Head - Finance & Accounts
151 Points
Joined November 2008
Hypo Tax (Hypothetical Tax) - also referred as "Tax Equalization" which is generally given to the expatriate employees.
Due to overseas assignment, the expatraite employee won't get any benefit/ lost - in TAX ANGLE. He will be subjected to the same tax level as if he is working at home country nothing but nutralisation of the tax impact on him due to overseas posting. It can be either payment of differential tax to the employee - or receivable by the employer (Company) -depending on the situation.
In the first case where the company will be paying the tax - for simplicity we can take as Grossing Up.
However, recent ITAT judgement states that Hypothetical tax paid abroad not income.
There won't be any separate challans as this is only a separate concept and not a separate tax as such. In my opinion, if any Hypot tax is being paid to the employee by Indian company then they can deposit the same and needs to be Grossed-up due to IT provisions.