The Tax Publishers

DTAA between India and USA--Treatment of salary earned in India and USA by a ordinary resident in India


Mr. X is ordinary resident in India for the financial year 2023-24 (by virtue of his stay in India exceeding 182 days) and he was employed and stayed in USA for part of the financial year i.e., exercised employment in USA (during January 2023 to August 2023 of US Tax Year 2023) and his employer is a resident USA Company and his employment for the balance period (September 2023 to March 2024) is in India with Indian Company. His stay in USA during the US Tax Year (calendar year) 2023 was more than 183 days and stay in India during the financial year 2023-24 will be more than 182 days). Though his global income (which includes salary income earned and received in USA) is taxable in India as he is an ordinary resident for the previous year 2023-24 (Assessment Year 2024-25), in his opinion the salary income relating to his employment in USA with US based company for the period April 2023 to August 2023 is taxable only in USA and exempt/ not taxable in India.

2. The Article 16 of Indo-US DTAA is reproduced here under :

'Article : Dependent 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.