TDS on salary to a Foreign Branch employee who is resident

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This discussion concerns whether Tax Deducted at Source (TDS) applies to salary paid to an Indian resident employee working for a foreign branch office in the UAE. While the employee is an Indian resident for tax purposes, the salary is paid in foreign currency to a foreign bank account by the foreign branch. The consensus is that TDS is generally not applicable if the payment is made directly by the foreign branch to a foreign bank account, even though the income is taxable in India and requires filing an ITR.

Himanshu Makhijani

Himanshu Makhijani (Querist)
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04 February 2021 Hi,

We have transferred one of our employees to our UAE Branch office and have executed a fresh employee agreement with her in foreign currency. But she is an Indian resident as per IT act for FY 2021 (spent >182 days in India). Wanted to check if TDS is applicable on the salary paid to her foreign bank account for the services rendered to the foreign branch office.

Thanks,
Himanshu

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 February 2021 No TDS applicable if payment is made by foreign branch.

Himanshu Makhijani

Himanshu Makhijani (Querist)
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15 February 2021 Thanks for the quick revert CA R SEETHARAMAN but isn't any income earned by a citizen taxable in India?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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15 February 2021 This income is taxable in India file ITR and pay taxes. TDS not applicable if salary is paid by foreign branch to foreign bank account.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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16 February 2021 Better to deduct tax as payment is made to Indian resident.

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