Section 9 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 9(2)(c) deems income through a "business connection in India" to accrue or arise in India. Section 9(9) says what a business connection includes, who counts as a dependent agent, which activities are left out, when a non-resident has a "significant economic presence" in India, and how much income is attributed to India. This article explains sub-section (9) as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
A business connection includes a business carried out in India, wholly or partly, and a significant economic presence in India. An agent who habitually concludes contracts, keeps a stock of goods for delivery or habitually secures orders can create it; an agent of independent status acting in the ordinary course of business does not. Significant economic presence turns on payments or user numbers "as may be prescribed", so no figure is printed in the Act. Only income reasonably attributable to the Indian operations or presence is deemed to arise in India.
Where this article sits
Section 9 is split over three articles. Sub-sections (1) to (8) are in the first article; sub-sections (10) to (13) are in the third article. A non-resident that sells into India, uses Indian agents or serves Indian users should look at this sub-section with an NRI tax filing adviser early, because a business connection leads to tax in India. For residence, see our note on Section 6.
Section 9(9)(a): what a business connection includes
For the purposes of section 9, "business connection" in India includes:
- (i) any business carried out in India in the case of which all or part of the operations are carried out in India; or
- (ii) a significant economic presence in India.
Section 9(9)(b): agents who create a business connection
A business carried out in India includes business activity carried out through a person who, acting on behalf of the non-resident, falls into one of these groups.
| Limb | The person acting for the non-resident |
|---|---|
| (i)(A) | Has and habitually exercises in India an authority to conclude contracts on behalf of the non-resident, or habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts by the non-resident, where the contracts are (I) in the name of the non-resident, or (II) for transferring ownership of, or granting the right to use, property owned by the non-resident or which the non-resident has the right to use, or (III) for the provision of services by the non-resident |
| (i)(B) | Has no such authority but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods on behalf of the non-resident |
| (i)(C) | Habitually secures orders in India, mainly or wholly for the non-resident, or for that non-resident and other non-residents controlling, controlled by, or under the same common control as that non-resident |
| (ii) | A broker, general commission agent or any other agent through whom the activity is carried out and who works mainly or wholly on behalf of the principal non-resident, or the principal non-resident and other non-residents who are controlled by it, have a controlling interest in it, or are subject to the same common control. Such a person is not deemed to have an independent status |
Section 9(9)(c): what is not a business connection
A business carried out in India does not include business activity or operations of the non-resident:
- (i) carried out through a broker, general commission agent or any other agent having an independent status, if he is acting in the ordinary course of his business; or
- (ii) confined to any of the following:
- (A) the purchase of goods in India for export out of India;
- (B) the collection of news and views in India for transmission out of India, where the non-resident runs a news agency or publishes newspapers, magazines or journals;
- (C) the display of uncut and unassorted diamond in any special zone notified by the Central Government, where the non-resident is a foreign company engaged in diamond mining; or
- (D) the shooting of any cinematographic film in India, where the non-resident is an individual who is not an Indian citizen, a firm that has no partner who is an Indian citizen or resident in India, or a company that has no shareholder who is an Indian citizen or resident in India.
The special zone in (C) is to be notified; what has been notified is not in the text consulted.
Section 9(9)(d) and (e): significant economic presence
A non-resident has a significant economic presence in India where there is:
- (i) a transaction in respect of any goods, services or property carried out by the non-resident with any person in India, including provision of download of data or software in India, if the aggregate of payments from the transaction or transactions during the tax year exceeds such amount as may be prescribed; or
- (ii) systematic and continuous soliciting of business activities or engaging in interaction with such number of users in India as may be prescribed.
This applies irrespective of whether the agreement is entered into in India, whether the non-resident has a residence or place of business in India, or whether the non-resident renders any services in India. Section 9(9)(d) prints no amount and no number of users; both are left to the Income-tax Rules, 2026. Clause (e) adds that clause (d) does not apply to transactions or activities confined to the purchase of goods in India for the purpose of export.
Section 9(9)(f) and (g): how much income is deemed to arise in India
Under clause (f), only the income reasonably attributable to the following is deemed to accrue or arise in India from a business connection:
- operations carried out in India, when all operations of the business are not carried out in India; and
- the transactions or activities referred to in clause (d).
Clause (g) adds that the income attributable to operations of any business, or to significant economic presence, also includes income from:
- advertisement that targets a customer who resides in India or who accesses the advertisement through an internet protocol address located in India;
- sale of data collected from a person who resides in India or who uses an internet protocol address located in India; and
- sale of goods or services using data collected from such a person.
Examples
Dependent agent. Zenith Apparel Inc. (an invented overseas company) appoints Ravi in Pune to sign supply contracts in its name with Indian buyers. He habitually exercises that authority and works mainly for Zenith. Under section 9(9)(b)(i)(A)(I), Zenith carries on business in India through him, which is a business connection. Only the income reasonably attributable to the operations in India is deemed to accrue or arise in India (clause (f)(i)).
Independent agent. Sunita runs a general commission agency in Mumbai for many foreign principals and acts in the ordinary course of her business. Under clause (c)(i), the business of a non-resident carried through an agent of independent status acting in the ordinary course of that business is not a business carried out in India. If she worked mainly or wholly for one non-resident, clause (b)(ii) says she would not be deemed to have an independent status.
Export purchasing. A foreign trader only buys goods in India for export, using a local buyer. Under clause (c)(ii)(A) this activity is excluded.
Digital presence. A foreign streaming platform interacts with users in India. Whether that is a significant economic presence depends on the number of users or payments "as may be prescribed", and the text consulted prints no number. If the test is met, clause (g) adds advertisement income aimed at customers in India to the income attributable to that presence.
Need help with Indian income of a foreign business?
A foreign company or non-resident with Indian customers, agents or users should confirm whether it has a business connection before the first invoice. For advice on Indian tax exposure and filings, see our NRI tax filing service.
Key takeaways
- Business connection includes a business carried out in India and a significant economic presence in India.
- Agents who habitually conclude contracts, stock goods for delivery or secure orders can create a business connection.
- Independent agents acting in the ordinary course are outside the net; agents working mainly for the non-resident are not independent.
- Purchasing for export, news collection, diamond display in a notified special zone and film shooting by non-citizens' entities are excluded.
- Payment and user thresholds for significant economic presence are "as may be prescribed"; none is printed.
- Only income reasonably attributable to Indian operations or presence is deemed to arise in India.
Read next
- Section 9: salary, dividend, interest, royalty and technical fees (sub-sections 1 to 8)
- Section 9: indirect transfer, fund managers and other rules (sub-sections 10 to 13)
- Section 4: the charging section
- Section 6: residential status
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.