BackForeign salary credited to Indian account is taxable
If you receive accommodation and so on, its taxability will need to be examined for taxation purpose
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I am going to the UK on an assignment for about three months. Where do I have to pay the income tax on the salary income earned in overseas country while I am there?
—Ashwin Parekh
The taxability in India of the income earned in the UK will depend upon your tax residential status in India during the financial year (FY) 2014-15. Your residential status in turn would be determined by your physical presence in India during the FY and the immediate preceding seven FYs.
Assuming that you have primarily been based in India and would be working in the UK for about three months, you are likely to continue to qualify as “ordinarily resident" (OR) of India.
Accordingly, your global income shall be taxable in India irrespective of the source or the place of receipt of such income. Hence, the income earned in the UK shall be taxable in India subject to benefits, if any, available under the double tax avoidance agreement (DTAA) between India and the UK.
Further, if you pay any tax in the UK on the income sourced in the UK as per the DTAA, the foreign tax credit could be availed against the tax liability payable in India on such UK-sourced income.
If you receive any per diem/accommodation and so on, the taxability of the same will need to be examined in detail for taxation purpose.
Also, as you will qualify as an OR, if you have any assets located outside India, then, you will be required to furnish details of assets such as foreign bank accounts, immovable property and so on in the income tax return.
Any failure to comply with the above disclosure requirement may attract certain penal consequences.
However, if your assignment is extended and depending upon your actual stay in India, if you qualify as non-resident in FY2014-15, you shall be taxable in India only on India-sourced income.
Accordingly, the income earned in the UK for rendering services there shall not be taxable in India provided the salary is directly credited to the overseas bank account.
If the salary is directly credited to your Indian bank account, then the same shall be taxable in the first instance in India on receipt basis.
The tax implications in the UK of the income earned there would be examined from the UK tax perspective.
Queries and views at mintmoney@livemint.com
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