Section 505: annual statement by a non-resident with an Indian liaison office

Introduction

The reporting duty applies to a non-resident with an Indian liaison office set up under the specified RBI guidelines. Its subject is the liaison office’s activities in a tax year.

The statement goes to the Assessing Officer with jurisdiction. The form, particulars and filing period come from prescribed rules rather than being set out in section 505 itself.

Key takeaways

Liaison-office statement

The non-resident must prepare and deliver to the jurisdictional Assessing Officer a statement of its activities in a tax year, in the prescribed form and period with prescribed particulars.

When this provision applies

Identify the non-resident and the Indian office’s status under the RBI guidelines issued under FEMA. The duty attaches to the described liaison-office arrangement; the label used on a letterhead does not replace the underlying establishment records.

Prepare the activities statement for the relevant tax year using the prescribed form, particulars and period. Reconcile the activity narrative with the office’s records before delivery to the Assessing Officer having jurisdiction.

Limits and procedural safeguards

Section 505 does not make the statement dependent on the office first earning taxable profit. Do not infer that an absence of revenue, by itself, removes the stated reporting duty.

An RBI or other regulatory submission does not by itself demonstrate delivery of this tax statement to the required recipient. Verify the applicable prescribed filing process separately. Section 460 addresses a potential penalty for failure; the statement obligation and any penalty decision are distinct.

Step-by-step review

1. Confirm the non-resident and the liaison office’s establishment under the specified RBI framework.

2. Identify the tax year and applicable prescribed statement requirements.

3. Reconcile the office’s activity records with the statement’s required particulars.

4. Deliver through the applicable prescribed process and retain the final statement and acknowledgement.

Hypothetical example

Hypothetical illustration: a liaison office undertakes only coordination activities and has no revenue for a tax year. The non-resident should not treat that fact alone as an exemption from Section 505. It must check and meet the prescribed activities-statement requirements for the office.

Records to prepare

RBI establishment or approval records and office identification.

The relevant year’s activity, expense and supporting operational records.

The applicable prescription, completed statement and delivery acknowledgement.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 505 and related provisions

Practical checklist

Glossary

Liaison office

The India office of a non-resident set up under the Reserve Bank of India guidelines referred to in section 505.

Jurisdictional Assessing Officer

The Assessing Officer for the non-resident’s relevant jurisdiction to whom the activities statement is delivered.

Activities statement

The tax-year statement required from the described non-resident liaison-office arrangement.

Frequently asked questions