Thursday , April 18 2024

Income Tax: Will there be tax on the subsistence allowance received when going abroad for office work? Know what the income tax rules say.

If a person goes abroad for office work, the company gives him subsistence allowance. This is given so that additional expenses incurred during stay abroad can be compensated. The question is whether this allowance will be taxable in India? The Delhi branch of the Income Tax Appellate Tribunal has recently given an important judgment in this regard.

Many times companies send employees abroad for work. Apart from the salary, they also give some living allowances to the employees in India. The question is whether this alimony will be considered a part of your salary in India and will be taxable? The Delhi branch of the Income Tax Appellate Tribunal has recently given an order, which is very important. It states that an NRI working in Austria who receives salary/living allowance from his employer in India will not have to pay tax on this income in India. Now the question is that if an Indian resident goes abroad for office work and gets subsistence allowance, will the same rule apply to him also?

Residence is very important in tax matters

Chetan Chandak, director of tax consultancy firm TaxBirable, says that when it comes to income tax, the question of residency comes first. It then matters whether the income is earned in India or abroad. After that the tax matter is decided. If you are a Resident Indian (RoR), you have to pay tax in India on your foreign income. If you have paid tax in any country on your income earned abroad, you can claim tax credit on it in India.

Separate rules for RNOR or NRI

According to Chandak, if you are RNOR (Resident but Non-Ordinary Resident) or NRI, then the income earned abroad will not be taxed in India. Therefore, there will be no tax on it in India, whether it is paid into an Indian bank account or a foreign bank account. He said that wages (including allowances) are deemed to be paid at the place where the work is performed or services are rendered. Therefore, if an NRI receives salary abroad, it will be taxed in that country.

The structure of the allowance is also very important

Neeraj Agarwal, partner, Nangia Andersen India, said that in case of salary of NRIs or RNORs, it will be taxable in India only if their income is for their services or work in India. As far as allowances are concerned, the allowance received by an employee in India as fixed income from the company will be considered as part of his salary and will be taxable. But if the company has wisely structured the allowance in which a fixed amount is reimbursed based on expenses incurred on official work rather than fixed income, this amount will not be included in taxable income, Agarwal said.