Clause 5 - Income deemed to accrue in India - Direct Taxes Code Bill, 2009

Income deemed to accrue in India 5. (1) The income shall be deemed to accrue in India, if it accrues, whether directly or indirectly, through or from:- (a) a business connection in India; (b) a property in India; (c) an asset or source of income in India; or (d) the transfer, directly or indirectly, of a capital asset situate in India. (2) Without prejudice to the generality of the provisions of sub-section (1), the following income shall be deemed to accrue in India: - (a) income from employment, if it is for- (i) service rendered in India; (ii) service rendered outside India by a citizen of India and the income is receivable from the Government; or (iii) the rest period, or leave period, which precedes, or succeeds, the period of service rendered in India and forms part of the service contract of employment; (b) dividend received outside India from an Indian company; (c) interest accrued from the Government or any resident; (d) interest accrued from any non-resident, if the interest is in respect of any debt incurred and the debt is used for the purposes of- (i) a business carried on by the non-resident in India; or (ii) earning any income from any source in India; (e) royalty accrued from the Government or any resident; (f) royalty accrued from a non-resident, if the royalty is for the purposes of - (i) a business carried on by the non-resident in India; or (ii) earning any income from any source in India; (g) fees for technical services accrued from the Government or any resident; (h) fees for technical services accrued from any non-resident, in respect of services utilised for the purposes of,- (i) a business carried on by the non-resident in India; or (ii) earning any income from any source in India; (i) transportation charges accrued from the Government or any resident; (j) transportation charges accrued from any non-resident, if the transportation charges are in respect of the carriage to, or from, a place in India. (3) For the purposes of clause (a) of sub-section (1), in the case of a business of which all the operations are not carried out in India, the income of the business deemed to accrue in India shall be only such part of the income as is reasonably attributable to those operations carried out in India. (4) The income deemed to accrue in India under sub-section (1) shall, in the case of a non-resident, not include the following :- (a) any income accruing through, or from, operations which are confined to the purchase of goods in India for the purposes of export out of India; (b) interest accrued from a resident, in respect of any debt incurred and used for the purposes of,- (i) a business carried on by the resident outside India; or (ii) earning any income from any source outside India; (c) royalty accrued from a resident for the purposes of,- (i) a business carried on by the resident outside India; or (ii) earning any income from any source outside India; (d) royalty consisting of lump sum consideration accrued from a resident for the transfer of any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer, along with a computer or computer-based equipment, under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India. (e) fees for technical services, accrued from a resident, in respect of services utilised for the purposes of,- (i) a business carried on by the resident outside India; or (ii) earning any income from any source outside India; (f) transportation charges for the carriage by aircraft or ship, accrued from any resident, if the transportation charges are in respect of the carriage from a place outside India to another place outside India. (5) The provisions of sub-section (2) shall be applicable regardless of the fact that,- (a) the payment is made outside India; (b) the services are rendered outside India; or (c) the income has otherwise not accrued in India.