One of our employee is going to be deputed abroad for a period of two years or more to our client company on a project assignment. So he is being relocated to the foreign country along with his family for the above mentioned period. His salary would be paid abroad during this period and his Indian salary would stop being credited to his account from the day of his deputation. Kindly let me know the tax implications for the same or the options available to minimize the tax burden in India or the host foreign country. Awaiting your reply.
Dear Sir,
Salary is taxable in the country where services are rendered. In India there would be no tax implications as services are rendered abroad. It would be better to pay from the host foreign country company account to whom he will rendered services otherwise in India Everytime at the time of payment of salary you need to file Form 15CA and 15CB.
Thanks
If the salary is paid by your branch or associate company abroad to the employee for the services rendered outside India, such salary income is not taxable in India, as the income is not accruing in India to such employee.
If the salary is paid by the company from India for the services rendered outside India, though the income is not accruing or arising in India, still there may be ground for the assessment of such income in India, if the employee's services are indirectly connected with Indian operations. Hence, it is not advisable to pay salary from India, which is also your plan as mentioned in your query.
The employee, though a non-resident will still be assessable in India if he has income like rent and interest. He will have to pay taxes in India by way of TDS and file returns on such income in India. However, he will be able to claim double taxation relief in the country in which his salary income is assessed, if there is double taxation relief treaty between India and such country.
To minimize his tax burden in the host foreign country, he needs to be careful about his residential status by not staying in India for 182 or more days in a financial year. Otherwise, his foreign income will also be added to his income in India, if he is treated as a Resident in India. This will unnecessarily complicate his returns in India as well as the host foreign country.
Hi,
Since the employee will be out of India for 2 years, he will be a non resident in India and so his income will not be taxable in India. His incone will be chargeable to tax in the foreign country. He will need to take some help from a local tax expert in the foreign country who can help in minimising his tax outgo.
Regards
Hi
The best option would be the salary payment by the foreign company. The employee shall be considered as an employee of the foreign company and not the Indian company. The Indian company shall be relieved from all compliances including TDS deductions. The employee shall pay taxes in the foreign country for such foreign income.
Till the employee is resident, he shall have to show the foreign income also in ITR. Once he turns to NRI, only income generated and earned in India shall have to be reported in ITR.
Hi,
Send him out before September end. Also ask him not to travel or be in India for more than 182 days during the FY 2018-19 in total. If this stay exceeds, I'm afraid, he may still be taxed in India.
Thanks
Damini
