GST and Income Tax Implication on Non-Resident Sportsmen Coming to India

When a non-resident sportsman comes to India for participating in any game or sport then a question arises which country has right to charge tax on such income earned by sportsmen by participating in game or sport and what are the tax implications on such income earned.

What is Section 115BBA?

This section provides a special tax rate at the rate of 20% (plus EC and SHEC), Plus Surcharge as applicable on specified income arising to a Non-Resident Sportsman or Entertainer or Sports Association.

However, no deduction for any expenditure arose and allowance is given to such assesses under the section 115BBA.

Specified income includes income from participating in any sports or income from advertising or income from contributing articles in the newspaper. All such income should arise only in India.

What is the rate of tax deduction under section 194E?

The tax deduction rate under section 194E is 20% (exclusive of EC & Surcharge). 

Tax Implication under Indian Income Tax Law on Non-Resident Sportsmen Coming to India

Residential Status: As per section 6(1) of Income Tax Act, if an individual has not complied with any of the following two conditions then such individual is considered as Non-Resident,

  1. He/she stays in India for 182 days or more during relevant previous year.
  2. He/she stays in India for 60 days or more during relevant previous year and for 365 days or more during last 4 years immediately preceding relevant previous year.

Tax Rate: Section 115BBA deals with the income earned by non-resident sportsmen by participating in any game (other than winning from game taxable under section 115BB), advertisement or contribution of article related to any game or sport in India. The income shall be taxable @ 20%.

Withholding Tax: According to the 194E of Income Tax Act, TDS on payment to non-resident sportsmen shall be deducted at the rate of [20% + surcharge( if applicable) + health & education cess of 4%] at the time of credit or payment whichever is earlier.

Benefit under DTAA: DTAA also known as Double Tax Avoidance Agreement. Non-Resident Sportsmen can avoid paying double tax under the Double Tax Avoidance Agreement. Usually, non-resident sportsmen live outside India but earn income in India. In such cases, it is possible that the income earned in India would attract tax in India as well as in their resident country. In short, this means that they would have to pay tax twice on the same income. To avoid this, the Double Tax Avoidance Agreement (DTAA) was introduced.

DTAA signed by India with various countries fixes a specific rate at which tax need to be deducted on income earned by residents of that country. This means that when non-resident earn an income in India, the TDS would be deducted at a rate specified in the Double Tax Avoidance Agreement with that country. To claim treaty benefits the non-resident sportsmen shall be required to provide certificate of his resident of country other than India (Tax Residency Certificate) and other documents and information as may be described.

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