In today’s interconnected global economy, many businesses and professionals engage in cross-border transactions. While this opens up exciting opportunities, it also brings complexities in taxation. In India, Section 9 of the Income Tax Act, 1961 plays a crucial role in determining when income of non-residents is considered taxable in India.
This section ensures that income arising directly or indirectly from India is taxed appropriately, even if earned outside the country.
Section 9 deems certain income to accrue or arise in India, regardless of where it is earned or received. The core principles include:
Business Connection in India
Any income arising through business activities, transactions, or agents in India is taxable.
Example: A foreign company selling goods in India through an Indian distributor.
Salary Income
Salaries for services rendered in India are taxable, even if paid abroad.
Dividend Income
Dividends paid by Indian companies are taxable in India, no matter where the shareholder resides.
Interest, Royalty & Fees for Technical Services (FTS)
Interest payable by the Indian Government or a resident (in most cases) is taxable.
Royalties for use of patents, copyrights, or technical know-how in India fall under Indian taxation.
Fees for managerial, consultancy, or technical services utilized in India are covered.
Indirect Transfer of Assets
If a foreign entity derives substantial value from assets located in India, transfer of its shares may also attract Indian taxation.
Withholding Tax (Section 195): Payments made to non-residents must be subject to tax deduction at source.
Double Tax Avoidance Agreement (DTAA): Relief can be claimed under DTAA to avoid double taxation and get concessional tax rates.
Permanent Establishment (PE): If a non-resident has a fixed place of business in India, income attributable to such PE is taxable.
Cross-border taxation is complex and requires careful interpretation of Indian tax law along with DTAA provisions. Non-compliance may result in:
Higher tax liability
Interest and penalties
Risk of litigation
At Kartik M Jain & Associates, Chartered Accountants, we help businesses and individuals navigate these challenges by offering:
✅ Direct & International Tax Advisory
✅ GST & Indirect Taxation
✅ Transfer Pricing Services
✅ Corporate Law & Compliance
✅ Audit & Assurance Services
Our team of experienced professionals ensures smooth compliance, strategic tax planning, and efficient dispute resolution.
Section 9 ensures that income with an Indian connection, whether earned by residents or non-residents, is brought within the Indian tax framework. For businesses engaged in international transactions, understanding these provisions and seeking professional guidance is essential for compliance and tax efficiency.