Extended limited tax liability

Tax Glossary Definition

Extended limited tax liability

This concept applies when non-residents or foreign entities, despite having only a minimal presence in a country, are taxed on certain income earned within that country’s borders. It broadens the scope of limited tax liability by covering income that maintains a clear economic connection or source link to the taxing jurisdiction, even if the taxpayer is not considered a resident.

Example: If a foreign enterprise receives royalty or interest payments from an Indian company, it may fall under extended limited tax liability in India—requiring tax payment on that income even without a permanent establishment there.

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