In case of a person leaving India for purposes of employment outside India, what is the taxability if his overseas salary is directly transferred to his NRE account in a bank in India?
TG Venkateswaran
Based on the limited facts provided, we assume that the individual in question qualifies to be a non-resident Indian (NRI).
As per Section 5(2) of the Income Tax Act, an NRI is required to pay tax on income received/deemed to be received or accrue/deemed to accrue/arise in India.
Hence, any income received by an NRI directly into his India bank account may be subject to tax in India.
However, as per Section 9 (1) (ii), salary earned overseas by an NRI does not arise/accrue in India and hence can be considered as not taxable in India.
There are some judicial precedents which support this position.
If the tax authorities are to argue that the salary received in an India bank account by an NRI for services rendered overseas is taxable, then based on the provisions of law and case laws (referred above) it has to be contested.
The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in