Residential status and withholding tax rate:

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