Income Tax, Abroad Salary, Resident and Ordinary Resident, foreign tax credits, Double Tax Avoidance Agreement, income tax return
This financial year (FY), I worked in the US for four months for a company assignment . My company put me on US’s payroll during the four months and I was paid salary (not per diem). After the completion of the project, I came back to Indian and was again put on Indian payroll. Please let me know how the salary I received in the US will be taxed? Also, where do I show this in my India tax return for the current FY?
—Name withheld on request
From the limited facts provided by you, it is assumed that you were in India for 182 days or more in the Indian financial year (FY) in which you got an assignment in the US for four months. Further, it is assumed that you have a substantial stay period (at least 729 days) in India in the preceding seven FYs. Hence, you are likely to qualify as a resident and ordinary resident (ROR) of India in the relevant Indian FY.
Based on the above information, salary received by you during the period in which you were on an assignment in the US would be taxable in India. You may evaluate claiming foreign tax credits under the India-US Double Tax Avoidance Agreement, for the taxes, if any, paid in the US on the salary received during the assignment, subject to satisfaction of conditions.
In the income tax return forms issued for FY2018-19, the US assignment salary would need to be shown in the “salary schedule" and “schedule of foreign assets (details of any other income derived from any source outside India)", as per the prescribed instructions in this regard. Also, in case any foreign tax credits have been claimed by you, “details of income from outside India and tax relief" and a summary of tax relief claimed for taxes paid outside India should be filled in the ITR, along with Form 67.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Send in your queries and views at firstname.lastname@example.org