Section 9 of Income Tax Act is specifically meant for non-residents, as residents are liable to pay tax on their global income, i.e., Indian income and foreign income.
Non-residents would be required to pay tax on income which is deemed to accrue or arise in India even though it may actually accrue or arise outside India.
Following incomes shall be deemed to accrue or arise in India under Section 9 of Income Tax Act:
- INCOME ACCRUING OR ARISING FROM ANY BUSINESS CONNECTION/ PROPERTY/ SOURCE OF INCOME IN INDIA – CLAUSE (I) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT – Any income accruing or arising in any place outside India Whether directly or indirectly through or from any business connection in India, through or from any property in India, through or from any asset or source of income in India or through the transfer of a capital asset situated in India [Section 9(1)(i)]
- INCOME FROM SALARIES EARNED IN INDIA – CLAUSE (II) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT – Income under the head “Salaries”, shall be deemed to accrue or arise in India, if it is earned in India.
- SALARY PAYABLE BY GOVERNMENT FOR SERVICES RENDERED OVERSEAS – CLAUSE (III) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT
- Salary earned by Indian citizen for services rendered outside India would be deemed to accrue or arise in Indian when salary is payable by Indian Government .
- Pension payable outside India by the government to its officials and judges who permanently reside outside India shall not be deemed to accrue or arise in India.
- DIVIDEND PAID BY AN INDIAN COMPANY OUTSIDE INDIA – CLAUSE (IV) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT – Dividends paid by an Indian company outside India shall be deemed to accrue or arise in India.
- DEEMED INTEREST INCOME – CLAUSE (V) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT – Under section 9(1)(v), interest shall be deemed to accrue or arise in India if it is payable by the Indian Government to any non-resident. Under section 9(1)(v), interest shall be deemed to accrue or arise in India if it is payable by a person resident in India. However, there are two exceptions wherein interest payable by resident shall not be deemed to accrue or arise in India.
- INTEREST PAYABLE BY NON-RESIDENT DEEMED TO ACCRUE OR ARISE IN INDIA – CLAUSE (V) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT – Interest payable by non-resident shall be deemed to accrue or arise in India when it is payable in respect of any debt incurred or moneys borrowed and used for the purpose of a business or profession carried on by such person in India.
- DEEMED ACCRUAL/ARISING OF ROYALTY INCOME – CLAUSE (VI) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT- Royalty shall be deemed to accrue or arise in India when it is payable by the Indian Government to Non-resident. Royalty payable by a non-resident shall be deemed to accrue or arise in India only when any of the conditions further discussed are satisfied i.e, royalty is payable in respect of any right, property or information used or services utilised for purposes of a business or profession carried on in India; or Royalty is payable for the purposes of making or earning any income from any source in India.
- FEES FOR TECHNICAL SERVICES – CLAUSE (VII) OF SUB-SECTION 1 OF SECTION 9 OF INCOME TAX ACT – Income by way of Fees For Technical Services (‘FTS’) shall be deemed to accrue or arise in India if it is payable by Indian Government to non-resident . Income by way of Fees For Technical Services (‘FTS’) shall be deemed to accrue or arise in India if it is payable by a person who is resident in India to a non-resident . However, there are two exceptions (Wherein FTS payable by resident shall not be deemed to accrue or arise in India) . FTS payable by non-resident shall be deemed to accrue or arise in India when any of the following conditions are satisfied : –
- Where the fees are payable in respect of services utilised in a business or profession carried on by the non-resident in India or
- Where such services are utilised for the purpose of making or earning any income from any source in India .