Salary Income Taxability of Salary and Allowances Received by a NonResident From an Indian Company

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The Tax Publishers Income Tax--Salary Income Taxability of Salary and Allowances Received by a Non-Resident From an Indian Company Subhodh Sharma In this write up the learned author seeks to examine the issue as to whether salary and allowances received from an Indian company by a non-resident working overseas, would be liable to tax in India. 1. Introduction The provisions of Income Tax Act, 1961 ('the Act') are not only applicable to residents of India, but are also applicable to Non-Resident Indians (NRIs). The provisions of Income Tax for the NRIs are extensive and unambiguous. However, despite that, the Income Tax Department intends to tax salaried NRIs, who are assigned to work outside India on the count that those individuals are being employed by the Indian companies, their salaries will be taxed in India. It may be noted that the issue as to whether salary and allowances received by a non-resident working overseas, from an Indian company, would be liable to tax, is settled by the Delhi Bench of the Tribunal in its recent decision in the case of Devi Dayal v. Dy. CIT/ACIT 2024 TaxPub(DT) 365 (Del-Trib). The facts of the case and the decision of Delhi Bench of the Tribunal is being discussed hereunder. 2. Facts of the case In this case the assessee was an employee of an Indian company, namely 'D'. He was deputed to work in a project awarded by IAEA, Vienna, Austria. He was stationed at Vienna and an NRI. Salary and compensatory allowances were paid to the assessee at Vienna from the company in India i.e. 'D'. The allowances were permissible to be utilized through a credit card, which was valid only in Austria. Assessee filed his return of income under section 139 of the Act for assessment year 2016-17. AO found that the assessee did not disclose salary and various allowances received from 'D' in his return of income. Accordingly, proceedings under section 147 of the Act were initiated by issuing a notice under section 148 of the Act. Thereafter, AO made an addition on account of salary and allowances, as the assessee did not furnish Tax Residency Certificate. 3. Contentions of the assessee It was assessee's contention salary earned by him as a non-resident for the year under consideration, would not be taxable under the Act. Assessee further contended that allowances received by him outside India, being a non-resident for the year under consideration, would not be taxable in India. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Salary Income

Taxability of Salary and Allowances Received by a Non-Resident From an Indian Company

Subhodh Sharma

In this write up the learned author seeks to examine the issue as to whether salary and allowances received from an Indian company by a non-resident working overseas, would be liable to tax in India.

1. Introduction

The provisions of Income Tax Act, 1961 ('the Act') are not only applicable to residents of India, but are also applicable to Non-Resident Indians (NRIs). The provisions of Income Tax for the NRIs are extensive and unambiguous. However, despite that, the Income Tax Department intends to tax salaried NRIs, who are assigned to work outside India on the count that those individuals are being employed by the Indian companies, their salaries will be taxed in India. It may be noted that the issue as to whether salary and allowances received by a non-resident working overseas, from an Indian company, would be liable to tax, is settled by the Delhi Bench of the Tribunal in its recent decision in the case of Devi Dayal v. Dy. CIT/ACIT 2024 TaxPub(DT) 365 (Del-Trib).

The facts of the case and the decision of Delhi Bench of the Tribunal is being discussed hereunder.

2. Facts of the case

In this case the assessee was an employee of an Indian company, namely 'D'. He was deputed to work in a project awarded by IAEA, Vienna, Austria. He was stationed at Vienna and an NRI. Salary and compensatory allowances were paid to the assessee at Vienna from the company in India i.e. 'D'. The allowances were permissible to be utilized through a credit card, which was valid only in Austria. Assessee filed his return of income under section 139 of the Act for assessment year 2016-17. AO found that the assessee did not disclose salary and various allowances received from 'D' in his return of income. Accordingly, proceedings under section 147 of the Act were initiated by issuing a notice under section 148 of the Act. Thereafter, AO made an addition on account of salary and allowances, as the assessee did not furnish Tax Residency Certificate.

3. Contentions of the assessee

It was assessee's contention salary earned by him as a non-resident for the year under consideration, would not be taxable under the Act. Assessee further contended that allowances received by him outside India, being a non-resident for the year under consideration, would not be taxable in India.