Non-compete fees paid to key employees at the time of joining is in the nature of "Salary Income"

FCS Deepak Pratap Singh | Last updated: 23 April 2022

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The Karnataka High Court has ruled that non-compete fees paid to key employees at the time of their joining are considered salary income. This decision stems from a case where an Indian company paid such fees to two employees hired from its US subsidiary. The court upheld that these fees are intrinsically linked to employment and not business income, and as the employees rendered services and resided in the US, the income was taxable there, relieving the employer of Indian withholding tax obligations.

Sasken Communication Technologies Ltd I.T.A. No. 241 of 2011 dated 10 June 2020 Karnataka High Court Karnataka HC rules that non-compete fees paid to key employees at the time of joining is in the nature of salary income. BRIEF FACTS In the case of Sasken Communication Technologies Ltd (Taxpayer), the issue before the HC was. whether non-compete fees paid to two key-employee rendering services outside India, i.e., in the US, would be regarded as taxable in India and;

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About the Author

FCS Deepak Pratap Singh

Associate Vice President - Secretarial & Compliance (SBI General Insurance Co. Ltd.)

Dear Friends, MyselfFCSDeepak P. Singh ( B.Sc.. LLB, FCS. FIII, CIAFP, CRMP, ID) , A Fellow Member of ICSI, Law Graduate ,Fellow Member of Insurance Institute of India, Certified Independent Director ,Certified Insurance Anti Fraud Professional , Certified Risk Governance Professional ( ICSI-III) and cleared Limited I ... Read more

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