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India’s income tax system is based on the concept of “residence” & “source.” But what happens when a person is a non-resident yet earns income that’s somehow connected to India? That’s where Section 9 of the Income Tax Act steps in.

This section plays a pivotal role in determining the scope of income deemed to accrue or arise in India, especially for non-residents & foreign entities doing business or earning income from Indian sources.


What Is Section 9 of the Income Tax Act?

Section 9 administers income deemed to arise or accrue in India. It brings into the Indian tax net those incomes that may not have been generated physically within India but have a close enough connection to be taxed here.

In simpler words, Section 9 of the Income Tax Act ensures that India rightfully taxes income that, while not entirely local, has an Indian linkage, such as royalty payments, interest, technical fees, and capital gains. "


Key Types of Incomes Covered under Section 9

  1. Income through or from a business connection in India
  2. Salaries paid by the Government of India to a citizen for services rendered outside India
  3. Dividend income from Indian companies
  4. Interest and royalty income from Indian sources
  5. Technical service fees received from an Indian entity

These categories define income deemed to accrue or arise in India, ensuring that any non-resident receiving such income is taxed accordingly. "


Why Is This Important for NRIs and Foreign Businesses?

Section 9 is one of the fundamental provisions relevant for a non-resident’s tax exposure. Suppose an NRI receives interest from an Indian bank, or a foreign company receives fees for technical services from an Indian client. Even if they are not physically in India, this income may be deemed to accrue or arise in India & become taxable.

This is particularly critical in today's global economy, where businesses & individuals interact across borders. Knowing how Section 9 determines the scope of income deemed to accrue or arise in India helps avoid non-compliance and unnecessary tax liabilities.


Example for Better Understanding

Let’s say a UK-based software company provides technical support services to an Indian IT firm and receives fees. Even though the work was performed entirely in the UK, the payment originates from India & is related to Indian business activity. Therefore, under Section 9, this payment could be deemed to accrue or arise in India & hence be taxable in India.


Final Thoughts

Section 9 of the Income Tax Act is a powerful provision that extends India’s taxation authority beyond its borders by linking income to Indian sources. Whether you're a non-resident earning royalties from India or a foreign company providing consultancy services, this section may apply to you.

If you're unsure how this affects your tax situation, consult a tax advisor or CA to avoid surprises during assessments.