The Indian government has issued a draft circular inviting suggestions/comments from the public regarding its examination of the existing approach to profit attribution to a permanent establishment, under article 7 of India’s Double Taxation Avoidance Agreements , and regarding the recommended changes to Rule 10 of the Income Tax Rules 1962designed to bring clarity to domestic law regarding the attribution of profits. The draft rules emphasize a formulary approach to the attribution of profits to a permanent establishment. This article explains the rationale provided by the Indian government for this approach, issues arising from the proposed approach and the impact of the proposed approach on multinational enterprises with operations in India.