Income Tax on Salary of Non Resident Foreign National working in India

If I move to India temporarily for a project (less than 5 months), how will I be taxed in India if I’m working for an American company? I will be paid in USD

There are 4 points to consider in arriving at the taxability of any income in India

1. Residential Status of assessee / person
2. Country in which Income arises / accrues
3. Section 9 - Scope of total Income
4. Double Taxation Avoidance Agreement or Treaty

In your case, you have stayed in India for a period of 150 days. However it is not clear if the entire period of stay is in one single financial year or begins in one FY and ends in the next FY

If you are in India for the first time and are staying for a period of less than 180 days in a Financial Year, you are a non resident.

If you stay in India for a period of 60 days or more in a FY, you will become a resident if you had also stayed in India for a total period of 365 days in 4 years preceding that FY.

Income earned in India is taxable in hands of both Resident and non resident Indian

As per section 5 - For a non resident,

Income from whatever source derived which— (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year

is taxable in India

So, we need to check if your income arises or accrues in India

As per explanation to section 9(1)(ii) - salary payable for service rendered in India shall be regarded as income earned in India.

Hence, it will be taxable in India

However, as per Article 16 of India USA DTAA

Salary earned in India will be taxed in India subject to the condition that it is paid by Indian entity and the cost is not reimbursed to them by the US Entity.

Assuming that you are on payroll as an employee, and are not a independent consultant - We need to see who is paying the salary or who is bearing the cost.

If you are on the rolls of US entity only and are paid from the US entity, you will not be liable for any tax in India

Make sure the payslips are from American company (irrespective of currency) or it is reimbursed from them to the Indian Company

Article 16 of India USA DTAA – Dependant Personal Services

1. Subject to the provisions of Articles 17 (Directors' Fees), 18 (Income Earned by Entertainers and Athletes), 19 (Remuneration and Pensions in respect of Government Service), 20 (Private Pensions, Annuities, Alimony and Child Support), 21 (Payments received by Students and Apprentices) and 22 (Payments received by Professors, Teachers and Research Scholars), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State, if :

a. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the relevant taxable year ;

b. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State ; and

c. the remuneration is not borne by a permanent establishment or a fixed base or a trade or business which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operating in international traffic by an enterprise of a Contracting State may be taxed in that State