Chapter XVII - Special Provisions Relating to Certain Persons
Section 306
Section 306: who may be regarded as the agent of a non-resident
Section 306 defines "agent" in relation to a non-resident for tax purposes - it covers employees, people with a business connection, income conduits and trustees in India, plus anyone who has acquired a capital asset in India by transfer, while carving out genuinely independent brokers and guaranteeing a hearing before agent status is fixed.
On this page
Need advice on Section 306?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) For the purposes of this Act, “agent”, in relation to a non-resident, includes––
(a) any person in India—
(i) who is employed by or on behalf of the non-resident; or
(ii) who has any business connection with the non-resident; or
(iii) from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or
(iv) who is the trustee of the non-resident;
(b) any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India.
(2) A broker in India who, in respect of any transactions, does not deal directly with or on behalf of a non-resident principal but deals with or through a non-resident broker shall not be deemed to be an agent under this section in respect of such transactions, if the following conditions are fulfilled:—
(a) the transactions are carried on in the ordinary course of business through the first-mentioned broker; and
(b) the non-resident broker is carrying on such transactions in the ordinary course of his business and not as a principal.
(3) A person shall not be treated as the agent of a non-resident unless he has had an opportunity of being heard by the Assessing Officer as to his liability to be treated as such.
(4) For the purposes of this section, “business connection” shall have the meaning assigned to it in section 9(9)(a).
Introduction
Section 306 identifies when a person can be treated as agent of a non-resident for income-tax purposes. It includes specified business, property and receipt connections with India.
A person must receive an opportunity to be heard before the Assessing Officer treats them as the non-resident’s agent.
Key takeaways
Non-resident agent categories
The section identifies persons whose relationship, business connection or control may make them an agent of a non-resident.
Hearing before designation
The Assessing Officer must give a person an opportunity of being heard before treating that person as an agent.
Broker exception
An Indian broker dealing only through a non-resident broker is not deemed the non-resident principal’s agent on that basis alone.
Who counts as an "agent" of a non-resident
For the purposes of the Act, "agent", in relation to a non-resident, includes:
- Any person in India who is employed by or on behalf of the non-resident.
- Any person in India who has any business connection with the non-resident.
- Any person in India from or through whom the non-resident is in receipt of any income, whether directly or indirectly.
- Any person in India who is the trustee of the non-resident.
- Any other person, whether resident or non-resident, who has acquired a capital asset in India by means of a transfer.
Independent brokers dealing through a non-resident broker are excluded
A broker in India who does not deal directly with, or on behalf of, a non-resident principal, but instead deals with or through a non-resident broker, is not deemed an agent under this section for those transactions, provided: the transactions are carried on in the ordinary course of business through the first-mentioned broker; and the non-resident broker carries on those transactions in the ordinary course of his own business, and not as a principal.
A hearing is required before agent status is fixed
A person cannot be treated as the agent of a non-resident unless he has had an opportunity of being heard by the Assessing Officer on his liability to be treated as such.
Meaning of "business connection"
For the purposes of Section 306, "business connection" has the meaning assigned to it in section 9(9)(a).
Step-by-step flow for deciding whether a person is an agent under Section 306
- 1
Is the person in India and linked to the non-resident in one of the listed ways?
Section 306(1)(a): employed by or on behalf of the non-resident, having a business connection with it (meaning as in Section 9(9)(a)), receiving income from or through whom the non-resident is paid, directly or indirectly, or acting as its trustee.
- Yes: Go to step 3.
- No: Go to step 2.
- 2
Has the person, resident or non-resident, acquired a capital asset in India by transfer?
Section 306(1)(b) covers such a person.
- No: The person is not within the Section 306(1) meaning of agent.
- Yes: Go to the next step.
- 3
Is the person a broker in India dealing with or through a non-resident broker, not directly with the non-resident principal?
- Yes, and both Section 306(2) conditions are met: The transactions are in the ordinary course of business through the Indian broker, and the non-resident broker acts in the ordinary course of its business and not as principal. The broker is not deemed an agent for those transactions.
- No, or a condition fails: Go to the next step.
- 4
Has the person had an opportunity of being heard by the Assessing Officer?
Under Section 306(3), no one is treated as an agent unless first heard on the liability to be so treated. Once treated as agent, the person is a representative assessee under Section 303(1)(a).
Practical checklist
Do
- Identify the precise statutory connection relied on to assert agent status.
- Respond to the notice and present evidence of the actual relationship with the non-resident.
Avoid
- Assume an independent Indian broker is an agent merely because they transact through a non-resident broker.
Illustrative example
Worked example: buyer of a building from a non-resident
Hypothetical facts (illustration only, not a real taxpayer): An Indian company buys an office building in Pune from a non-resident individual. The company has no other dealings with the seller. The Assessing Officer proposes to treat the company as the seller's agent.
Section 306(1)(a)
The company is not the seller's employee or trustee, and on these facts has no business connection with the seller.
Section 306(1)(b)
The company has acquired a capital asset in India by transfer, so it can be an agent under this clause.
Broker exception
The company is not a broker, so Section 306(2) does not help it.
Hearing
Before treating the company as agent, the Assessing Officer must give it an opportunity of being heard under Section 306(3).
Outcome
- After a hearing, the company may be treated as the non-resident's agent and so as a representative assessee under Section 303(1)(a).
- Its rights to retain or recover the tax are in Section 305.
Frequently asked questions
Can any person who deals with a non-resident be treated as their agent?
Section 306(1) covers employees, people with a business connection, people through whom the non-resident receives income, trustees, and anyone who has acquired a capital asset in India by transfer - but Section 306(3) requires the Assessing Officer to give that person a hearing before treating them as an agent.
Is an Indian broker automatically the agent of a non-resident broker they deal with?
No - Section 306(2) excludes a broker who deals only through a non-resident broker (not directly with a non-resident principal), provided the transactions are in the ordinary course of business on both sides and the non-resident broker is not acting as a principal.
Need help applying this provision to your situation?
Talk to our team about non-resident agent tax obligationsLast updated 9 October 2026