Income Tax Guidelines for Non-Residents and Residents in India

Understanding Income Tax Provisions for Non-Residents and Residents

Navigating the Income Tax Act is crucial for non-residents planning to conduct business in India and for residents involved in transactions with non-residents. This article highlights key sections relevant to international business dealings.

The Income Tax Act contains numerous sections outlining tax liabilities based on various circumstances concerning both non-residents and residents. These sections clarify definitions, income tax imposition, residency criteria, and tax implications for income deemed received or accrued in India. Additionally, it covers available deductions and special provisions for non-residents.

For non-residents intending to establish a business in India, grasping the concept of business connections and specific taxes associated with activities like shipping, mineral oil exploration, and aircraft operations is vital. Understanding regulations around Transfer Pricing, Double Taxation Avoidance Agreements, and the tax treatment of income from international transactions is also essential.

Residents engaging in transactions with non-residents must be aware of tax deduction and collection procedures upon payment remittance. It is crucial to understand reporting obligations for international transactions and the tax consequences when dealing with parties in notified jurisdictional areas, including aspects related to the General Anti-Avoidance Rule (GAAR).

Key Income Tax Sections to Remember

Important Provisions of the Income Tax Act for Non-Residents and 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 constituting 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)	Non-deductible amounts in case of TDS default
11	40(a)(iii)	Non-deductible salary payable outside India or to a non-resident in case of TDS default
12	44B	Special provision for computing profits of non-resident shipping businesses
13	44BB	Special provision for profits from mineral oil exploration and related business
14	44BBA	Special provision for profits from aircraft operations for non-residents
15	44BBB	Special provision for foreign companies in turnkey power projects
16	44C	Deduction for head office expenditure for non-residents
17	44D	Special provisions for computing income through royalties for foreign companies
18	44DA	Special provisions for computing income through royalties for non-residents
19	45	Capital gains
20	47	Transactions not regarded as transfer
21	48	Mode of computation
22	49	Cost concerning specific acquisition modes
22A	80EEB	Deduction for electric vehicle purchase
22B	80-IAC	Special provisions for specified businesses
22C	80LA	Deductions for certain incomes of Offshore Banking Units and International Financial Services Centres
23	90	Agreements with foreign countries for relief from double taxation
24	90A	Adoption of agreements for double taxation relief by the Central Government
25	91	Countries lacking tax agreements
26	92	Computing income from international transactions using arm’s length price
27	92A	Definition of associated enterprise
28	92B	Definition of international transaction
29	92BA	Definition of specified domestic transaction
30	92C	Arm’s length price computation
31	92CA	Reference to Transfer Pricing Officer
32	92CB	Board's authority to create safe harbour rules
33	92CC	Advance pricing agreements
34	92CD	Effects of advance pricing agreements
34A	92CE	Secondary adjustments
35	92D	Maintenance and document keeping for international transactions
36	92E	Accountant’s report for specified transactions
37	92F	Definitions relevant to arm’s length price computation
38	93	Avoidance of income tax through income transfer to non-residents
39	94	Tax avoidance via securities transactions
40	94A	Special measures for transactions with notified jurisdictional area persons
40A	94B	Limits on interest deductions
41	95	Applicability of GAAR
42	96	Impermissible avoidance arrangements
43	97	Arrangements lacking commercial substance
44	98	Consequences for impermissible avoidance
45	99	Treatment of connected parties
46	100	Chapter application
47	101	Guidelines formulation
48	102	Definitions
49	111A	Tax on short-term capital gains in certain scenarios
50	112	Tax on long-term capital gains
50A	112A	Long-term capital gains tax in specified cases
51	115A	Tax on dividends, royalties, and technical service fees from foreign companies
52	115AB	Tax on income from foreign currency investment units
53	115AC	Tax on bonds or Global Depository Receipts in foreign currency
54	115ACA	Tax on income from Global Depository Receipts
55	115AD	Tax on Foreign Institutional Investors' income from securities
56	115BBA	Tax on non-resident sports entities
57	115BBD	Tax on certain dividends from foreign companies
57A	115BBJ	Tax on winnings from online games
58	115C	Relevant chapter definitions
59	115D	Special computation provisions for non-residents
60	115E	Tax on investment income and long-term capital gains
61	115F	Exemptions for capital gains on foreign exchange asset transfers
62	115G	No income return filing in some cases
63	115H	Continued chapter benefits after becoming a resident
64	115-I	Choice not to apply special provisions
65	115JAA	MAT Credit provisions
66	115JB	Minimum Alternate Tax (MAT) provisions
67	115JC	Alternate Minimum Tax (AMT) provisions for specific entities
68	115JD	AMT credit
69	115JE	Applicability of Act provisions to AMT taxpayers
70	115JEE	AMT provisions applicability
71	115JF	Definitions relevant to AMT provisions
72	115JG	Branch of foreign company conversion to subsidiary
72A	115JH	Special provisions for foreign companies deemed residents
72B	115TCA	Tax on income from securitization trusts
73	115U	Tax on incomes from venture capital funds
74	115UA	Special provisions for Business Trust taxation
75	115UB	Tax provisions for investment funds
76	139	Income return requirements
77	139A	Permanent account number (PAN) regulations
78	140	Signing protocols for income returns
79	140A	Self-assessment provisions
80	160	Representative assessees
81	161	Liability of representative assessees
82	162	Rights of representative assessees for tax recovery
83	163	Definition of agents in tax
84	166	Direct assessment and recovery restrictions
85	167	Remedies regarding representative assessee property
86	172	Non-resident shipping business regulations
87	173	Tax recovery from non-residents’ assets
88	174	Assessment protocols for individuals leaving India
89	192	Salary payment protocols
90	192A	Taxable provident fund balance payments
91	194B	Income from lotteries and similar games
91A	194BA	Winnings from online games
92	194BB	Winnings from horse races
93	194E	Payments to non-resident sports entities
94	194G	Lottery ticket sale commissions
94A	194-IB	Rent payments by specific individuals
94B	194-IC	Payments under predefined agreements
94C	194K	Income concerning units
95	194LB	Interest payments on infrastructure debt funds
96	194LBA	Distributions from business trusts to unit holders
97	194LBB	Income from investment fund units
97A	194LBC	Investment income from securitization trusts
98	194LC	Foreign currency debt interest payments
99	194LD	Interest payments on rupee bonds to foreign investors
99A	194M	Specific sum payments by certain individuals
99B	194-O	Payments by e-commerce operators
100	195	Payments to foreign entities or companies
101	195A	Net of tax payment provisions
102	196B	Income from units to offshore funds
103	196C	Income from foreign currency bonds
104	196D	Income from securities to Foreign Institutional Investors
105	197	Lower rate deduction certificates
106	199	Tax deduction credits
107	200	Tax deduction duties
108	201	Consequences of failing to deduct or remit tax
109	204	Definition of those responsible for payments
110	205	Prohibition on direct demands for taxes
111	206AA	PAN requirements for tax filing
111A	206AB	TDS provisions for non-filing taxpayers
111B	206CC	TCS provisions for non-filing taxpayers
112	207	Advance tax payment liabilities
113	208	Conditions for advance tax liability
114	209	Advance tax computation
115	210	Advance tax payment requirements
116	211	Advance tax instalment regulations
117	218	Default situations for taxpayers
118	219	Advance tax credit provisions
119	220	Tax payment due dates
120	221	Penalties for overdue taxes
121	222	Tax recovery officer's certificates
122	226	Other tax recovery methods
123	228A	Tax recovery agreements with other countries
124	230	Tax clearance certificates
125	234A	Interest on tardy income return submissions
126	234B	Interest for late advance tax payments
127	234C	Interest on deferred advance tax
128	245N	Advance ruling definitions
129	245-O	Advance Rulings Authority
129A	245-OB	Board for Advance Rulings
130	245P	Validity of proceedings despite vacancies
131	245Q	Advance ruling application procedures
132	245R	Procedures following application receipt
133	245RR	Restrictions on appellate authorities
134	245S	Applicability of advance rulings
135	245T	Void advance rulings under certain conditions
136	245U	Authority powers
137	245V	Authority procedural directives
138	271BA	Penalties for non-compliance with section 92E
139	271C	Penalties for failing to deduct TDS
140	271FAB	Penalties for failure to furnish documents by investment funds
141	271G	Penalties for failing to provide information under section 92D
142	271GA	Penalties for furnishing inaccurate information under section 285A
142A	271GB	Penalties for failure to provide accurate reports regarding international groups as per section 286
143	271-I	Penalties for inaccurate information under section 195
144	285	Non-resident statement submission
145	285A	Information provision requirements for foreign companies holding Indian assets
146	286	International group report requirements

This comprehensive overview serves as a valuable resource for both non-residents embarking on business operations in India and residents handling international transactions. Staying informed about these provisions is essential for compliance and effective engagement with the Indian taxation system.