on its real scope, not simply the description used in an invoice.

The statutory Explanation defines plant to include ships, aircraft, vehicles, drilling units, scientific apparatus and equipment used in the specified business. Mineral oil includes petroleum and natural gas.

How the 10% presumptive income calculation works

Under Section 44BB(1), profits and gains are deemed to equal 10% of the aggregate of the qualifying amounts described in Section 44BB(2). The income is then subject to the applicable income-tax provisions and rates. It is incorrect to treat the 10% as the final tax payable.

Amounts included in the base

• Section 44BB(2)(a): amounts paid or payable, in or outside India, to the non-resident or on its behalf for qualifying services, facilities or equipment hire used or to be used for mineral oil activities in India.
• Section 44BB(2)(b): amounts received or deemed received in India by the non-resident or on its behalf for qualifying services, facilities or equipment hire used or to be used for mineral oil activities outside India.

The statutory language distinguishes paid or payable amounts for India-related operations from received or deemed received in India amounts for operations outside India. Cross-border contract and treaty facts require separate review.

Section 44BB explained, subsection by subsection

Section 44BB(1): presumptive profits

Overrides specified ordinary business-income computation rules for qualifying non-resident mineral oil service and equipment-hire businesses and deems 10% of the Section 44BB(2) base to be business profit, subject to express exclusions.

Section 44BB(2): qualifying payments and receipts

Defines the two categories of amounts entering the presumptive base, including qualifying payments made outside India for Indian mineral oil operations.

Section 44BB(3): claim of lower profits

A qualifying assessee may claim profit below the deemed 10% by maintaining the books and documents required by Section 44AA(2), obtaining the audit and report required by Section 44AB, and undergoing assessment under Section 143(3).

Section 44BB(4): losses and depreciation

Inserted by the Finance Act, 2023 with effect from 1 April 2024, this subsection disallows set-off of unabsorbed depreciation under Section 32(2) and brought-forward losses under Section 72(1) where profits are declared under the presumptive rule in Section 44BB(1).

Explanation: statutory definitions

The broad meaning of plant expressly includes drilling units, vehicles, aircraft, ships and scientific equipment; mineral oil expressly includes petroleum and natural gas.

When Section 44BB does not apply

The proviso to Section 44BB(1) excludes cases where Sections 42, 44D, 44DA, 115A or 293A apply for computing the specified profits, gains or other income. These provisions concern different tax treatments, including certain mineral oil arrangements and royalty or fees for technical services. Contract characterization, permanent establishment facts and treaty terms can materially affect the outcome.

Where a lower actual profit is claimed, the taxpayer must follow the books, audit and assessment route under subsection (3), rather than simply substituting a lower percentage in the presumptive calculation.

Illustrative Section 44BB calculation

This example assumes all amounts meet the statutory conditions and no exclusion applies. The tax payable is computed separately under the applicable rate and treaty framework.

Section 44BB compared with nearby provisions

Section 44B concerns non-resident shipping business; Section 44BBA concerns non-resident aircraft operations; and Section 44BBB addresses specified turnkey power-project work. Each provision has its own eligibility conditions and calculation base.

Frequently asked questions

Official law and guidance

• Income Tax Department: Section 44BB text, including subsection (4)
• Income Tax Department: business and profession presumptive schemes
• Income Tax e-Filing Portal
• India Code: central legislation and current Acts

Updated: 25 October 2026. This explanatory article is not a substitute for the applicable Act, rules, treaty or professional advice.