A foreign national (Mr. A) is a resident in India and holds a valid PAN. He is employed with an Indian company, and as per his employment agreement, he receives a net (in-hand) salary of ₹3 lakhs per month. All statutory deductions, including TDS on salary, are to be borne by the employer. Accordingly, the employer has grossed up the salary and deducted TDS as per applicable slab rates. Since Mr. A joined in January, the total gross salary comes to around ₹10 lakhs for the financial year, and tax has been duly deducted by the employer on this amount.
In addition to salary, Mr. A has other income of ₹20 lakhs, on which no tax has been deducted at source.
Mr. A’s contention is that since tax has already been paid (by the employer) on the ₹10 lakh salary, that portion of income should be treated as tax-paid or exempt, and therefore, tax liability should be computed only on the remaining ₹20 lakhs, applying the slab rates afresh.
Is this contention correct under Indian tax laws? Does the fact that tax was borne by the employer and deducted at source make the salary income exempt for the employee? Are there any relevant case laws, provisions, or clarifications from the Income Tax Department that support or contradict this position?
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