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Section 9 Income Tax — Deemed Income Accruing in India

Updated: 3 June 2026  |  Income-tax Act 2025  |  NRI & Non-Resident Taxation

Section 9 deems certain incomes as accruing or arising in India even if received abroad. Covers: income from business connection in India, property in India, indirect transfer of Indian assets, salary for services in India, interest/royalty/FTS paid by Indian residents. Key provision for NRI and foreign company taxation.
Section 9
Deeming provision — non-residents taxed on income "arising" in India even if received outside India.
DTAA (Double Taxation Avoidance Agreement) overrides Section 9 where beneficial to taxpayer. Submit TRC + Form 10F to claim DTAA benefit.

Income Types Deemed to Arise in India — Section 9

Income TypeSectionKey ConditionTDS Rate
Business connection profits9(1)(i)Attributable to India operationsSection 195 (varies)
Capital gains — Indian asset9(1)(i)Capital asset situated in IndiaSection 195 (20%/12.5%)
Indirect transfer — foreign co.9(1)(i) Expln 5>50% value from Indian assets + >₹10CrSection 195
Salary for India services9(1)(ii)Services rendered in IndiaSection 192 (slab)
Government salary (Indian citizen abroad)9(1)(iii)Paid by Indian GovtSection 192
Interest paid by Indian resident9(1)(v)Paid to non-resident; few exceptionsSection 195 (20%)
Royalty from Indian resident/Govt9(1)(vi)IP used/usable in IndiaSection 195 (20%)
Fees for Technical Services (FTS)9(1)(vii)Services utilised in IndiaSection 195 (20%)

DTAA Override — How Non-Residents Reduce Tax

Payment TypeIndia Domestic RateTypical DTAA RateRequirement
Royalty20% + surcharge + cess10–15%TRC + Form 10F
FTS (Technical Services)20% + surcharge + cess10–15%TRC + Form 10F
Interest20% + surcharge + cess10–12.5%TRC + Form 10F
Business profits (PE)Slab/40% corporateNegotiated in DTAAPE determination
Capital gains (shares)12.5% LTCG / 20% STCGSome DTAAs exemptTRC + Form 10F

Frequently Asked Questions

What does Section 9 of Income-tax Act 2025 cover?
Section 9 deems certain incomes as "accruing or arising in India" even if received outside India. Key provisions: (a) Income from business connection in India: profits attributable to Indian operations of non-resident are taxable. (b) Income from property/asset situated in India. (c) Income from transfer of capital asset situated in India (including indirect transfer — if >50% derives from Indian assets). (d) Salary for services rendered in India. (e) Interest paid by Indian resident or Indian government. (f) Royalty paid by Indian resident. (g) Fees for technical services (FTS) paid by Indian resident. These deem the income to arise in India regardless of where it is received.
What is a "business connection" under Section 9?
Business connection under Section 9(1)(i): A non-resident has a business connection if there is a real and intimate relationship between the non-resident's business and India. Examples: Agent in India who habitually concludes contracts on behalf of non-resident. Dependent agent with authority to maintain stock/goods in India. Person who habitually secures orders in India. Exclusions: Independent agents acting in ordinary business. Purchasing goods/merchandise for the non-resident. Merely collecting news or information. Mere presence of subsidiary in India does not create business connection (arm's length dealing required). POEM (Place of Effective Management): if foreign company managed from India — entire income taxable in India.
How is TDS applicable on payments to non-residents under Section 9?
Payments to non-residents covered by Section 9: Interest payments to non-residents: TDS under Section 195 at applicable DTAA rate (typically 10-15%). Royalty payments: TDS at 20% under domestic law; DTAA rate (often 10-15%) if treaty exists. FTS (Fees for Technical Services): TDS at 20% under domestic law; DTAA may give lower rate. Salary to non-resident for India services: TDS at applicable slab/Section 192. Business income attributable to Indian operations: TDS under Section 195. Important: Payer must deduct TDS even if payee in DTAA-territory country — use Form 15CA/15CB to remit. DTAA benefit: non-resident submits Tax Residency Certificate (TRC) + Form 10F to claim lower DTAA rate.
What is indirect transfer of assets under Section 9?
Indirect transfer (Section 9(1)(i) Explanation 5 — also called Vodafone provision): If a non-resident transfers shares of a foreign company and that foreign company derives substantial value (>50% of total assets) from assets in India — the transfer is deemed to occur in India and is taxable. Threshold: value of Indian assets > ₹10 crore AND constitutes >50% of the global assets. Exemptions: Listed foreign companies. Small holdings (<5% shareholding + <5% voting rights). Transfers on reorganisations if no tax in foreign country. Reporting: Indian company must report indirect transfer to income tax department. Introduced to prevent tax avoidance via structures like Cayman Islands holding companies for Indian assets.
Does Section 9 apply to salary and service income of NRIs?
Yes — Section 9(1)(ii) and (iii) cover salaries: Salary earned in India (services rendered in India): fully taxable in India even if paid outside India. Salary paid by Indian government to Indian citizen abroad: taxable in India. NRI working briefly in India: salary for those days is taxable (proportionate to India working days). Salary for services outside India paid by non-resident employer: NOT taxable in India even if NRI. Interest income under Section 9(1)(v): interest paid by Indian resident company to non-resident is deemed to accrue in India (except: interest on foreign currency borrowing for business outside India). Planning: NRI should maintain careful records of India vs non-India service days for proportionate exemption.

Related Pages

NRI Taxation DTAA Relief TDS on NRI Property Section 195 TDS NRI Income Tax
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