Living Allowance Taxation in India for Onsite USA Deputation

Dear Querist,

Living allowance is not automatically tax-exempt merely because it was taxed in the USA. If you are Resident and Ordinarily Resident in India, it is taxable as global salary unless it qualifies as a tour/deputation allowance under Section 10(14) read with Rule 2BB.

The judgments cited may support exemption only where the deputation facts and documents establish a temporary tour and eligible expenses. Residential status must be checked separately for each financial year. If taxable, credit for US tax may be claimed by filing Form 67.

For a more detailed review of your case, you may book a phone consultation.

CA Shubham Goyal

Dear Sir,

Hope you are doing well.

Based on the facts provided, the overseas Living Allowance cannot be considered automatically exempt from tax in India merely because it is separately mentioned in the deputation letter or because tax has already been paid in the USA. If you qualify as a Resident and Ordinarily Resident (ROR) in India, your global income is taxable in India under Section 5 of the Income-tax Act, 1961, unless a specific exemption applies. The taxability of the allowance depends on its actual nature whether it is a reimbursement of official expenses or forms part of employment remuneration. The terminology used in the salary structure is not conclusive.

Overseas allowance rulings are fact-specific and need to be examined based on the terms of the deputation arrangement. If the allowance is taxable in India and US tax has already been paid, relief from double taxation may generally be claimed through Foreign Tax Credit (FTC) under Section 90 of the Income-tax Act read with Rule 128 of the Income-tax Rules, 1962, subject to prescribed conditions and documentation. Therefore, the deputation agreement, salary structure, and tax documents should be reviewed before concluding the final tax treatment.

Considering the facts involved, it would be advisable to schedule a telephonic consultation for a detailed discussion and a proper evaluation of the tax implications.

Thanks & Regards,

Payal Chhajed