# Income Deemed to Accrue or Arise in India – Section 9(1)(i)

## Why this matters

For a non-resident, only income that is received in India or that accrues/arises in India is taxable. Section 9 creates a legal fiction: certain incomes are deemed to accrue or arise in India even though they actually arise outside India. This brings them into the Indian tax net.

## The three limbs of Section 9(1)(i)

Income arising — directly or indirectly — through or from any of the following is deemed to accrue in India:

Limb	Source	Example
Business Connection	A business connection in India	Profits routed through an Indian agent
Property / Source / Asset	Property (movable, immovable, tangible, intangible), asset, or source in India	Rent from Indian property; interest on deposits with Indian companies
Capital Gains	Transfer of a capital asset situated in India	Gain on sale of Indian land, irrespective of where payment is made

## Exceptions to Business Connection (Non-Residents only)

Even where a business connection exists, the following are NOT deemed to accrue in India:

1. Operations partly outside India [Expln 1(a)] – Only income reasonably attributable to operations carried out in India is taxable. Income from outside operations is not deemed to accrue here.

2. Purchase of goods for export [Expln 1(b)] – If operations are confined to purchasing goods in India for export, no income is deemed to accrue.

3. Collection of news/views [Expln 1(c)] – News agencies/publishers confining activity to collecting news in India for transmission outside India.

4. Shooting of films [Expln 1(d)] – No deemed income for shooting films if the non-resident is:

an individual who is not an Indian citizen, OR
a firm with no Indian-citizen/resident partner, OR
a company with no Indian-citizen/resident shareholder.

5. Display of rough diamonds in SNZ [Expln 1(e)] – A foreign diamond-mining company displaying uncut, unassorted diamonds in a notified Special Notified Zone.

## Key principle on capital gains

The charge arises because the asset is situated in India — the type of asset and the place where the consideration is paid are irrelevant.

Worked example

### Example 1

Operations partly outside India: A US company manufactures goods in the USA and sells partly through a branch in India. Only the profit reasonably attributable to the Indian selling operations is deemed to accrue in India and is taxable; the manufacturing profit attributable to US operations is not.

### Example 2

Purchase for export: A foreign company sets up a buying office in India solely to procure handicrafts and export them abroad. No income is deemed to accrue in India, since operations are confined to purchase of goods for export [Explanation 1(b)].

### Example 3

Film shooting: A non-resident foreign citizen (individual) shoots a film in Rajasthan. No income is deemed to accrue in India under Explanation 1(d). But if a firm shooting the film has even one Indian-citizen partner, the exception fails and income is deemed to accrue here.

⚠️ Common exam mistakes

Applying Section 9 to residents — these deeming provisions matter mainly for non-residents (residents are already taxed on global income).
Taxing the entire business profit when operations are only partly in India; only the India-attributable portion is taxable.
Forgetting that the film-shooting exception is lost the moment any Indian citizen/resident is a partner/shareholder.
Thinking capital gains depend on where payment is received — what matters is that the asset is situated in India.

Bare-Act text Section 9(1)(i) · Income-tax Act, 1961 · click to expand

Section 9(1)(i): All income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India shall be deemed to accrue or arise in India.

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Section 9(1)(i) – Business Connection, Property, Capital Gains

Worked example

⚠️ Common exam mistakes