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Residential status and withholding tax rate:

Started by sujittalukder, October 10, 2012, 08:49:17 PM

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The Article 15 of Indo-UK DTAA covers 'Independent Personal Services'. Now, an Indian Hospital wants to appoint an UK resident doctor on year assignment basis in India. He will be present in India and do surgical works and also provide consultancy. He does not have any fixed base in India. The payment will be made in UK Pound and will be required to be remitted to UK net of taxes.

Now the query is:
1.   Whether he will be 'resident in India' or continue to be resident in UK and thereby non-resident under Indian tax law given that his presence and stay in India during the previous is more than 182 days?
Reference may be drawn from Article 4 of Indo-UK DTAA where if an individual is resident of both the countries, residential status shall be determined on the basis of tie-breaker rule.

2.   If the UK doctor remains resident in UK and thereby non-resident under Indian law, whether tax is required to be withheld from such payments?
By virtue of Article 15 – 'Independent Personal Services' of the DTAA, since his stay in India exceeds 90 days, India has got the right to tax the income in India. In this case what will be the rate of TDS u/s 195? (Whether he can be considered as resident for the purpose of TDS under Indian law and thus 194J will apply?)

3.   Whether the UK doctor is required to file ITR in India w.r.t. Indian income? Whether he will be get the benefit of deduction of expenses from his Indian Professional income while offering the Indian Income to tax in India? At what rate his income will be taxed?

Your reply will be highly appreciated.

Thanks and regards

Sujit Talukder


 Dear sir
1. If stay in India exceeds 182 days then the person will be treated as resident in India but since the person fulfills conditions mentioned in section 6(6) hence he will  b resident but not ordinarily resident in India for first two years.
2. Once the fellow is non-resident in india section 195 will apply and accordingly tax will be deducted as per that section read with part II of the annual finance act. the rate of tax deduction will be 30.9 pc
3. The answer will much depend upon the relevant tax rules in UK.


Thanks Mr Manoj for the reply.

Regarding reply to Point 2.
In case he becomes Resident but not ordinary resident then whether TDS is required u/s 195 or 194J? (Sec 195 deals with non-resident and 194J for residents only)

Regarding Point 3.
w.r.t Indian income, filing of return in India and payment of tax by him in India , in my view and to the extent of my limited knowledge, is governed by Sec 115A and you have replied this will depend on UK tax law. Could you please clarify more on this?

Once again, heartiest thanks for the reply and sparing your valuable time for giving the reply.

Sujit Talukder


Under which provisions of the Act, credit for 'withholding tax' can be given? what are the requirement of the claim?..a supplementary question

Vinay Surana

Tax will be deducted u/s 195 only since as u mentioned 194J is governed for resident only.

If he does not have any other income other than mentioned by you and tax for the same is deducted by the Indian deductor then there is no requirement for the non resident to file income tax returns.

Fees for Technical and professional work

SP Sridhara

you are required to read sec 90 and 91 for relief to claimed.


Hello Mr. Sujittalukder,

Please find my views pointwise to your query.

1. : As he stays > 182 days, he will be considered as a Resident in India.

2. : As you pointed in 1, that his presence is more than 182 days in India, he will be treated as a resident in India and not of U.K. Residents are further categorised
as 'Resident and Ordinarily Resident' and Resident but not Ordinarily Resident (R &NOR). Your client falls under R &NOR. Hence will be subjected to 194J.

3. : Your client needs to furnish ITR.

Applicable even if 139(B) becomes applicable as per the below provision :

'Provided also that a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6, who is not required to furnish a return under this sub-section and who during the previous year has any asset (including any financial interest in any entity) located outside India or signing authority in any account located outside India, shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in such form and verified in such manner and setting forth such other particulars as may be prescribed'.

Hope the above helps.

My query though is : You have stated your client does not have a fixed base in India. Are your meaning that this is somehow related to 'permanent establishment' as per the DTAA ?
If yes tax applicability becomes debatable. Please check at your end. 

Bala FCA., LLB.