227. Guidelines regarding taxation of income of artists, entertainers, sportsmen, etc., from international/national/ local events
Circular No. 787 was issued by the Central Board of Direct Taxes on 10 February 2000. Its subject is 227. Guidelines regarding taxation of income of artists, entertainers, sportsmen, etc., from international/national/ local events.
Gives guidelines on taxing income from entertainment and sports events. It maps the flows: the event manager or artists management company receives sponsorship money, gate money, advertisement revenue, proceeds of broadcasting or telecasting rights and rents from space and caterers, and pays out guarantee money, prize money, rentals, payments to labour contractors for decoration, salaries, royalties, fees for technical services and event insurance. For residents, sections 194C, 194J and 194-I are to be examined, and for non-residents sections 194E and 195 in addition. For a non-resident sportsman who is not a citizen of India, and for a non-resident sports association, income is determined under section 115BBA, which for a sportsman covers participation in a game or sport in India and payment for articles on sport contributed to newspapers, magazines or journals in India, with deduction under section 194E; guarantee money receivable by a non-resident sports association is also within section 115BBA. Under a treaty, the article on artists and sportsmen taxes income from personal activities in India even where it accrues to another person and not to the performer, and covers advertising or sponsorship income related directly or indirectly to the performance or appearance in India, while payment for a recorded performance goes to the royalties article. Guarantee money to a sports association is tested against the other income article of the relevant treaty, and the circular tabulates that position for several countries, taxable in India under the United Kingdom, United States, Japan, Australia, New Zealand and France agreements, and taxable in the association's State of residence under the Sri Lanka agreement. On performers, it notes that a gratuitous performance with no consideration produces no income and no tax, and so does a performance to promote the artist's own records for which no one pays him.
The Board had recently had to examine tax issues on national and international entertainment and sports events, where large sums are earned in very short periods and the performers often leave the country within hours of the show.
227. Guidelines regarding taxation of income of artists, entertainers, sportsmen, etc., from international/national/ local events
1. The Board had in the recent past, occasion to examine taxation issues concerning national and international events or shows for entertainment, sports, etc. Such shows are often characterised by substantial incomes being earned by organisers, sponsors, players, athletes and artists during very short periods of time. In many cases, the performers leave the country within a few hours of the show or event.
2. The events or shows normally involve an event manager, artists management or intermediate company. Their receipts may be of the following nature:—
(i) Sponsorship money;
(ii) Gate money;
(iii) Advertisement revenue;
(iv) Sale of broadcasting or telecasting rights;
(v) Rents from hiring out of space, etc.;
(vi) Rents from caterers.
In turn, the event manager, etc., may inter alia incur expenditure on guarantee money, prize money, rental for premises or equipment payments to labour contractor for decoration, salaries, royalties, fees for technical services, insurance premium for the event, etc.
Such receipts and payments may be liable to deduction of tax at source under various provisions of the Income-tax Act, 1961. In the case of residents, the applicability of the provisions of sections 194C, 194J and 194-I and in addition in the case of non-residents, the applicability of section 194E and section 195 should be examined.
3. In the case of non-residents, in addition to the provisions of the Income-tax Act, 1961, the applicability of Double Taxation Avoidance Agreement (DTAA) should be examined. The Income-tax Act, 1961 provides that in case of sportsmen or artists participating in such events or shows, all income accruing or arising or deemed to be accruing or arising, received or deemed to be received in India is taxable in India. Under the DTAAs, usually there is a separate Article on "Artists and Sportsmen", which provides for taxation in India of the income from the personal activities of the sportsmen or artists in India. Even where the income from personal activities accrues to another person and not directly to the artists or sportsmen, it is still taxable in India in accordance with this article in the DTAAs. The advertising or sponsorship income, etc., of the sportsman or artists, which is related directly or indirectly to performance or appearance in India would also be covered under the said DATA Article on "Artists and Sportsmen". Where, under the same contract or under a separate one, the performance is recorded and royalties are stipulated to be paid, the same would be covered under the Article on ‘Royalties’ in the DTAA.
4. The income earned by non-resident sportsmen, who are not citizens of India or the income earned by non-resident sports association or institutions is required to be determined in accordance with the provisions of section 115BBA of the Income-tax Act, 1961. In the case of the sportsmen, this would include the income by way of participation in India in any game or sport, from advertisement or contribution to any newspapers, magazines or journal of any articles relating to sport or game in India. The tax should be deducted at source under section 194E from such payments. The provisions of section 115BBA would be applicable to the guarantee money receivable by the non-resident sports association. The payment by way of guarantee money to non-resident sport associations needs to be considered in terms of the Article on "Other income" or on "Income not expressly mentioned" of the relevant DTAA. The position of the taxation of such guarantee money under this Article in some of the DTAAs is as under :—U.K.
Taxable in India, as per article 23.3
U.S.A
Taxable in India, as per article 23.3
Japan
Taxable in India, as per article 22.3
Australia
Taxable in India, as per article XXII(2)
New Zealand
Taxable in India, as per article 22
Sri Lanka
Taxable where the sports association/institutions is resident, as per article 22.
France
Taxable in India, as per Article 23.3.
Similarly, in the case of other countries, the Article on "Other income" etc. in the relevant DTAAs would be applicable. In cases where such guarantee money is taxable in India under the DTAA, income would be determined in accordance with section 115BBA of the Income-tax Act and the tax deducted at source under section 194E of the Income-tax Act.
5. In connection with the taxability of income of the non-resident artists or performer in India, the facts and circumstances of each event need to be considered. A few situations are illustrated below :
(i) If an artist performs in India gratuitously without any consideration, there would be no income and, consequently, no tax.
(ii) Where the artists performs in India to promote sale of his records and no consideration is paid for this performance by the record company or anyone else; there will be no tax as he does not receive any income for performance in India.
(iii) Any consideration received by artists or performer for the live performance or simultaneous live telecast or broadcast (on radio, television, internet, etc.) in India would qualify as income and, consequently, should be taxable. Even, if separate consideration is received for simultaneous live telecast, etc., of performance, the same shall be taxable in India and is to be treated under the Article on ‘Artists and Sportsmen" in the DTAA.
(iv) The consideration paid to the artists to acquire the copyrights of performance in India for subsequent sale abroad (of records, CDs, etc.) or the consideration paid to the artist for acquiring the license for broadcast or telecast overseas is not taxable in India due to exclusions provided in section 9(1)(vi) of the Income-tax Act;
(v) The consideration paid to the artist to acquire the copyrights of performance in India for subsequent sale in India (as records, CDs, etc.) or the consideration paid to the artist for acquiring the license for broadcast or telecast in India is taxable in India as per sections 9(1)(vi) of the Income-tax Act as royalties. Under the DTAA also, this would fall under the "Royalties" Article;
(vi) The portion of endorsement fees (for launch or promotion of products, etc.) which relates to artist’s performance in India shall be taxable in India in accordance with the provisions of section 5 of the Income-tax Act. Under the DTAA, this would fall under the Article on "Artists and Sportsmen".
In view of the above, the contracts of the artists or performers with event managers, sponsors, etc., are of vital importance in deciding the taxability of their income in India. It is, therefore, necessary to obtain and examine the contracts of the artists or performers relating to the event. The apportionment of the income attributable to India would have to be done by the Assessing Officer. The situations cited above are for the purpose of illustrations and do not cover all possible cases.
6. Wherever the participants in such shows or events are not domiciled in India, they may be required to obtain tax clearance certificate (TCC) under section 230 of the Income-tax Act from the competent authority. The Central Government vide its Notification No. SRO 961, dated 25-5-1953 has listed the persons who are exempted from obtaining TCC. The persons who are not domiciled in India are not required to obtain TCC when they spend less than 120 days in India. However, the said Notification also provides that the competent authority, at its discretion, may still require such persons to obtain TCC from the competent authority. The period of stay in India of performers in such international/national events or shows for sports, entertainment, etc., may often be for durations less than one hundred and twenty days. The competent authority should insist on obtaining of TCC by the performers in such shows are events wherever such persons are believed to be having taxable income in India and no tax has been paid or no arrangement for the payment of tax has been made.
Circular: No. 787, dated 10-2-2000.
In advising an event organiser before a tour or match on what to deduct, and in a section 201 proceeding after the performers have left India.
Source: the Income Tax Department’s own published text — its page for this instrument.
