## Royalty [Sec 9(1)(vi)] & Fees for Technical Services [Sec 9(1)(vii)]

The rules for both Royalty and FTS are identical in structure to interest, with a critical difference: the residential status of the payer does not exclude Resident payers in any case.

### Source 1: Government of India

Royalty / FTS paid by the Government of India is always deemed to accrue/arise in India.

### Source 2: Paid by Resident or Non-Resident

Royalty/FTS is deemed to accrue/arise in India if the right / property / service is used by the payer for:

Use by Payer (Resident or NR)	Royalty/FTS Taxable in India?
Business or profession in India	YES
Earning income from any source in India	YES
Business or earning income outside India	NO

### Visual Example

Royalty: Yash Joota Co. (Resident) pays royalty to Nike (NR) for using Nike's brand patent.

If Yash Joota Co. uses Nike's IP for business in India / earning any income in India → Royalty deemed to accrue/arise in India → Taxable in Nike's hands.

### Key Takeaways

1. Unlike interest, Section 9(1)(vi) and (vii) bring in Royalty/FTS even when the payer is a Resident using them for India operations.

2. The 'use' determines source — not the residence of the payer or the payee.

3. If a non-resident pays royalty/FTS to another non-resident but uses the right/service outside India → Not taxable in India.

Worked example

### Example 1

Example: Tata Motors (Resident) pays royalty to Volvo (NR) for using Volvo's technology in cars manufactured and sold in India.

Solution: Royalty used for business in India → Deemed to accrue/arise in India → Taxable in India in Volvo's hands.

### Example 2

Example: Infosys (Resident) pays FTS to a Singapore consultant for setting up an Infosys operation in Singapore.

Solution: Service utilised for business outside India → NOT deemed to accrue/arise in India → Not taxable in India.

⚠️ Common exam mistakes

Confusing Royalty with FTS — both follow identical rules but cover different income streams.
Looking only at residence of payer/payee — the deciding factor is the place of utilisation of the right/service.
Forgetting that Royalty/FTS from Government of India is always taxable in India.
Treating Resident-to-NR payments as always taxable in India — they are NOT if used for business/source outside India.

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

Section 9(1)(vi): Income by way of royalty payable by — (a) the Government; or (b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c) a person who is a non-resident, where the royalty is payable in respect of any right, property or information used for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India. Section 9(1)(vii): Income by way of fees for technical services payable by — (similar three sources as above).

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Royalty & Fees for Technical Services [Sec 9(1)(vi) & (vii)]

Worked example

⚠️ Common exam mistakes