Taxability of Non Resident
Sportsperson/Entertainer/Sports Association
Taxability of any Non-Resident
in India is governed by the provisions of Income Tax Act and Provisions of
DTAA, whichever is more beneficial.
In case of taxability of Non
Resident Sportsperson/Entertainer/Sports Association, inter-play of following
provisions are analysed herein.
1.
Section 9 – Income Tax Act
2.
Section 115BBA – Income Tax Act
3.
Article 17 – UN Model Double Taxation
Convention, (UN Model)
4.
Article 14 – UN Model
5.
Article 15 – UN Model
Income Tax
Provisions
Ø Section 115BBA provides special basic
rate of 20% (plus applicable surcharge & EC) on prescribed income accruing
to Non Resident Sportsman/Entertainer/Sports Association. No deduction for any expenditure and allowance is allowed to such
assessee u/s 115BBA. The Provision of section 115BBA is explained as
under:-
|
Nature of Income
|
Income from participation in
India in any game or sports /Performance in India
|
Income from Advertisement
|
Income from Contribution of
Articles in Newspaper, magazines etc.
|
Other Income
|
|
Assessee
|
||||
|
Sportsman (including
athlete), who is non-resident and not
a citizen of India
|
Tax @ 20% u/s 115BBA
|
Tax @ 20% u/s 115BBA
|
Tax @ 20% u/s 115BBA
|
Normal Provisions
|
|
Sports Association, which is
non-resident
|
Tax @ 20% u/s 115BBA
|
N.A
|
N.A
|
Normal Provisions
|
|
Entertainer, who is non-resident and not a citizen of
India
|
Tax @ 20% u/s 115BBA
|
Appears to be Tax @ 20% u/s
115BBA
|
Normal Provisions
|
Normal Provisions
|
Critical Observations
1.
The words sportsman & Entertainer are neither
defined in section 115BBA nor in other sections of Income Tax Act.
2.
The
question for consideration is whether taxability of team members like Coach,
Manager, musicians etc., are covered by provisions of section 115BBA. It
appears that team members are not covered by provisions of section 115BBA and
their income in India, in connection with performance by sportsman or
entertainer in India, will be governed by Normal Provisions of Income Tax Act.
3.
The wordings of section 115BBA are similar to
one used in Article 17 of UN model convention, which is also on same lines as
adopted in OECD model Double taxation convention. As per treatise on double
taxation convention by Professor Klaus Vogel, The words “Sportsman (including
athlete)” should be interpreted broadly and it should cover the sportswomen
also. Thus on similar analogy, conclusion can be drawn that the words
“Sportsman (including athlete)” should cover sportswomen also u/s 115BBA.
4.
Section
115BBA does not cover winnings from games specified in section 115BB viz.
winnings from lotteries, crossword puzzles, horse races, card games, gambling
or betting.
Ø Section 9(1)(ii), Salary shall be
deemed to accrue in India, if it is earned in India i.e employment is exercised
in India.
DTAA
Provisions –As per UN Model
DTAA provisions allocate the
taxability right of various types of Income among the contracting states
involved and then their taxability is left to the respective state
Ø Article
17 which, deals with Income of Sportsman & Entertainer, grant both contracting states (Contracting
state of which sportsman/entertainer is resident (hereinafter referred to foreign state) and Other contracting state
where they perform) (hereinafter
referred to as India) right to tax income of sportsman/entertainer. The
salient feature of Article 17 is as under:-
1.
This Article overrides the provisions of Article 14 (Independent Personal
Service) & Article 15 (Dependent Personal Services)
2.
The Income covered is those which are derived
directly or indirectly from performance
in India by resident of foreign state.
3.
Where on performance in India, the income
accrues not to the sportsperson or entertainer, but to other person (organisation/association),
India too gets a right tax such income, overriding the provisions of Article 7
i.e irrespective of whether such organisation or association is having PE in
India or not.
Critical Observations
1.
Article 14 governs distribution of taxability right
of income, when resident of Foreign state performs professional services or
other activities of independent character in India. India gets taxability
rights only when either of following two conditions are met:-
a)
Resident of Foreign state has fixed base
available to him in India for performing his activities;
b)
Stay of resident of Foreign state in India exceed
the prescribed period.
Gist- For India to get taxability right on
income of nature specified in Article 14, Fixed base or stay for prescribed
period in India is essential.
2.
Article 15 govern the distribution of taxability
right of salaries, wages & other remuneration, when an employee being
resident of Foreign state, exercise employment in India. India does not get right to tax remuneration
from employment of resident of Foreign state if following conditions are met :-
a)
The recipient (resident of Foreign state) is not
present in India for prescribed period and
b)
The employer is not resident of India and
c)
The remuneration is not borne by PE or fixed
based, which has employer in India.
Gist – For India to get taxability right on
salary or remuneration of resident of foreign state for employment exercise in
India, Stay in India for prescribed period by employee of foreign state is one
of the essential conditions.
3. Article 17 overrides Article 14 & 15. Following
consequences prevails:-
a) Irrespective of resident of foreign state
having Fixed base or prescribed stay in India, by, India gets taxability right
on income accrues to such resident due to performance in India in independent
character.
b) Where sportsperson or entertainer is an
employee of an organisation and income from their performance in India accrue
to an organisation, then irrespective of performer Stay in India, salary due to such performer for the period
during which performance was carried in India,
India get right to tax such proportionate salary.
4.
Article 17 of UN model convention is similar to
corresponding Article in OECD model Convention. Thus OECD commentary on said
Article is equally applicable to Article 17 of UN model Convention.
5.
Article 17 deals with Income derive by resident
either directly from performance in
Other contracting state. As per OECD commentary, Article 17 will also apply to
Advertisement or sponsorship income which is related directly to performance in
other contracting state.
6. As a corollary, following income will not
be governed by Article 17, which will be dealt by either Article 7, 14 or 12.
a) Advertisement income, which is not linked
to performance on other contracting state
b) Journalism income (Contribution of an
article in newspaper etc.), which is not linked to performance in other
contracting state
c) Royalty income from exploitation of
Intellectual right of performance in India
7.
Income of
team members- As per OCED commentary
on OECD model double taxation convention, Article 17 does not extend to support
staff (e.g cameramen for a film, producers, film directors, choreographers,
technical staff, road crew for a pop group etc).
Taxability of
Non-resident and not being citizen of India sportsman/entertainer in India
A sportsman/entertainment can earn income in the
following modes:-
1.
By performing in independent capacity
2.
As an employee of an association.
3.
Other means- Advertisement, Journalism, royalty.
Performance in India in
independent capacity
By visiting India, an entertainer can earn income from
various activities;-
a)
Direct performance
b)
By advertisement, (either linked or not linked
to performance in India)
c)
By Contribution of an article in Newspaper
etc.,( hereinafter referred to as Journalism) (linked or not linked to
performance in India).
d)
By Royalty on use by other person of copyright
over the performance in India.
The taxability based on interplay of Section 115BBA and
Article 17 of DTAA is explained as under:-
|
S.No.
|
Activity
|
Taxability
|
|
1.
|
Direct Performance
|
1.
Article 17 empowers performing state to tax
income, irrespective of period of stay or performance in India
2.
Section
115BBA tax such income @ 20%
|
|
2.
|
Advertisement/Journalism linked with performance in
India
|
1.
Same as applicable in the context of Direct
Performance at S.No (1)
|
|
3.
|
Advertisement/Journalism not linked with any
performance in India
|
1.
Article 17 will not be applicable to said
income
2.
Article 14 or Article 7 will be applicable.
Under this article, income from India will not be taxable in India, unless
non-resident has PE or fixed based in
India. Income from one time activity in India is not taxable in India.
3.
Unless
entertainer has PE or Fixed based in India, said advertisement income is not
taxable in India
|
|
4.
|
Royalty
|
1.
Article 17 will not be applicable to said
income
2.
Article 12 will be applicable to said income,
which gives payer state, India in the instant case, to tax such royalty.
3.
Such
Royalty will be taxable in India u/s 115A @ 25%.
|
Performance in India in as
an employee.
1.
Section 9(1)(iii) provides for an accrual of
salary income in India, in case of non-resident for service rendered in India
2.
Article 15 of DTAA, India get taxability rights
only when Non-resident in present in India for prescribed period
3.
Article 17 over-rides Article 15, thereby for
service rendered in India, India get taxability right irrespective of period of
Stay India.
4. Thus sportsman/entertainer performing in
India as an employee, his proportionate salary for the period corresponding to
performance in India, shall be taxable in India. Since section 115BBA is
separate section providing for special rates for sportsman/entertainer, their
salary will be taxable in India @ 20%.
Taxability of
Non-resident and being citizen of india, sportsman/entertainer in India
In this case, when India get
taxability right under Article 17, the tax rates will be normal as applicable
to non-resident, other than specified in section 115BBA.
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