India–US Service PE: The 90-Day Test, Related Enterprises and the Protocol’s 30-Day Exception

There is no universal 90-day safe harbour

Under India–US DTAA Article 5(2)(l), furnishing services other than Article 12 included services within India through employees or other personnel can create a PE if the qualifying activities exceed 90 days in any twelve-month period, or if the services are performed in India for a related enterprise within Article 9(1). The related-enterprise limb does not contain that 90-day minimum. A no-PE conclusion based only on an employee’s short visit is therefore incomplete.

For a time period spanning two taxable years, Protocol I, Ad Article 5 adds a further rule: in the specified circumstances a PE is not deemed to exist in a year with less than 30 days of the relevant activity. That exception does not erase those days from the rolling threshold calculation. Exactly 30 days is not less than 30.

Apply the actual treaty and its protocol

This guide addresses an eligible US enterprise furnishing services in India, based on official sources reviewed on 23 October 2026. The Indian Income Tax Department’s India–US Convention text contains Article 5(2)(l), Articles 7 and 9, and Protocol I. The IRS treaty publication also includes the protocol and related instruments. These treaty-specific tests should not be copied into an India–Singapore, India–UK or other treaty file.

For tax years beginning from 1 April 2026, the current domestic framework is the Income-tax Act, 2025, including sections 9 and 159. Treaty relief depends on eligibility; section 159(8) requires residence certification and prescribed information. Rule 75 and Form 41 address the current information requirement. A US invoice address or a generic no-PE certificate does not establish treaty residence, Article 24 entitlement or the actual service facts.

Question	Treaty test	Workpaper consequence
What service is being supplied?	Article 5(2)(l) excludes Article 12 included services.	Classify the deliverables before counting this service-PE population.
Where are services furnished?	The limb concerns services within the other Contracting State.	Identify personnel, locations and actual activities.
Unrelated or related recipient?	More than 90 days in any twelve months, or the separate related-enterprise limb.	Retain both a rolling calendar and Article 9 relationship analysis.
Does the relevant period span years?	Protocol I: less-than-30-day exception in a taxable year.	Count threshold days and year allocation separately.
Is another PE possible?	Fixed-place, agency and other Article 5 provisions remain distinct.	A failed service test does not complete the PE review.

Build an enterprise service calendar

A personnel tracker should record legal employer/service provider, recipient, relationship, location, arrival/departure, actual service dates, deliverable and supporting documents. Then build a consolidated activity calendar for the enterprise. Visa validity, salary-tax residence days, invoices and individual travel totals answer different questions; none automatically supplies the treaty service-day result.

The numerical calendars below assume qualifying activity on every date within the stated inclusive period and no disputed interruption or overlapping-person issue. In practice, separately document travel-only days, holidays, temporary interruptions and simultaneous teams; do not mechanically multiply a day by headcount or assume every passport day is a service day. Review legal treatment where those facts affect the outcome. The treaty says any twelve-month period, not simply the Indian tax year and not an individual employee’s total.

Read the cross-year exception before concluding which year has a PE

The US Treasury Technical Explanation, discussion of Article 5 and Protocol I explains that days in the short first year can count towards the time threshold while the protocol prevents a PE being deemed to exist in that short year. The explanation is an official explanatory aid; the treaty and integral protocol are the operative texts. Use the taxable-year definition relevant to the Indian tax analysis, rather than copying a US-calendar-year illustration without adjustment.

The protocol exception discussed here relates to the specified time-period case. It is not a general 30-day exemption for all PEs or a minimum duration inserted into the related-enterprise limb. A fixed-place or agency PE needs a separate conclusion.

PE existence and profit attribution are different workstreams

Article 7 addresses attributable profits and includes specified same/similar sales or activities in its limited force-of-attraction language. The separate-enterprise and expense rules also matter. Do not tax all Indian invoices merely because a PE exists, apply a universal margin, or allocate profits only to day 91 onward without analysing the treaty and facts. Transfer-pricing remuneration and PE attribution likewise require coordinated analysis, not an automatic assumption that one eliminates the other.

Worked illustrations

These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.

Illustrative example 1: Exactly 90 days versus the next day

Assume qualifying non-included services to an unrelated Indian customer on every date from 1 April to 29 June 2026. April 30 + May 31 + June 29 = 90 days: the more-than-90-day limb is not met. Extending through 30 June gives 91 days and meets it. Other PE routes remain open in both cases; the example is not an overall tax exemption.

Illustrative example 2: Two visits still fall within one rolling period

Qualifying services run from 1 February to 17 March 2026 inclusive, 45 days, and 1 May to 15 June 2026 inclusive, 46 days. The non-overlapping total is 91 days within a twelve-month period. Do not reset the rolling test on 1 April. Here the Indian year allocations are 45 and 46 days; neither is less than 30 for the illustrated protocol test.

Illustrative example 3: A short first year under Protocol I

Continuous qualifying activity from 20 March to 18 June 2026 is 91 days: 12 days to 31 March and 79 days from 1 April. The rolling service threshold is met, but the first Indian taxable year has less than 30 days. Assuming this is the only relevant activity and no other PE basis, Protocol I prevents a service PE being deemed to exist in that first year; a PE exists in the later year on the stated facts. The 12 days still count towards the 91-day total.

Illustrative example 4: Exactly 30 days does not receive the same exception

Qualifying activity from 2 March to 31 May 2026 totals 91 days: 30 in March and 61 in April–May. The earlier-year period is exactly 30 days, not less than 30. The illustrated Protocol I short-year exception therefore does not remove the PE in that year. Check the relevant domestic law separately for each year; this is a treaty day-count illustration, not a two-year tax computation.

Illustrative example 5: Fourteen days for a related enterprise

A US enterprise furnishes non-included services in India for its Article 9(1)-related Indian enterprise from 1 to 14 July 2026: 14 qualifying days. Assuming the other service-PE conditions are met, Article 5(2)(l)(ii) can apply without exceeding 90 days. All activity is within one taxable year, so the cross-year time-period example cannot be used as a generic 30-day shield.

Illustrative example 6: Remote delivery is not automatically an Indian service day

An unrelated-customer project has 100 evidenced service days performed entirely outside India and 20 non-overlapping qualifying days furnished by personnel in India. The stated Indian service-activity population is 20 days, not 120. That alone does not meet Article 5(2)(l)(i). Examine whether the services are included services, and whether fixed-place, agency or another income article changes the result; remote delivery is not a blanket no-tax rule.

Illustrative example 7: Included services are classified before this calendar

A contract has 120 days of activity, all assumed on legal review to be Article 12 included services, and no separate non-included-service activity. Those 120 days do not automatically create a service PE under Article 5(2)(l), which excludes included services. Article 12 may nevertheless permit Indian tax without a PE. Other Article 5 facts and any Article 12(6) attribution require independent review.

Illustrative example 8: A project margin is not a statutory attribution percentage

An Indian project has revenue ₹120 lakh and evidenced commercial costs ₹90 lakh: project accounting margin ₹30 lakh, or 25% of revenue. Neither 25% nor ₹30 lakh is automatically the treaty-attributable taxable profit. Analyse functions, assets, risks, expenses, other same/similar activities and domestic computation rules. A day-count conclusion establishes a nexus question; it does not certify this margin as the final tax base.

Ten-step verification table

Step	Verification	Evidence to retain
1	Identify taxpayer, treaty residence and entitlement.	TRC, Form 41 information and Article 24 analysis.
2	Obtain the full contract and actual deliverables.	Executed scope, amendments and acceptance evidence.
3	Classify included versus non-included services.	Article 12 memo and factual basis.
4	Map recipients and Article 9 relationships.	Ownership/control and relationship documentation.
5	Prepare personnel-level location/activity records.	Travel, timesheets, work orders and recipient confirmations.
6	Consolidate the enterprise’s qualifying calendar.	Day list, overlap control and interruption analysis.
7	Test every relevant rolling twelve-month window.	Boundary calculations and cumulative calendar.
8	Apply Protocol I to the year allocation where relevant.	Tax-year split and less-than-30-day analysis.
9	Review fixed-place, agency and other PE routes separately.	Premises, authority, contracting and activity evidence.
10	Analyse attribution and payment compliance independently.	Article 7 computation, domestic-law mapping and reasoned conclusion.

Sixteen practitioner FAQs

1. Is 90 days itself sufficient under the unrelated-service limb?

No. Article 5(2)(l)(i) requires more than 90 days. Other PE limbs and tax articles may still apply.

2. Does the count restart on 1 April?

No. The time test is any twelve-month period. Separately allocate qualifying activity to taxable years for the protocol analysis.

3. Can each employee be tested separately to avoid aggregation?

A personnel tracker is evidence; the treaty refers to the enterprise’s furnishing of services. Do not treat employee rotation as an automatic reset.

4. Are employee-days the same as service-activity days?

Not necessarily. Simultaneous staff, travel-only days and interruptions need a reasoned calendar methodology; a headcount multiplication is not itself the treaty test.

5. Does every related company automatically become a PE?

No. Corporate control alone is insufficient under Article 5(6). The related-enterprise service limb additionally requires the specified furnishing of services in India and other conditions.

6. What does related enterprise mean here?

Article 5 refers to Article 9(1). Apply that relationship standard; do not substitute every accounting related-party label without analysis.

7. Is there a 90-day allowance for related-enterprise services?

The related-enterprise limb has no such time threshold. Its conditions must be assessed independently from the unrelated-service limb.

8. Does Protocol I remove days from the rolling count?

No. The short-year activity may still establish that the threshold is exceeded; the protocol then determines whether a PE is deemed to exist in that short taxable year.

9. Does exactly 30 days qualify for the short-year exception?

No. The protocol wording is less than 30 days, in the relevant cross-year circumstances.

10. Is every visit below 30 days protected?

No. That is not a general treaty exemption. The protocol’s conditions, related-enterprise limb and other PE routes need separate consideration.

11. Do remote services automatically create a service PE in India?

This limb concerns furnishing services within India through personnel. Document actual delivery facts, while also testing included services and any other applicable nexus.

12. Why exclude included services before counting?

Article 5(2)(l) expressly excludes services defined as included services in Article 12. Those fees can have their own source-tax treatment without a PE.

13. Does no service PE establish no fixed-place PE?

No. The tests are distinct. Examine premises and business activity, as well as dependent-agency and other Article 5 provisions.

14. Can a generic no-PE declaration settle the issue?

It is supporting evidence, not a substitute for contracts, personnel locations, calendar, relationships and the applicable treaty analysis.

15. Is income earned before day 91 automatically outside Indian tax?

Do not assume that. Analyse PE existence over the relevant activity period, the protocol, attribution and timing; the threshold is not a daily tax-free allowance.

16. Can this article be applied to every DTAA?

No. Service definitions, periods, project aggregation, related-party limbs and protocols differ. Read the specific bilateral treaty and any applicable modifications.

Conclusion

Prepare both a rolling enterprise service calendar and a taxable-year allocation. Resolve classification and related-enterprise facts before relying on a day threshold, and keep the subsequent attribution analysis separate.