What are the provisions for taxing non-residents in India?

Non-residents are taxed in India on their Indian-sourced income as per Sections 5, 6, 9 and 115 of the Income Tax Act. This includes income from business/profession, capital gains on Indian assets, salaries for services rendered in India, interest/royalties, and other specified incomes. The residential status determines the total taxable income and applicable rates. For instance, non-residents pay tax only on Indian income while residents are taxed on global income. Note: Finance Act 2025 has expanded the scope of ‘business connection’ for deeming certain digital revenues as Indian-sourced income. Supporting Case Law: Formula One World Championship Ltd. vs Commissioner of Income Tax (2017 – Supreme Court) – Held that deduction of tax at source is mandatory for payments to non-residents even if the income is not taxable in India. Current Status: Cross-border taxation continues to be a contentious area due to evolving taxation rules and principles like BEPS Action Plan and multilateral instruments.