Non-Resident Overseas: In a recent verdict, the Income Tax Appellate Tribunal (ITAT) extended tax relief to a salaried individual employed overseas, regarding their foreign earnings.
The ITAT’s Delhi bench ruled that the income, comprising both salary and allowances, earned by a ‘non-resident’ for services rendered abroad, should not be subject to taxation in India.
Non-Resident Overseas…
The case centred around Devi Dayal, seconded by his employer—an Indian digital technology firm—to work on a project in Austria. Both Dayal’s salary and compensatory allowance were disbursed abroad by the Indian company, with the allowance accessible to him solely through an Austria-valid credit card.
During the assessment for the fiscal year 2016, an Income Tax official augmented Rs 21.8 lakh to Dayal’s taxable income in India, citing his failure to produce the tax residency certificate (TRC).
In contrast to common perception, the classification of ‘non-resident’ for tax purposes is determined not by nationality but by the duration of stay in India. Residents are subject to global taxation, whereas non-residents are taxed solely on income originating within India.
This ITAT ruling underscores the principle that earnings acquired by non-residents for services performed outside India, including salary and allowances, should be exempt from Indian taxation.
It emphasizes the importance of discerning one’s residency status and understanding the jurisdictional scope of tax laws applicable to individuals employed abroad.
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