I am an Indian citizen and a lawyer by profession. I used to work as an in-house counsel in a promoter-run Indian company. I shifted my residence to the US with my family in 2023. The promoter has recently offered me the opportunity to provide legal services from the US. There is no need to travel to India, though I may visit annually for about 15-20 days for vacation. If I agree to take up this work, will I be taxed on the professional fee income in India? The promoter will directly wire my fees to my US bank account.
–Name withheld on request
I assume you are a tax resident of the US and qualify as a non-resident of India (NRI) under Indian tax law. If your professional fees are subject to taxation in India, you may examine the provisions of the India-US Double Taxation Avoidance Agreement (DTAA). If the DTAA provisions are more beneficial, then you have the option to be governed by them instead.
Under the Indian tax law, the services you would provide would be classified as ‘consultancy services’, and the professional fees you will receive would be considered ‘fees for technical services’, making them taxable in India, since the services would be utilized by an Indian company. In such a case, your professional fees would be taxed at 20% (plus applicable surcharge and cess) on the gross amount.
Whereas under the India-US DTAA, payments made to an individual towards professional services are covered under Article 15-independent personal services (rather than Article 12-royalties and fees for included services). These fees can be taxed in India only if the individual has a fixed base in India for the performance of the services or if their physical presence in India exceeds 90 days in the fiscal year. Since you will be providing the services virtually from the US and will not visit India for the service provision, neither of these conditions applies, and your professional fees would not be subject to taxes in India.
If you choose to be governed under the Indian tax law and the professional fees from the Indian company are your only income from India, you would not be required to file an income tax return in India, provided the correct amount of TDS is deducted. However, if you choose to be governed by the DTAA provisions, filing a tax return in India would become mandatory.
Further, to access the DTAA benefits, you would need to obtain a tax residency certificate from relevant US authorities and submit Form 10F.
Harshal Bhuta is partner at P. R. Bhuta & Co. Chartered Accountants
