Income received from an overseas company is taxable in India

An individual who is a ‘resident and ordinarily resident of India’ as per the Indian tax laws, is liable to tax in India for all the India-sourced and non-India-sourced income


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I have a job offer from an Australian company. The role requires me to work from India but they would be paying me in Australian dollars, and would also deposit the salary in my Indian bank account. I have not accepted the offer yet, as I would like to know a few things before making the decision. Can you please explain the tax implications, as I don’t think they would generate a Form 16.

—Sai Pavan

At the outset, you may note that salary pertaining to services rendered in India is taxable in India, irrespective of the place of receipt of such salary.

Broadly, taxability in India depends on the following factors:

►* Source of income

►* Residential status

Typically, source of income lies where the services are performed, or where the asset from which the income arises is located.

Any income, the source of which is located in India, is taxable in India (irrespective of residential status).

Residential status is dynamic and is required to be determined for each financial year (FY) (1 April to 31 March). Residential status is determined on the basis of physical presence of an individual in India during the relevant financial year and last 10 financial years.

An individual who is a ‘resident and ordinarily resident of India’ as per the Indian tax laws, is liable to tax in India for all the India-sourced and non-India-sourced income.

As you would be rendering the services in India, the salary earned by you from an Australian company will get taxed in India irrespective of your residential status and place of receipt of such salary.

As per the Indian tax laws, the employer is required to withhold the applicable India tax on the salary.

However, in case no tax is withheld by your Australia-based employer, you may deposit the tax under the advance tax mechanism as per the following schedule, during the financial year in which the salary is earned:

*15% of total tax by 15 June

*45% of the total tax by 15 September

*75% of total tax by 15 December

*100% of total tax by 15 March

You may also deposit the tax as self-assessment tax, before filing the India income-tax return.

However, in such cases, the penal interest for delay in deposit or non-deposit of advance tax will be applicable, subject to certain conditions.

While deciding upon your job offer, amongst various personal and financial factors, you may keep in mind the expected tax impact and the resultant take-home salary.

You may note that there are exemptions available (subject to conditions), under the Indian tax laws on some salary components.

For instance: house rent allowance; conveyance allowance; including retirement benefits such as leave encashment and gratuity.

Eligibility of such tax benefits on the salary expected to be received from the Australian employer, may be analysed.

Please take advice from your tax consultant to evaluate the eligible tax benefits on your salary from the Australian employer.

Sonu Iyer, tax partner and people advisory services leader, EY India.

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