Section 306 Income Tax Act 2025: Who Can Be an Agent of a Non-Resident?

Section 306 explains when a person may be regarded as an agent of a non-resident for Indian income-tax purposes, identifies a specific exception for brokers, and protects the proposed agent's right to be heard.

Current law: Section 306, Income-tax Act, 2025 (effective from 1 April 2026), corresponds broadly to Section 163 of the Income-tax Act, 1961. Read it with Sections 303 to 305 and Section 9(9)(a).

What does Section 306 provide?

Section 306 is part of Chapter XVII, dealing with special provisions relating to certain persons. Its heading is Who may be regarded as agent. It identifies persons with a sufficient statutory connection to a non-resident who may be considered for representative assessment. Being within a listed category does not dispense with the hearing required by sub-section (3).

Section 306(1): Who may be regarded as an agent?

The provision includes the following categories:

Employment: a person in India employed by or on behalf of the non-resident.
Business connection: a person in India who has a business connection with the non-resident.
Receipt of income: a person in India from or through whom the non-resident receives income, directly or indirectly.
Trustee: a person in India who is trustee of the non-resident.
Transfer of capital asset: any other person, whether resident or non-resident, who has acquired a capital asset in India by means of a transfer.

These categories describe who may fall within the statutory meaning of agent. Actual tax liability must be considered alongside the charging and representative assessee provisions, including Sections 9, 303 and 304.

Section 306(2): When is an Indian broker excluded?

An Indian broker who does not deal directly with or on behalf of a non-resident principal, but deals with or through a non-resident broker, is not deemed an agent in respect of those transactions if both conditions are met:

The transactions are conducted through the Indian broker in the ordinary course of business.
The non-resident broker carries on those transactions in the ordinary course of its business, and not as principal.

The exception is transaction-specific and depends on the actual commercial relationship and conduct of the parties.

Section 306(3): Is a hearing mandatory?

Yes. A person cannot be treated as an agent of a non-resident without first having an opportunity of being heard by the Assessing Officer on the proposed liability to be treated as such. The person may explain the contractual relationship, transaction structure, broker exception and other relevant facts before a determination is made.

Section 306(4): Relevant statutory definitions

Non-resident: Residence status is determined under the applicable residence provisions of the Act; it is not established merely by nationality or the location of a business.

Agent: For this section, the term includes the categories set out in Section 306(1), subject to the other subsections.

Business connection: Section 306(4) expressly adopts the meaning assigned by Section 9(9)(a). The precise statutory test should be applied to the facts.

Representative assessee: Section 303 includes, in relation to specified income of a non-resident, the non-resident's agent, including a person treated as agent under Section 306.

Capital asset: The meaning under the Act is relevant when applying the transferred-capital-asset category in Section 306(1)(b).

Practical illustrations

Example 1: Indian business intermediary

An Indian company habitually facilitates transactions that generate income for an overseas enterprise. Whether the Indian company may be treated as agent depends on the facts and the statutory business-connection test. The Assessing Officer must provide an opportunity of hearing before treating it as an agent.

Example 2: Broker-to-broker transactions

An Indian broker executes transactions through a non-resident broker, without acting directly for a non-resident principal. If both ordinary-course-of-business conditions in Section 306(2) are satisfied, the Indian broker is not deemed an agent for those transactions.

Example 3: Acquisition of Indian capital asset

A purchaser acquires a capital asset situated in India from a non-resident. Section 306(1)(b) can bring the purchaser within the class of persons who may be regarded as agents; this does not by itself determine the amount of any taxable income or final liability.

Practical point: Agency classification, taxability of the non-resident's income, withholding obligations and ultimate recovery are distinct questions. Examine the relevant statutory provisions and any applicable tax treaty separately.

Frequently asked questions

Does every Indian customer of a non-resident automatically become an agent?

No. The facts must bring the person within the statutory categories, and the procedural hearing requirement must be observed.

Can a non-resident purchaser be covered?

Section 306(1)(b) expressly refers to a person, whether resident or non-resident, acquiring a capital asset in India by transfer.

Can the Assessing Officer declare a person an agent without hearing them?

No. Section 306(3) requires an opportunity of being heard before the person is treated as agent.

Which earlier provision corresponds to Section 306?

Section 163 of the Income-tax Act, 1961 addresses the corresponding subject.

Official statutory sources

For authoritative wording and amendments, consult the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Income Tax Department Act resource.

Last reviewed: 11 November 2026. This article is general legal information; application depends on facts and the current statutory text.