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Taxability of non-indian salary

SANJAY JAIN (PROP.) (21 Points)

24 February 2017

ASSESSEE WENT TO THAILAND IN NOVEMBER 2014 ON EMPLOYMENT SALARY BASIS. DURING FY 2014-15, HE WAS IN INDIA FOR 7 MONTHS. IS HIS SALARY OF 5 MONTHS IN THAILAND TAXABLE IN INDIA? OR IS IT TO BE SHOWN IN TAXFREE INCOME? KINDLY CONSIDER INDIA-THAILAND DOUBLE TAXATION AGREEMENT ALSO, IF APPLICABLE

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2 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 24 February 2017

"HE WAS IN INDIA FOR 7 MONTHS. IS HIS SALARY OF 5 MONTHS IN THAILAND TAXABLE IN INDIA? "

Yes, because he was Resident for the FY 2014-15 as per IT act.

As per DTAA, any tax paid in Thailand may be claimed against tax liability in India.

Abhinav (CA) (397 Points)
Replied 03 March 2017

There is no doubt that the full income in Thailand will also have to be included in Indian tax return and offered to tax in India. Do not forget to fill Schedule FSI and FA as applicable.

NOw, the only issue is whether income has to be offered in Thailand or not, considering the DTAA. Relevant Article of India Thailand DTAA is given below:

ARTICLE 15

DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a)		the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days within any twelve-month period commencing or ending in the fiscal year concerned, and
(b)		the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
(c)		the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, by an enterprise of a Contracting State may be taxed in that State.

So, if the three conditions are satisfied, in that case income need not be offered in Thai tax return and claimed as exempt quoting the respective article and any tax withheld can be claimed to be refunded.

If the conditions are not satisfied, income need to be offered to tax in Thailand as well and FTC of tax paid/deducted can be claimed in Indian tax return.

P.S. This is my interpretation of DTAA. Please consult other experts as well.