Special Taxation of Non-Resident Sportsmen and Entertainers : Clause 211 of the Income Tax Bill, 2025 Vs. section 115BBA of the Income-tax Act, 1961

Clause 211 Tax on non-resident sportsmen or sports associations.

Income Tax Bill, 2025

Introduction

Clause 211 of the Income Tax Bill, 2025 introduces special provisions for the taxation of non-resident sportsmen, sports associations, and entertainers, mirroring and updating the existing regime under section 115BBA of the Income-tax Act, 1961. These provisions are designed to ensure the taxability of incomes accruing to non-resident individuals and entities from specified activities conducted in India. The legislative focus is on preventing tax leakage from cross-border sporting and entertainment activities, reflecting both policy continuity and certain procedural enhancements.

This commentary examines Clause 211 in depth, elucidates its objectives, dissects its operative mechanisms, and compares it with the established framework u/s 115BBA. The analysis explores legislative intent, practical implications, interpretative nuances, and the significance of these provisions in the context of India's evolving tax landscape.

Objective and Purpose

Legislative Intent and Policy Rationale

The core objective of both Clause 211 and Section 115BBA is to provide a clear, simple, and effective mechanism for taxing income earned by non-resident sportsmen, sports associations, and entertainers from activities conducted in India. The rationale for such special provisions is multifold:

• Source-Based Taxation: India, like many jurisdictions, asserts the right to tax income arising or accruing within its territory, even if the recipient is a non-resident. Sporting and entertainment activities often involve transient presence and complex payment structures, which can lead to tax avoidance if not specifically addressed.
• Administrative Simplicity: By prescribing a flat rate of tax and denying deductions for expenses, the law simplifies compliance and administration, reducing disputes over allowable deductions and ensuring a minimum tax collection.
• Level Playing Field: The provisions aim to ensure that non-resident participants do not enjoy a tax advantage over resident counterparts, thus maintaining fairness in the taxation regime.
• Revenue Protection: With the globalization of sports and entertainment, significant sums flow to non-residents. The special provisions ensure that India's tax base is protected from erosion.

The inclusion of entertainers in the scope of Clause 211 and Section 115BBA (post-2012 amendment) reflects the growing economic significance of entertainment events and performances in India, aligning the tax regime with contemporary realities.

Historical Context

Section 115BBA was introduced by the Direct Tax Laws (Second Amendment) Act, 1989, effective from 1 April 1990. It was subsequently amended to include entertainers (Finance Act, 2012) and to update tax rates. The new Income Tax Bill, 2025, through Clause 211, seeks to carry forward this framework into a restructured code, with certain refinements and clarifications.

Detailed Analysis of Clause 211 of the Income Tax Bill, 2025

1. Scope of Taxation

Clause 211(1) specifies three categories of assessees and the types of income subject to special taxation:

• Non-resident Sportsmen (including athletes): Taxable on income received/receivable from:
  • Participation in India in any game (excluding those where winnings are taxed u/s 194(1) Table: Sl. No. 1) or sport.
  • Advertisements.
  • Contribution of articles relating to any game or sport in India in newspapers, magazines, or journals.
• Non-resident Sports Associations or Institutions: Taxable on any amount guaranteed to be paid/payable in relation to any game (other than those covered u/s 194(1) Table: Sl. No. 1) or sport played in India.
• Non-resident Entertainers: Taxable on income received/receivable from performances in India.

The provision thus casts a wide net, covering direct performance income, endorsement revenue, and ancillary income such as writing articles, reflecting the multifaceted ways in which sportsmen and entertainers monetize their presence in India.

2. Exclusion of Certain Games

Both Clause 211 and Section 115BBA exclude games where winnings are subject to separate taxation (u/s 194(1) Table: Sl. No. 1 in the Bill, and section 115BB in the Income-tax Act, 1961). This typically covers lotteries, betting, and gambling, which are taxed at higher rates under special provisions.

3. Computation of Tax Liability

Clause 211 prescribes a two-step computation:

1. Special Income: Income referred to in clause (a), (b), or (c) is taxed at 20%.
2. Other Income: The remaining total income (if any) is taxed at normal rates.

The aggregate of these two amounts constitutes the total tax liability. This dual structure ensures that special income is ring-fenced and taxed at a flat rate, while other income (if any) is taxed as per the applicable slab or rates.

4. Disallowance of Deductions

Clause 211(2) categorically denies any deduction for expenditure or allowance in computing the income referred to in sub-section (1). This is a crucial anti-avoidance measure, precluding arguments over the deductibility of expenses such as agent fees, travel, or accommodation, which could otherwise substantially reduce the taxable base.

5. Exemption from Return Filing

Clause 211(3) provides that an assessee is not required to file a return of income u/s 263(1) if:

• The total income consists only of income referred to in sub-section (1); and
• Tax deductible at source (TDS) under Chapter XIX-B has been duly deducted.

This provision is designed to ease compliance for non-residents whose India-sourced income is fully subject to TDS and who have no other Indian income.

6. Table of Tax Rates

The Table under Clause 211 prescribes a flat 20% tax on specified income, mirroring the rate u/s 115BBA (post-2012 amendment). The clarity of this tabular presentation aids in straightforward computation.

7. Procedural and Structural Changes

While the substance of Clause 211 closely tracks Section 115BBA, there are differences in referencing (e.g., section 194(1) in the Bill vs. section 115BB in the Income-tax Act, 1961), reflecting the restructuring and renumbering of the Income Tax Bill, 2025. The language is also updated for clarity and alignment with the new code's drafting style.

Practical Implications

1. Impact on Non-resident Sportsmen and Entertainers

The flat 20% tax rate, with no allowance for deductions, means that the effective tax burden can be significant, particularly for those with high expenses. Non-resident sportsmen and entertainers must ensure that their contracts and payment arrangements account for this withholding, as the law provides little scope for tax planning or reduction.

2. Impact on Sports Associations and Event Organizers

Indian sports associations, event organizers, and sponsors must ensure compliance with TDS obligations under Chapter XIX-B. Failure to deduct and remit tax can result in disallowance of expenses and imposition of interest and penalties.

3. Compliance Simplification

The exemption from return filing for non-residents whose income is fully subject to TDS is a welcome simplification, reducing administrative burdens and aligning with international best practices for source-based taxation.

4. Revenue Assurance

For the tax authorities, these provisions ensure a steady and predictable stream of revenue from high-profile international events, reducing the risk of under-reporting or base erosion.

5. Treaty Considerations

India's tax treaties may override domestic law in certain cases, particularly where the treaty restricts the scope of source-based taxation or prescribes a lower rate. However, most treaties allow India to tax performance and endorsement income of non-residents, subject to specified conditions.

Comparative Analysis: Clause 211 vs. section 115BBA

1. Structural Parity

Both Clause 211 and Section 115BBA are substantively similar, reflecting legislative continuity:

• Scope of Income: Both cover non-resident sportsmen, sports associations, and (post-2012) entertainers, taxing participation, advertisements, and article contributions.
• Exclusion of Certain Games: Both exclude games where winnings are taxed under a separate provision (section 115BB in the Income tax Act, 1961; section 194(1) Table: Sl. No. 1 in the Bill).
• Tax Rate: Both prescribe a 20% flat rate (raised from 10% in 2012).
• Disallowance of Deductions: Both deny deductions for expenses or allowances in computing the special income.
• Return Filing Exemption: Both exempt non-residents from filing returns if their income is fully subject to TDS and consists only of the specified income.

2. Differences and Evolution

• Referencing and Drafting: Clause 211 updates references to align with the new Income Tax Bill, 2025 (e.g., section 194(1) instead of section 115BB), and employs contemporary drafting language.
• Tabular Presentation: Clause 211 uses a table to specify the tax rate, enhancing clarity.
• Procedural Alignment: The exemption from return filing refers to section 263(1) in the Bill, corresponding to section 139(1) in the of the Income-tax Act, 1961.
• Chapter Reference: TDS compliance is linked to Chapter XIX-B in the Bill, replacing Chapter XVII-B in the Income-tax Act, 1961.
• Potential for Future Amendments: The new code may provide greater flexibility for future amendments, as it is drafted with modern legislative techniques.

3. Unique Features

The inclusion of entertainers (since 2012) reflects India's recognition of the economic impact of international entertainment events. The special provisions for article contributions acknowledge the diverse revenue streams of sportsmen and entertainers.

4. Ambiguities and Issues

• Definition of 'Entertainer': Neither provision defines "entertainer" exhaustively, potentially leading to interpretative disputes.
• Scope of 'Participation': The term "participation" may raise questions in cases of virtual events or remote involvement.
• Overlap with Other Provisions: Care must be taken to avoid double taxation where income could fall under multiple heads (e.g., winnings vs. participation fees).

5. International Comparison

Many jurisdictions (e.g., the United States, the United Kingdom) have similar source-based taxation regimes for non-resident entertainers and sportsmen. India's approach is consistent with international practices, though the flat rate and denial of deductions can be more stringent than some counterparts, who may allow limited expense deductions.

Conclusion

Clause 211 of the Income Tax Bill, 2025, represents a direct continuation and modernization of the regime established by section 115BBA of the Income-tax Act, 1961. It preserves the policy focus on efficient, source-based taxation of non-resident sportsmen, sports associations, and entertainers, while updating procedural references and clarifying computation mechanisms. The flat rate structure, denial of deductions, and exemption from return filing collectively enhance administrative simplicity and revenue assurance, albeit at the cost of flexibility for affected taxpayers.

As India continues to host high-profile international sporting and entertainment events, these provisions will remain critical in ensuring equitable and effective taxation. The transition to the new code offers an opportunity for further refinement, particularly in addressing definitional ambiguities and aligning with evolving global tax standards.

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Full Text:

Clause 211 Tax on non-resident sportsmen or sports associations.

 

Dated: 2-5-2025