Indian Court Clarifies Tax Rules For Non-Residents Working Abroad
An Indian court dealing with matters related to taxes announced that the income tax is not payable on services rendered abroad by non-residents deputed by Indian employers, a ruling which will have a major bearing for hundreds of thousands of Indian employees working overseas.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held the view in a case involving a senior company employee, questioning the overcharging of tax by Indian Income Tax authorities.
The case in question involved Devi Dayal, deputed by his employer – an Indian company specialising in digital technologies – to work on a project in Austria.
Both the salary and compensatory allowance were disbursed overseas by the Indian company. The allowance was accessible to Dayal through a credit card valid only in Austria.
During the assessment for the financial year 2016, the Income Tax official augmented INR 2.18 million to the income taxable in India due to the non-submission of the tax residency certificate (TRC) by the taxpayer.
The ITAT view, however, made it clear that contrary to popular belief, the term ‘non-resident’ under tax laws is not determined by the country of origin but by the number of days spent in India.
Residents are taxed globally, while non-residents are only taxed on income accruing or arising in India.
Tax experts said this ruling by the ITAT reinforces the principle that income earned by non-residents for services performed outside India, including salaries and allowances, are not taxable in India.
