Query Regarding ITR 3 for NRI's

[Vineet Kumar]

I am an Indian citizen who lived and worked in the US from Apr-2021 to 6-Feb-2026. I returned to India on 6-Feb-2026 and my residential status for FY 2025-26 remains Non-Resident (NRI) based on the number of days stayed in India.

After returning, I started working as a freelance software consultant / sole proprietor for a US client. I provide software development/technical consultancy services remotely from India, work from my residence, have no employees or separate commercial office, and receive payment in USD. I am GST registered and export services under LUT. The professional income is being offered to tax in India through ITR-3.

While filing ITR-3 for AY 2026-27, Part A-General asks:

"In case of non-resident, is there a permanent establishment (PE) in India?"

Should I select Yes or No?

Section 92F defines PE to include a fixed place of business through which business is wholly or partly carried on. However, the India-US DTAA also uses the concept of a "fixed base" for independent professional services.

Does working as an NRI sole proprietor/freelancer from my home in India constitute a PE for this specific ITR-3 disclosure? Or is this question mainly intended for foreign enterprises/non-residents operating in India through a branch, office, agent, etc.?

AI Summary

Permanent establishment disclosure for home-based non-resident consultants depends on premises, client control, authority, business infrastructure and treaty analysis.
Permanent-establishment disclosure in ITR-3 for a non-resident independent consultant working from India is fact-sensitive. Working from a residence does not automatically create a PE. Relevant factors include dedicated premises, use of the address for GST or invoicing, client access, authority to conclude contracts, employees or subcontractors, separate office premises, business continuity and home-office expenses. PE and the India-US DTAA fixed-base concept for independent professional services are distinct. Section 92F should not be mechanically applied outside its transfer-pricing context. The position should be supported by contemporaneous documentation and treaty-residence analysis where relevant.