CA Goutam Jain
Section 5 of Income Tax Act says resident global income ( both earned in India & foreign) is taxable in India however the Non- Resident’s only income which is received in India OR accrues or arises or deemed to accrue or arise in India is taxable.
Now who is Resident and who is Non Resident? Section 6 of Income Tax Act determines residential Status on the basis of No. of days stay during the year in India. Sometimes according to the domestic law of countries an Individual become Resident of two or more countries than tie breaker rule as per DTAA need to apply to determine eventual Resident Country.
Hence once a person determined to be Non-Resident in India as discussed above; his following income will be taxable in India-
(a) Income received or deemed to be received in India or
(b) Income accrues or arises or deemed to accrue or arise to him in India
Now the term income received in India can be taken straight however what is Income accrues or arises or deemed to accrue or arise to him is defined in Section 9 if Income tax Act as follow-
|Income||When deemed to accrue or arise in India|
|Business Income||Nat profit earned in India when business connection is in India or source of income is in India|
|Capital Gain/House Property Income||When Capital asset situate in India|
|Dividend||When Paid by an Indian company|
|Interest||When Payable by-|
|Government of India|
|a person who is a resident except where moneys borrowed used for business outside India|
|a person who is a non-resident where moneys borrowed used for business in India|
|Royalty & fees for technical services||When Payable by-|
|Government of India|
|a person who is a resident except where its utilized used for business outside India|
|a person who is a non-resident where its utilized for business in India|
|Salaries||When Paid for service rendered in India|
|paid by the Government to a citizen of India for service outside India|
Briefly now it clear that what income earned by Non Resident is taxable in India however what is tax rate is yet to find out. Income is generally taxed at slab rate in case of Individual and 40% for foreign Company however Income Tax Act specified lower tax rates for income like capital gain etc.
Here it worth to note that double tax avoidance agreements (DTAA) or tax treaty entered with countries overwrite the Income tax Act hence if particular income is taxable in Income tax Act is exempt under DTAA or taxable at lower rate than the same will be followed.
(Author is Partner of G Y & Company -B-101, Purav Heights, Mugbhat Lane , Girgoan , Mumbai-04. Author can be reached at firstname.lastname@example.org)