TDS

This query is : Resolved

navin goyal (Querist)
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20 January 2011 Dear Sir,

I have one Querry.Pls provide me ur Opinion ASAP.

A Indian Company registered in India employs a US national and US resident - Mr. A for carrying out Research work. Mr. A is not required to visit india.

Whether the Indian Comapny is liable to deduct TDS on salary paid to Mr. A?
As per DTAA provision will the company not be required to deduct any tax i.e. TDS?

PLs mail me ur opinion on my email id goyalsweetdream@gmail.com

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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21 January 2011 No, as per sec. 5 of Income tax Act the income does not accrue or arise in India and also the same is not deemed to accrue or arise in India as per sec. 9 therefore the requirement of TDS is not there.

navin goyal

navin goyal (Querist)
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22 January 2011 Thanks for ur prompt reply.
But Source of income has been arising from Indian Company.So it is an indian income???

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Great question! Let me clarify:

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### Situation:

* Indian company pays salary to Mr. A, a US resident, for research work.
* Mr. A **never visits India** and work is presumably done outside India.
* Question: Is this income taxable in India? Is TDS required?

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### Taxability under Indian law:

1. **Section 5(2) of Income Tax Act** says:
Income received or deemed to be received in India, or income accruing or arising in India, is taxable in India.

2. **Section 9** defines "Income deemed to accrue or arise in India."
Salary income is deemed to arise in India if services are rendered in India.

3. In this case, **services are not rendered in India** as Mr. A does not visit India and presumably performs research outside India.

4. **Therefore, income does not accrue or arise in India.**

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### DTAA (India-USA):

* Article on Income from Employment generally says:
Salary is taxable in the country where services are rendered.
* If Mr. A renders no services in India, India has no right to tax that salary.
* Hence, **India will not tax this salary income** under DTAA.

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### TDS implication:

* Since income is **not taxable in India**, TDS is **not required** under Section 195 or any other provisions.
* Indian company is not liable to deduct TDS on salary paid to Mr. A.

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### Summary:

| Condition | Conclusion |
| --------------------------- | ---------- |
| Services rendered in India? | No |
| Income taxable in India? | No |
| TDS deduction required? | No |

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If the work or services are performed in India, then the situation changes and TDS is required.

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**Let me know if you want me to draft an official opinion email for you!**

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