Shed the Myth that All Income of Non Resident are Tax Free

Shed the Myth that All Income of Non Resident are Tax Free

I'm an Indian working for a MNC in different projects abroad, on contract basis. Since the MNC can't employ me directly, my services are hired through an Indian Company and my salary is routed through Indian company.Considering the number of days I stay abroad (more than 182 days in a FY) I feel I'm an NRI. In this case, is my salary taxable in India? and if yes, at what percentage?Please clarify.Thanks.

It is common error to think that all income of Non Resident is tax free in India.

In my view, even if you are NON-RESIDENT ,your salary is chargeable under Indian Income Tax. The reason is Section 5 [2] of the I T Act. The said subsection states scope of total income for Non Resident in following words :

" Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which

(a) is received or is deemed to be received in India in such year by or on behalf of such person ; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year."

In your case, you are receiving Salary from an Indian Company in India. As such , your Salary received from Indian company ,even though you are Non Resident, become part of the Total Income taxable income in India by virtue of Section 5[2] as stated above.Even otherwise , section 5[2] is so wide that in many case, salary of Non Resident gets taxed in India .

Remember , if a Non Resident gives service outside India, and receives the salary outside India such income may not fall taxable in India. Even if the salary is received outside India and by virtue of Double TaxationAvoidance Agreement become taxable in other country , in that case also ,based on facts of the case, such income may not become taxable in India.