Direct Tax Amicus, April 2026

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Article

Conundrum of Taxability of FTS: Services rendered in India

By Ravi Sawana, Dinesh Kukreja and Priyanshi Chokshi

Fees for Technical Services (FTS) are typically taxed where services are rendered, but many Indian tax treaties instead tax FTS based on the payer’s residence or an Indian PE. Three treaties, namely, India-China, India-Israel and India-Finland, however, depart from this approach by linking taxability to where services are performed. Discussing the question as to what it means to ‘render’ a service in India, the article in this issue of Direct Tax Amicus examines the domestic law history, India’s own treaty practice, and international jurisprudence on the subject. According to the authors, the expressions ‘services rendered in India’ and ‘services performed’ or ‘provided’ in India is understood to mean services physically carried out in India by the service provider, especially under the India-China, India-Israel and India-Finland tax treaties. 

Notifications and Circulars
 

• Time limit for issuance of TDS certificates under Section 203 for the quarter ending 31 December 2025 extended
• DIN may be quoted either in communication or through annexed document or in email correspondence; certain exclusions provided
• GAAR not applicable for pre-1st April 2017 investments – Rules amended
• India-Brazil DTAA: Key highlights of the amending Protocol
   

Ratio Decidendi
 

• Capital gains on intra-group buy-back not taxable in India; falls within ‘corporate reorganisation’ under Article 13(5) of India-Netherlands DTAA – ITAT New Delhi
• Gains from stock derivatives not taxable under Article 13(3A) of India-Mauritius DTAA – ITAT New Delhi
• Sale of software licences not taxable in India in absence of PE/DAPE; distributor model found to be on principal-to-principal basis – ITAT New Delhi
• Flat received on redevelopment constitutes consideration for surrender of tenancy rights; not taxable under Section 56(2)(x) of the IT Act – ITAT Mumbai
• ESOP cross-charge allowable as revenue expenditure u/s 37(1) of the IT Act; employee compensation cost, not capital in nature – ITAT Bengaluru