NITI Aayog releases NITI Tax Policy Working Paper Series–I

• 04 Oct 2025
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To ensure long term growth as India moves towards its Vision 2047, it is essential to put in place a transparent, predictable and tax efficient framework. The Consultative Group on Tax Policy (CGTP) of NITI Aayog lays emphasis on facilitating Ease of Doing Business, promoting Foreign Direct Investment, making tax laws simpler and creating a future-ready mechanism.

The working paper reflects the spirit of collaborative governance. It was developed after extensive stakeholder consultations were held. Drafts were shared for comments and suggestions, only then was the paper finalized.

In line with these efforts, NITI Aayog on 3 October 2025 had released the first working paper under NITI Tax Policy Working Paper Series-I. It is titled ‘Enhancing Tax Certainty in Permanent Establishment and Profit Attribution for Foreign Investors in India’. This paper addresses long standing concerns of foreign investors when it comes to tax predictability. It also outlines dispute resolution for strengthening the investment climate of India.

While releasing the working paper, the CEO of NITI Aayog mentioned the sustained growth of our nation in Foreign Direct Investment and Foreign Portfolio Investment over the past two decades and reflected the strong economic fundamentals. He noted that refining approaches to Permanent Establishments would provide a greater clarity as well as predictability in tax regulations. This, in turn, is expected to attract new foreign investments and encourage the expansion of existing multinational corporations.

The launch of the paper saw participation from representatives of the Central Board of Direct Taxes (CBDT), the Department for Promotion of Industry and Internal Trade (DPIIT), the Institute of Chartered Accountants of India (ICAI) and the Central Board of Indirect Taxes and Customs (CBC).

Domain experts from Lakshmikumaran & Sridharan, Deloitte, EY and other firms also contributed. They highlighted the importance of public-private collaboration in advancing tax policy reforms and fostering a more predictable investment environment. The working paper accentuates that FDI and FPI are critical catalysts for India's economic growth. A stable tax regime is really important for the purpose of building confidence among foreign investors. However, these investors often face substantial tax uncertainty and compliance burdens, particularly regarding issues related to Permanent Establishment and profit attribution.

India, despite such tax irritants, has seen a remarkable rise in Foreign Direct Investment inflows in the last two decades. This rise shows our nation’s inherent attractiveness as an investment destination. This growth shows the fundamental economic strengths of India, incl. its large market, demographic dividend and ongoing economic reforms, are strong investment drivers.

The working paper of NITI Aayog proposes a detailed framework that is intended to enhance tax certainty as well as predictability for foreign investors. In the paper, recommendations exist such as the introduction of an optional, industry-specific Presumptive Taxation Scheme for foreign companies, coupled with broader legislative clarity, administrative efficiency, robust dispute resolution mechanisms and strategic alignment with international best practices.

This multi-pronged approach is expected to drastically reduce litigation, encourage investor confidence, enhance administrative efficiency and secure India's tax base by attracting higher quality, sustainable Foreign Direct Investment.

The paper recommends the Ministry of Finance to take into consideration the proposed framework for inclusion in future Finance Bills after holding consultations with industry, experts and treaty partners. This reform would be a major step in making India a more attractive and predictable destination for foreign investors.

To access the full working paper, you can visit the official website of NITI Aayog.

Source: Press Information Bureau (PIB)