India’s Income-Tax Framework for Non-Residents and International Transactions
The comprehensive list of sections under the Income-tax Act, as amended (potentially by the Finance Act, 2025), outlines a structured compliance and tax regime for non-residents establishing a business presence in India and for domestic entities engaging in transactions with them. This framework is primarily anchored in determining the scope of total income for a non-resident, based on residence (Section 6) and income deemed to accrue or arise in India (Section 9). The Act explicitly details the taxability of various income streams, including dividends, royalty, and technical service fees for foreign companies (Section 115A). Crucially, Section 9A introduces certain carve-outs, specifying activities that do not constitute a business connection in India, offering clarity on the trigger for domestic tax liability.
Specialized provisions exist to simplify the computation of profits for non-residents engaged in specific sectors, often employing a presumptive taxation model. These include shipping (Section 44B), exploration of mineral oils (Section 44BB), operation of aircraft (Section 44BBA), civil construction in turnkey power projects (Section 44BBB), and the operation of cruise ships (Section 44BBC). Furthermore, a new provision (Section 44BBD) addresses profits for non-residents providing services or technology for setting up electronics manufacturing facilities. For non-residents, the deduction of certain head office expenditures is restricted (Section 44C). Overall tax incidence is influenced by Minimum Alternate Tax (MAT) (Sections 115JB, 115JAA) for companies and Alternate Minimum Tax (AMT) (Sections 115JC to 115JF) for other persons.
A significant part of the non-resident compliance regime is centered on anti-avoidance and proper income allocation. The Act mandates that residents dealing with non-residents must strictly adhere to the Tax Deducted at Source (TDS) provisions, particularly Section 195 for any payment of sums to a non-resident. Failure to comply with TDS obligations, including payments of salary outside India, results in disallowance of the expenditure (Sections 40(a)(i) and 40(a)(iii)). The Act provides relief through Double Taxation Avoidance Agreements (DTAA) (Section 90) or unilateral relief (Section 91) where no DTAA exists.
A cornerstone of international taxation is Transfer Pricing (TP), governed by an elaborate set of provisions (Sections 92 to 92F). These rules ensure that income from international transactions between Associated Enterprises (AE) is computed based on the arm’s length principle (Section 92C). Compliance requires maintenance of detailed documentation (Section 92D) and furnishing an accountant’s report (Section 92E). Mechanisms like Advance Pricing Agreements (APA) (Sections 92CC, 92CD) and Safe Harbour Rules (Section 92CB) are available for certainty. The framework also encompasses measures to prevent tax avoidance, including Limitation on Interest Deduction (Section 94B), and the overarching General Anti-Avoidance Rule (GAAR) (Sections 95 to 102), which empowers authorities to deny tax benefits to arrangements lacking commercial substance. Finally, administrative duties include obtaining a PAN (Section 139A) and compliance with various reporting requirements for international groups and transactions (Sections 285, 286).
Relevant Provisions of the Income-tax Act to Be Complied With by Non-Residents Planning to Set Up Business in India and by Residents Dealing With Non-Residents
| S. No. | Section | Particulars |
| 1. | 2 | Definitions |
| 2. | 4 | Charge of income-tax. |
| 3. | 5 | Scope of total income. |
| 4. | 6 | Residence in India. |
| 5. | 7 | Income deemed to be received in India |
| 6. | 9 | Income deemed to accrue or arise in India. |
| 7. | 9A | Certain activities not to constitute business connection in India |
| 8. | 10 | Incomes not included in total income |
| 9. | 28 | Profits and gains of business or profession |
| 10. | 40(a)(i) | Amounts not deductible in case of TDS default |
| 11. | 40(a)(iii) | Salary payable outside India or to a non-resident not deductible in case of TDS default |
| 12. | 44B | Special provision for computing profits and gains of shipping business in the case of non-residents |
| 13. | 44BB | Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. |
| 14. | 44BBA | Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents. |
| 15. | 44BBB | Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects. |
| 15A. | 44BBC | Special provision for computing profit and gains of business of operation of cruise ships in case of non-residents |
| 15B. | 44BBD | Special provision for computing profits and gains of non residents engaged in business of providing services or technology for setting up an electronics manufacturing facility or in connection with manufacturing or producing electronic goods, article or thing in India. |
| 16. | 44C | Deduction of head office expenditure in the case of non-residents |
| 17. | 44D | Special provisions for computing income by way of royalties, etc., in the case of foreign companies. |
| 18. | 44DA | Special provision for computing income by way of royalties, etc., in case of non-residents. |
| 19. | 45 | Capital gains |
| 20. | 47 | Transactions not regarded as transfer |
| 21. | 48 | Mode of computation |
| 22. | 49 | Cost with reference to certain modes of acquisition |
| 22A. | 80EEB | Deduction in respect of purchase of electric vehicle |
| 22B. | 80-IAC | Special provision in respect of specified business |
| 22C. | 80LA | Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre. |
| 23. | 90 | Agreement with foreign countries or specified territories |
| 24. | 90A | Adoption by Central Government of agreement between specified associations for double taxation relief. |
| 25. | 91 | Countries with which no agreement exists. |
| 26. | 92 | Computation of income from international transaction having regard to arm’s length price. |
| 27. | 92A | Meaning of associated enterprise. |
| 28. | 92B | Meaning of international transaction. |
| 29. | 92BA | Meaning of specified domestic transaction. |
| 30. | 92C | Computation of arm’s length price |
| 31. | 92CA | Reference to Transfer Pricing Officer. |
| 32. | 92CB | Power of Board to make safe harbour rules. |
| 33. | 92CC | Advance pricing agreement. |
| 34. | 92CD | Effect to advance pricing agreement. |
| 34A. | 92CE | Secondary adjustment |
| 35. | 92D | Maintenance and keeping of information and document by persons entering into an international transaction [or specified domestic transaction] |
| 36. | 92E | Report from an accountant to be furnished by persons entering into international transaction [or specified domestic transaction]. |
| 37. | 92F | Definitions of certain terms relevant to computation of arm’s length price, etc. |
| 38. | 93 | Avoidance of income-tax by transactions resulting in transfer of income to non-residents. |
| 39. | 94 | Avoidance of tax by certain transactions in securities. |
| 40. | 94A | Special measures in respect of transactions with persons located in notified jurisdictional area. |
| 40A. | 94B | Limitation on interest deduction |
| 41. | 95 | Applicability of General Anti-Avoidance Rule. |
| 42. | 96 | Impermissible avoidance arrangement. |
| 43. | 97 | Arrangement to lack commercial substance |
| 44. | 98 | Consequences of impermissible avoidance arrangement. |
| 45. | 99 | Treatment of connected person and accommodating party. |
| 46. | 100 | Application of this Chapter. |
| 47. | 101 | Framing of guidelines. |
| 48. | 102 | Definitions. |
| 49. | 111A | Tax on short term capital gain in certain cases |
| 50. | 112 | Tax on long term capital gains |
| 50A | 112A | Tax on long-term capital gains in certain cases |
| 51. | 115A | Tax on dividends, royalty and technical service fees in the case of foreign companies. |
| 52. | 115AB | Tax on income from units purchased in foreign currency or capital gains arising from their transfer |
| 53. | 115AC | Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer. |
| 54. | 115ACA | Tax on income from Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer |
| 55. | 115AD | Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer |
| 56. | 115BBA | Tax on non-resident sportsmen or sports associations. |
| 57. | 115BBD | Tax on certain dividends received from foreign companies |
| 57A. | 115BBJ | Tax on winning from online games |
| 58. | 115C | Definitions relating to chapter on ‘Special provisions relating to certain incomes of non-resident’ |
| 59. | 115D | Special provision for computation of total income of non-residents. |
| 60. | 115E | Tax on investment income and long-term capital gains |
| 61. | 115F | Capital gains on transfer of foreign exchange assets not to be charged in certain cases. |
| 62. | 115G | Return of income not to be filed in certain cases. |
| 63. | 115H | Benefit under Chapter to be available in certain cases even after the assessee becomes resident. |
| 64. | 115-I | Chapter on ‘Special provisions relating to certain incomes of non-resident’ not to apply if the assessee so chooses. |
| 65. | 115JAA | Special provision relating to Minimum Alternate Tax (MAT) Credit |
| 66. | 115JB | Special provisions relating to payment of Minimum Alternate Tax (MAT) by certain companies |
| 67. | 115JC | Special provisions relating to payment of Alternate Minimum Tax (AMT) by certain persons other than a company |
| 68. | 115JD | Tax credit for Alternate Minimum Tax (AMT) |
| 69. | 115JE | Application of other provisions of Act to a person liable to pay Alternate Minimum Tax (AMT) |
| 70. | 115JEE | Application of provisions relating to Alternate Minimum Tax (AMT) to certain persons |
| 71. | 115JF | Interpretation of certain terms referred to in chapter relating to Alternate Minimum Tax (AMT) |
| 72. | 115JG | Conversion of an Indian branch of foreign company into subsidiary Indian company |
| 72A | 115JH | Special provisions relating to foreign company said to be resident in India |
| 72B | 115TCA | Tax on income from securitisation trusts |
| 73. | 115U | Special provisions relating to tax on income received from venture capital companies and venture capital funds |
| 74. | 115UA | Special provisions relating to Business Trust |
| 75. | 115UB | Special provisions relating to tax on income of investment funds and income received from such funds |
| 76. | 139 | Return of income |
| 77. | 139A | Permanent account number |
| 78. | 140 | Return by whom to be signed |
| 79. | 140A | Self-assessment |
| 80. | 160 | Representative assessee |
| 81. | 161 | Liability of representative assessee |
| 82. | 162 | Right of representative assessee to recover taxes paid |
| 83. | 163 | Who may be regarded as agent |
| 84. | 166 | Direct assessment or recovery not barred |
| 85. | 167 | Remedies against property in cases of representative assessee |
| 86. | 172 | Shipping business of non-residents. |
| 87. | 173 | Recovery of tax in respect of non-resident from his assets |
| 88. | 174 | Assessment of persons leaving India. |
| 89. | 192 | Payment of Salary |
| 90. | 192A | Payment of taxable accumulated balance of provident fund to an employee |
| 91. | 194B | Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort |
| 91A. | 194BA | Winning from online games |
| 92. | 194BB | Income by way of winnings from horse races |
| 93. | 194E | Payments to non-resident sportsmen or sports associations. |
| 94. | 194G | Commission, etc., on the sale of lottery tickets |
| 94A. | 194-IB | Payment of rent by certain individuals or Hindu undivided families. |
| 94B. | 194-IC | Payment under specified agreement |
| 94C. | 194K | Income in respect of units |
| 95. | 194LB | Payment of interest on infrastructure debt fund |
| 96. | 194LBA | Certain income distributed by a business trust to its unit holder |
| 97. | 194LBB | Income in respect of units of investment fund |
| 97A | 194LBC | Income in respect of investment in securitisation trust |
| 98. | 194LC | Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) |
| 99. | 194LD | Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor |
| 99A. | 194M | Payment of certain sums by certain individuals or Hindu Undivided Families |
| 99B. | 194-O | Payment of certain sums by e-commerce operator to e-commerce participant |
| 100. | 195 | Payment of any other sums to a non-resident or to a foreign company |
| 101. | 195A | Income payable “net of tax” |
| 102. | 196B | Income from units (including long-term capital gain on transfer of such units) to an offshore fund |
| 103. | 196C | Income from foreign currency bonds or shares of Indian company. |
| 104. | 196D | Income of Foreign Institutional Investors from securities. |
| 105. | 197 | Certificate of deduction at lower rate |
| 106. | 199 | Credit for tax deducted |
| 107. | 200 | Duty of person deducting tax |
| 108. | 201 | Consequences of failure to deduct or pay |
| 109. | 204 | Meaning of person responsible for paying |
| 110. | 205 | Bar against direct demand on assessee |
| 111. | 206AA | Requirement to furnish Permanent Account Number |
| 112. | 207 | Liability for payment of advance tax |
| 113. | 208 | Conditions of liability to pay advance tax |
| 114. | 209 | Computation of advance tax |
| 115. | 210 | Payment of advance tax by the assessee of his own accord or in pursuance of order of Assessing Officer |
| 116. | 211 | Instalment of advance tax and due taxes |
| 117. | 218 | When assessee deemed to be in default |
| 118. | 219 | Credit for advance tax |
| 119. | 220 | When tax payable and when assessee deemed in default |
| 120. | 221 | Penalty payable when tax in default |
| 121. | 222 | Certificate to tax recovery officer |
| 122. | 226 | Other modes of recovery |
| 123. | 228A | Recovery of tax in pursuance of agreements with foreign countries. |
| 124. | 230 | Tax clearance certificate |
| 125. | 234A | Interest for default in furnishing return of income |
| 126. | 234B | Interest for default in payment of advance tax |
| 127. | 234C | Interest for deferment of advance tax |
| 128. | 245N | Provisions relating to advance rulings- Definitions. |
| 129. | 245-O | Authority for Advance Rulings. |
| 129A. | 245-OB | Board for Advance Rulings. |
| 130. | 245P | Vacancies, etc., not to invalidate proceedings. |
| 131. | 245Q | Application for advance ruling. |
| 132. | 245R | Procedure on receipt of application. |
| 133. | 245RR | Appellate authority not to proceed in certain cases. |
| 134. | 245S | Applicability of advance ruling. |
| 135. | 245T | Advance ruling to be void in certain circumstances |
| 136. | 245U | Powers of the Authority. |
| 137. | 245V | Procedure of Authority |
| 138. | 271BA | Penalty for failure to furnish report under section 92E. |
| 139. | 271C | Penalty for failure to deduct tax at source |
| 140. | 271FAB | Penalty for failure to furnish statement or information or document by an eligible investment fund |
| 141. | 271G | Penalty for failure to furnish information or document under section 92D |
| 142. | 271GA | Penalty for failure to furnish information or document under section 285A |
| 142A | 271GB | Penalty for failure to furnish report or for furnishing inaccurate report in respect of international group as per section 286 |
| 142B | 271GC | Penalty for failure to submit statement of having a liaison office under section 285 |
| 143. | 271-I | Penalty for failure furnish information or furnish inaccurate information under Section 195 |
| 144. | 285 | Submission of statement by a non-resident having liaison office |
| 145. | 285A | Furnishing or information or documents by an Indian concern, through or in which the Indian assets are held by the foreign company or the entity, in certain cases |
| 146 | 285BAA | Obligation to furnish information on transaction of crypto-asset. |
| 147 | 286 | Furnishing of report in respect of international group |
[As amended by Finance Act, 2025]
(Republished with amendments)
VERY USEFUL AND INNOVATIVE THINKING TO COMPILE ALL SECTIONS OF IT THAT AFFECT INTERNATIONAL BUSINESS !
MUCH APPRECIATED 1