SALARY RECEIVED FROM FOREIGN COMPANY IN HANDS OF RESIDENT OF INDIA

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S H S NARASIMHA RAO (Querist)
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21 July 2022 Hi experts,
Please read below and provide your insights
I worked for a Japan Company from India before I moved to Japan I received salary for 7 months in India (which they transferred from Japan after deducting tax at Japanese rates @10%) . For A.y 2022-23 my tax status is Resident of India.
wanted to know below
1. Is salary received in India for those 7 months taxable in India or not considering I've already paid tax at source in Japan
2. If it is taxable what is the DTAA benefits I can avail and any tax reliefs I can get ?

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 1 Being resident of India salary of 7 months is taxable in India.
2 Yes, you can claim tax relief for the tax paid in Japan. File ITR 2 claim relief in schedule FSI and schedule TR and claim relief by filing form 67 before filling return.

S H S NARASIMHA RAO

S H S NARASIMHA RAO (Querist)
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22 July 2022 Hi Sir,
Thanks for the reply
One more query on this.
1. what is the special tax rates for this income as per DTAA b/w Japan and India ?
2. while filing ITR-2 in Schedule Special Income, I see Other source income chargeable under DTAA rates @1% , So is tax rate really 1%

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 It should be 10% let us check.

Adv. Ravish Bhatt, ADIT, CIOT

Adv. Ravish Bhatt, ADIT, CIOT (Expert)
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26 July 2022 Article 15(1) of India – Japan DTAA reads:-“ 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 Contracting 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 Contracting State.”

So, when employment is exercised not in Japan but in India, income will be taxable in India. There could be a debate about whether employment can be said to have been exercised in India depending on employment arrangement, roles, responsibilities and pattern of working etc. However, prima facie it could be said that your salary income will be taxable in India only.

The deduction made by Japanese company at time of paying the salary amount is in line with Japanese Law but that does not determine your final liability. You could claim that amount back from National Tax Agency, Japan.

For any reason, if your employment could be said to have been exercised in Japan while you were physically in India, again DTAA will provide a relief to you and in such case, you may declare such details in ITR and not pay tax in India.

Anyway, you will have DTAA benefits available. From limited facts I have, I understand your income for 7 months will be taxable in India only and for refund of tax deducted at source, you may file a renturn in Japan and claim the deducted amount back.

Author: Advocate Ravish Bhatt
Gmail: ravishdbhatt@gmail.com
Link to Linkedln Profile: https://bit.ly/3IDGfsU

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