India: Software development services not taxable | KPMG | GLOBAL
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India: Software development services not taxable under U.S. treaty

India: Software development services not taxable

The Ahmedabad Tribunal held that software development services that required certain intellectual skill and that were dependent on the individual characteristics of the person pursuing software development, qualify as professional services.


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Because such professional services are rendered by an individual, the tribunal concluded that they are covered by the “independent personal services” article—and not by the “fees for included services” article—under the India-United States income tax treaty. Also, absent a fixed base in India and the person not being present in India for more than 90 days during the relevant assessment year, these software development services are not taxable under the independent personal services article of the tax treaty. The tribunal observed that due to a specific clause under Article 12(5)(e), once an amount is covered and subject to the independent personal services article, the tax authorities cannot claim the amount is also covered under the “fees for included services” article of the treaty.

The case is: ITO v. Susanto Purnamo.  Read an August 2016 report [PDF 334 KB] prepared by the KPMG member firm in India

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