The income is earned for the services rendered in India and hence the income has accrued in India. It is there fore taxable in India, irrespective of the residential status of the company based in UK. The Indian customers will have to deduct tax u/s 195 of the Income Tax Act, 1961, if the residential status of the UK based company is Non Resident. The repatriation of income to UK depends upon the business structure in India.
Company operating from UK with Indian customers
If a company is based in U.K. but serves many Indian customers, these Indian customers pay in INR, so the company has income in INR as well. Is the income earned in India taxable to Indian govt? Or can the U.K. company translate the income to UK pound and pay taxes only in U.K.?
Asked 9 years ago in Income Tax
Yes, the income earned in Indian shall be taxable in India.
As per Income Tax Act, any income which is earned or received in India will be taxable in India.
A detailed analysis for tax planning can be structured after detailed understanding of the transaction.
Regards
Ankit Jain
+919810661322
As per our opinion the income accrued or arised in India is taxable in India. Thus in the above case the income is taxable in India.
As per section 9(1)(i) of the Income-tax Act, 1961, all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India or through the transfer of a capital asset situate in India, subject to proviso, are income deemed to accrue or arise in India. Hence, it is taxable in India.
Also, it is worthwhile to keep the provisions of the DTAA with UK.
*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge.
Section 5(2) of the Income-tax Act provides that a Non resident is liable to tax in respect of Income received or deemed to be received in India by or on his behalf and income that accrues or arises or deemed to accrue or arise in India during the previous year.
As per Section 9, certain incomes are deemed to accrue or arise in India even though they may actually accrue or arise outside India. This section is applicable to all assessees irrespective of the residential status , nationality,domicle and place of business.
In the given case, we need to determine whether the company is having any business connection in India. In order to determine the business connection, the following conditions shall be satisfied :-
1) The taxpayer has a "business connection" in India
2) by virtue of the "business connection" in India, income actually arises outside India.
Meaning of Business connection :-
It includes a profession connection. It includes a person acting on behalf of a non-resident and who performs any one or more of the following :-
a) He exercises in India an authority to conclude contracts on behalf of the non resident
b) He has no such authority but habitually maintains in India a stock of goods from which he regularly delivers goods on behalf of the non-resident.
c) He habitually secures order in India for the non-resident or for non residents under the same managment.
If these conditions are satisfied, it will be taxable in India
As here International Taxation will apply. The Indian customer will pay to the UK based customer for their services after deducting TDS u/s 195. So in that case company has already paid tax to the Indian government and then you have to look in the UK as per DTAA between India & UK for taxation position in UK.
Hello Sir,
In your given case it appears that the Company is based in UK and hence Non Resident in India. But as they are serving Indian Customers the income is accruing in India. Any income which has accrued or arisen in India is Taxable in India.
Assuming that the UK based Company is a Non Resident Company in India, withholding Tax/ TDS u/s 195 of the Income Tax Act, 1961 should also be deducted before making such payment by the Indian Resident.
Regards,
CA Rohit R Sharma
INCOME DEEMED TO ACCRUE OR ARISE IN INDIA IS TAXABLE IN INDIA
COMPANY SHOULD NOT HAVE ANY PE IN INDIA.
MONEY RECD. IN INR ATTRACTS TAX IN INDIA.
MONEY RECD. BY THE COY. DIRECTLY IN UK IN FOREIGN EXCHANGE IS NOT TAXABLE IN INDIA.
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