Indian workers abroad for 182 days not subject to income tax, court rules

Delhi's Income Tax Appellate Tribunal has ruled that no income tax can be levied on the salary earned by Indian employees who have resided outside of the country for 182 or more days.

According to TaxScan, the individual involved in the case earned a salary from his employer in Korea. The sum was received when he was outside of India and was not declared in his income return. Relief was also not claimed under Section 90 of the Income Tax Act.

But the assessing officer held that the salary earned in Korea was subject to income tax in India during the assessment year, and that the man’s employer had deducted tax from the amount in question.

Under Indian law, if an individual has spent less than 182 days in the country during the previous year and spent time outside of India for employment purposes, then regardless of whether they were in India for 365 days or more during the four preceding years, they cannot be treated as an Indian resident.

The individual involved in the case claimed that since he was outside India for more than 182 days, he had become a non-resident and, therefore, was not liable to tax on his salary. The tribunal accepted his argument and held that his income was not taxable.

The Bench said: "It has been held in various decisions that when a citizen of India leaves India for employment abroad and stayed outside India for 182 days or more, then he becomes a non-resident and the income received from services rendered outside India cannot accrue or arise or be deemed to accrue or arise in India and cannot be taxed in India notwithstanding the fact that the same is credited in the bank in India or TDS [tax deducted at source] has been deducted on such income."

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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Delhi's Income Tax Appellate Tribunal has ruled that no income tax can be levied on the salary earned by Indian employees who have resided outside of the country for 182 or more days.

According to TaxScan, the individual involved in the case earned a salary from his employer in Korea. The sum was received when he was outside of India and was not declared in his income return. Relief was also not claimed under Section 90 of the Income Tax Act.

But the assessing officer held that the salary earned in Korea was subject to income tax in India during the assessment year, and that the man’s employer had deducted tax from the amount in question.

Under Indian law, if an individual has spent less than 182 days in the country during the previous year and spent time outside of India for employment purposes, then regardless of whether they were in India for 365 days or more during the four preceding years, they cannot be treated as an Indian resident.

The individual involved in the case claimed that since he was outside India for more than 182 days, he had become a non-resident and, therefore, was not liable to tax on his salary. The tribunal accepted his argument and held that his income was not taxable.

The Bench said: "It has been held in various decisions that when a citizen of India leaves India for employment abroad and stayed outside India for 182 days or more, then he becomes a non-resident and the income received from services rendered outside India cannot accrue or arise or be deemed to accrue or arise in India and cannot be taxed in India notwithstanding the fact that the same is credited in the bank in India or TDS [tax deducted at source] has been deducted on such income."

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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A guide to supporting expats in India

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