SaaS and app income from Indian users as an NRI

Start with the two charges people expect, and why they usually miss. The first is royalty. Tax officers have long argued that paying for software is paying for a copyright, which would make it a royalty taxable in India. The Supreme Court closed most of that in Engineering Analysis Centre of Excellence v. CIT in 2021, holding that buying a standardised, off-the-shelf software product is buying a copyrighted article, not the copyright itself, so it is not a royalty under the treaties. For ordinary SaaS and app subscriptions that reasoning means no royalty charge, and so no withholding under Section 195 on a royalty basis.

The second is the equalisation levy, and here the news is simply that it is gone. The 2 per cent levy on e-commerce supplies was abolished from August 2024, and the 6 per cent levy on online advertising from April 2025. So do not budget for it. That leaves ordinary business income, which India can tax only if you have a business connection or permanent establishment here, or through the significant economic presence rule, which treats a non-resident as taxable once India revenue crosses ₹2 crore or users cross three lakh. The catch for the tax office is that a treaty still requires a permanent establishment, which significant economic presence alone does not create, so a treaty-resident SaaS seller with no office or dependent agent in India usually has no Indian income-tax liability on the business profits.

The real Indian exposure for a small cross-border SaaS or app business is not income tax, it is GST, and this is the piece people miss. Supplying digital services to users in India, software, apps, subscriptions, streaming, is treated as OIDAR, which stands for online information and database access or retrieval. From 1 October 2023 the rules were widened and the old exemption for individual consumers was removed, so a non-resident supplying these services to any unregistered Indian recipient, ordinary consumers included, must register in India and pay 18 per cent GST on those sales. Business customers who are registered handle the GST themselves under reverse charge, but consumer sales are on you.

So the practical picture for an NRI running a SaaS product with Indian users is often the reverse of what they expect: little or no Indian income tax, because standard software is not a royalty and there is no permanent establishment, but a live GST registration and 18 per cent liability on sales to Indian consumers. Getting this the right way round matters, because the cost and the compliance sit in GST, not income tax. A practising CA confirms your no-permanent-establishment position for income tax, and handles the OIDAR registration and GST so you are compliant on the charge that does apply.