Taxable income
This query is : Resolved
25 February 2014
Hello,
Receipt of Share of Profit frpm abroad firm (firm in abroad) is taxable to resident in india or not.
Share is accrued outside India and received out side India.
Thanks in advance.
Receipt of Share of Profit frpm abroad firm (firm in abroad) is taxable to resident in india or not.
Share is accrued outside India and received out side India.
Thanks in advance.
25 February 2014
It is not taxable in India as you have already paid taxes of that country and the income has been earned outside India but if no tax has been paid in that country then at the time of bringing that income minimum 20% plus SC is to be paid in India
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21 March 2014
Hello Sir,
Can you mention Section for above explanation?
Thanks in advance.
Can you mention Section for above explanation?
Thanks in advance.
26 July 2025
Regarding the **taxability of share of profit from a foreign firm** received by a resident in India, here’s the detailed explanation:
---
### 1. **Whether the income is taxable in India?**
* As per Indian Income Tax law, **a resident Indian is taxable on their global income** (i.e., income received or accrued anywhere in the world).
* So, even if the share of profit is accrued and received **outside India** from a foreign firm, it is **taxable in India** if the recipient is a resident.
### 2. **Is the share of profit from a foreign firm taxable?**
* Under the Indian Income Tax Act, **share of profit from a partnership firm (including foreign firm) is exempt from tax in the hands of partners under Section 9(2)** if the firm itself is taxed in its jurisdiction.
* However, if the foreign firm is **not assessed to tax in its country**, the share of profit will be treated as income and taxable in India in the hands of the partner.
### 3. **Double Taxation Relief (if foreign tax is paid):**
* If tax is paid in the foreign country, the resident Indian can claim relief under **Double Taxation Avoidance Agreement (DTAA)** or under **Section 90/91** of the Income Tax Act.
### 4. **Section Reference:**
* **Section 9(2)** of the Income Tax Act, 1961: Exempts share of profit from a partnership firm from tax if the firm is taxed.
* **Section 5(1)**: States that resident individuals are taxable on global income.
* **Section 90/91**: For relief from double taxation.
* **Section 91(1)** specifically provides unilateral relief where no DTAA exists.
---
### Summary:
| Scenario | Taxability in India |
| --------------------------------- | ------------------------------------------- |
| Foreign firm pays tax on profit | Share of profit exempt in hands of partner |
| Foreign firm does **not** pay tax | Share of profit taxable in hands of partner |
| Tax paid abroad | Relief available under DTAA or Section 91 |
---
If you want exact **legal backing**, here are the relevant excerpts:
* **Section 9(2)**:
*“Any share in the profit of a firm paid or payable to a partner shall be exempt from income-tax, if the firm is liable to pay tax on the whole of the income of the firm in respect of such profits.”*
* **Section 5(1)**:
*“The total income of a person who is a resident includes all income wherever received or accrued.”*
---
If you want, I can help draft this into a formal explanation or assist with how to declare this income in your ITR.
Would you like that?
---
### 1. **Whether the income is taxable in India?**
* As per Indian Income Tax law, **a resident Indian is taxable on their global income** (i.e., income received or accrued anywhere in the world).
* So, even if the share of profit is accrued and received **outside India** from a foreign firm, it is **taxable in India** if the recipient is a resident.
### 2. **Is the share of profit from a foreign firm taxable?**
* Under the Indian Income Tax Act, **share of profit from a partnership firm (including foreign firm) is exempt from tax in the hands of partners under Section 9(2)** if the firm itself is taxed in its jurisdiction.
* However, if the foreign firm is **not assessed to tax in its country**, the share of profit will be treated as income and taxable in India in the hands of the partner.
### 3. **Double Taxation Relief (if foreign tax is paid):**
* If tax is paid in the foreign country, the resident Indian can claim relief under **Double Taxation Avoidance Agreement (DTAA)** or under **Section 90/91** of the Income Tax Act.
### 4. **Section Reference:**
* **Section 9(2)** of the Income Tax Act, 1961: Exempts share of profit from a partnership firm from tax if the firm is taxed.
* **Section 5(1)**: States that resident individuals are taxable on global income.
* **Section 90/91**: For relief from double taxation.
* **Section 91(1)** specifically provides unilateral relief where no DTAA exists.
---
### Summary:
| Scenario | Taxability in India |
| --------------------------------- | ------------------------------------------- |
| Foreign firm pays tax on profit | Share of profit exempt in hands of partner |
| Foreign firm does **not** pay tax | Share of profit taxable in hands of partner |
| Tax paid abroad | Relief available under DTAA or Section 91 |
---
If you want exact **legal backing**, here are the relevant excerpts:
* **Section 9(2)**:
*“Any share in the profit of a firm paid or payable to a partner shall be exempt from income-tax, if the firm is liable to pay tax on the whole of the income of the firm in respect of such profits.”*
* **Section 5(1)**:
*“The total income of a person who is a resident includes all income wherever received or accrued.”*
---
If you want, I can help draft this into a formal explanation or assist with how to declare this income in your ITR.
Would you like that?
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