Brief: Artists coming to India - Tax aspects to consider!


[Briefs is a series wherein I try to decipher the law surrounding a subject in a concise and abridged form ~ usually a 2-minute read] 

Introduction: 

For the purposes of this Article, I have assumed that the Non-Resident Artist (hereinafter 'Artist') shall be coming down to India from the USA [for the purposes of the interplay of an illustrative DTAA as an example] 

Illustrative facts considered: 

The Theater Group Company, USA (hereinafter 'ThUS') proposes to enter into an arrangement with an Indian producer (hereinafter 'IPD') wherein the show produced by ThUS shall be performed in India. IPD shall pay a consideration to ThUS that shall be first, royalty payments to exploit the necessary intellectual property rights to perform the theatrical and second, for the payment of Artists. 

The presence of the theatrical shall be less than 90 days [to exclude the Permanent Establishment considerations involved] 

Taxability on consideration: 

IPD shall be required  to withhold taxes on the consideration as follows:
  • Royalty Payments - Consideration relating to grant of intellectual property rights as royalty and consideration relating to ancillary services as Fees for Included Services, both taxable at 10% (plus applicable surcharge and cess)
  • Consideration towards Artists -  Consideration chargeable by artists, taxable at 20% (plus applicable surcharge and cess) under Section 115BBA of the Income-tax Act, 1961. Further sub-section 2 to Section 115BBA states that if the remuneration to such artists is only accruing u/s 115BA, i.e, in relation to their performance then such artists do not require to file their Income-tax return in India. Beneficial provision Article 18 of the US-India DTAA mandates that taxability shall arise in a Source State only if the net income of such artist from the source state is more than USD 1,500. 
Taxability of other aspects in relation to the Artists
  • Housing, meals & touring of Artists  - Expenditure in connection to the Housing, meals & touring of the Artists are an integral part of their ability to perform their artistic calling. Therefore, the same should not be taxable in the hands of such artists. These may be considered as expenditure in the hands of ThUS. Aggressively, should the Tax Office take a stand that these expenses form part of perquisities in the hands of artists, they may claim exemption u/s 10(14) which are "specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit" However, should these expenses be in a form which is over and above the quantum actually spent, the same shall form part of Artists income u/s 115BBA provided it is justifiable that such income has accrued/actually recieved from their performance in India. The same principles shall apply to other expenses and incomes viz., any allowance to visit the home country, etc. 

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