In order to comply with the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which went into effect on May 26, the companies had appointed nodal officers.

The new IT policies necessitate the appointment of a local grievance officer, a nodal officer, and a chief compliance officer for these Tech platforms with over 50 lakh users. 

With the effect of the IT Rules 2021, The companies may see an increase in their domestic tax bills beginning this year, according to people familiar with the situation. Because top digital companies do not have a presence or permanent establishment (PE) in India, they do not pay domestic taxes on their entire income.

According to the sources, the tax department believe that appointing a nodal or compliance officer in India indicates that the US-based companies have a permanent establishment in the country.

As per the reports, Big Tech could be asked to pay taxes on its income generated in the country—at least 25%, but possibly as much as 42%.

Companies have been looking for ways to avoid the potential tax consequences. In addition, the companies were denied permission to outsource compliance functions.

"The government has specifically denied this request. Our client was told that the nodal officer has to be part of the US entity or a separate entity, and neither can this function be outsourced nor can they hire anyone on a temporary or consulting basis," a lawyer told the paper.

Aside from the appointment of nodal officers and a chief compliance officer in the country, the new IT rules require social media companies to take action on flagged content within 36 hours and remove any content reported for nudity or pornography within 24 hours.

The Indian government, on the other hand, has taken a tough stance this time and requires all such companies to follow the rules of the land if they want to operate in the country.

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