Am in Onsite but Salary paid in India, What is the income tax process?

POSTED BY Kumar ON April 2, 2012 10:02 pm COMMENTS (9)

Hi, Am in onsite, but my salaries(70%) are credited to my indian account and am getting living allowance (30%) in onsite. My company deducts 10% of my salary as income tax every month. I have few queries on my case as 1. Is the amount credited in my INdian bank is taxable? 2. Is 10% deduction every month is correct? or I have to pay more? 3. Do i need to file my IT returns in India? Thanks in Advance

9 replies on this article “Am in Onsite but Salary paid in India, What is the income tax process?”

  1. Karthik says:

    Living Allowance is taxable in India. The companies consider this as a perquisite and pays the tax on it. So it’s not taxable in the hands of the employee. You need to check with your company, if they are paying tax for it.
    I am sure you will not be spending all the 1000 USD. So when you remit back to India, you should be remitting through an Employee Reimbursement Account(ERA) account provided by your company.

  2. PK says:

    @justgrowmymoney,

    Everybody says NRE FD is an excellent investment. For the truth is, its non-taxable only in India. For people residing in US, this is still a taxable income and the tax in US is much more than that of India. Its almost 40%-45%(depending on the state in US). So, for NRIs in US this is useless. Instead its better to keep in India FD and pay tax in India which will be straight 30%.

    Also,
    how is the tax slab for Kumar calculated? Since he is an NRI, is the tax slab for him same as others? I guess for NRIs, the Indian income is taxed at 30% straight.

    Share your thoughts..

    1. Dear PK, as dear Kumar is earning his Indian income from Indian employer, the regular tax slabs as per his income ‘ll be applicable.

      Thanks

      Ashal

  3. BanyanFA says:

    Kumar,
    My two cents are as follows (as I have been in your situation earlier) :
    1. If you are out of India for more than 182 days, you become NRI for India but a resident for your respective country. Your global income then becomes taxable in the respective foreign country. Generally the Companies tend to shield employees from such Global taxation. In this case you would ideally need to pay tax on your entire Income in the foreign country.
    2. Subsistence allowance is generally tax free in India. However in some cases it is taxable in India if you have unspent amounts.
    3. You would need to file your return in India if your company is deducting tax and you believe that you may be eligible for a refund in India.

    I would strongly recommend you to avoid asking this question on the forum and go to your Tax department of your Company with your case. You might be sitting on a heavy tax liability (outside India) if your company has not shielded you.

    Regards
    BFA

  4. Darshan Mankad says:

    Kumar,

    Your residential status is important for determining your tax liability. You will be “Resident and Ordinary Resident” if you fulfil two conditions: a) You are in India either for 182 days or more in PY or you are in India for 60 days or more in India during PY AND 365 days in India in the 4 years preceding the PY (In case the person is employed outside India, he should be in India for 182 days in PY instead of 60 days); b) You are resident in 2 out of preceding 10 PYs and You are present in India for more than 730 days during seven years preceding the PY…

    If you fulfil either of a) and both of b), you are resident…If you fulfil either of a) but none or only one of b), you are resident but nor ordinarily resident; If you fulfil neither of a) you are non-resident…

    In all the cases, since your Salary is paid in India, it is deemed to accrue or arise in India and so taxable…your living allowance is not included in the total income and hence not taxable…

    Regards

    Darshan

  5. Kumar says:

    Thanks for the quick reply.

    Ashal: For example if the total salary is $3500, out of $3500, am getting $2500 to my indian account and rest $1000 in hand for living expenses.

    In this case what is the tax amount I need to pay in India provided am out of India for more than 182 days.

    1. Dear Kumar, as the salary is paid in India by your Indian Employer, the indian part is taxable. The onsite allowance is tax free. So for your given example of $2500 yly salary, the converted Indian salary becomes 1.25L Rs. roughly @ 1$ = Rs. 50.

      As this 1.25L Rs. amount is less than the taxable income limit, you are out of tax liability.

      In case you are not comfortable to disclose full details about you on this open forum, you may contact on personal mail id for more info.

      Thanks

      Ashal

  6. Dear Kumar, can you please elaborate what’s your 70% salary? In my opinion, you are carrying a huge tax liability. Please send more details.

    Thanks

    Ashal

  7. 1) Your living allowance is not taxable in any location.
    2) Your Indian salary will attract tax in India. If you have lived more than 182 days outside India last FY 2011-12 your taxation will be that of a NRI. You need to file returns if the amount earned is more than minimum taxable income (which I presume it is).

    If you are still a NRI and expect this to continue so you can open NRE FDs for 9.25% which is tax free – this is an excellent form of investment for NRIs

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