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Taxability of Income of a Non-Resident

🌍 Scope of Taxable Income [Section 5(2)]

A Non-Resident is taxable in India only on:

✅ Income received or deemed to be received in India, and

✅ Income accruing or arising or deemed to accrue/arise in India.

❌ Income earned and received outside India is not taxable for a Non-Resident.


📜 Income Deemed to Accrue or Arise in India (Section 9)

Section 9 lists specific situations where income is treated as Indian-sourced income:

  1. Business Connection in India
    • Includes activities carried on through a business connection, office, or agent in India.
    • The concept of Significant Economic Presence (SEP) also applies – even digital/economic presence without physical presence may create tax liability.
  2. Property or Source of Income in India
    • Income from property situated in India, or any source of income in India.
  3. Transfer of Capital Asset
    • Transfer of a capital asset situated in India (shares, immovable property, etc.).
  4. Salary Income
    • Salary earned in India or for services rendered in India.
    • Salary payable by the Government of India for services rendered abroad is also taxable in India (with exceptions for diplomats).
  5. Dividend Income
    • Dividend declared or paid by an Indian company is taxable in India.
  6. Interest, Royalty, and Fees for Technical Services (FTS)
    • Interest payable by Government or resident (except when borrowed for business outside India).
    • Royalty and FTS payable by Government or resident (except when utilized for business outside India).


📊 Example – Understanding Taxability

👉 Mr. John, a US citizen, stayed in India for 100 days in FY 2023-24. His income sources are:

  • Salary from a US company credited in the US – Not taxable in India.
  • Dividend from an Indian company – Taxable in India.
  • Interest on NRO bank deposit – Taxable in India.
  • Rental income from property in Delhi – Taxable in India.

Thus, only his Indian-sourced income is chargeable to tax.


✅ Key Takeaway

A Non-Resident is liable to tax in India only on income that is received, deemed to be received, accrues, or is deemed to accrue in India. Their foreign income, which is earned and received outside India, remains outside the purview of Indian taxation.

Who is a Non-Resident in accordance with Income Tax Act, 1961
Section 6 of Income Tax Act, 1961