Expatriate Taxation (Outbound)

Expatriate Taxation (Outbound)

 Individuals who go to a foreign country for employment work.

Under Indian Income Tax Act, 1961 incidence of tax depends and determined on the basis of Residential Status of an Individual Tax payer and place & time of accrual or receipt of any income.

Residential status as per Income tax law can be summarised as under:

 

 

 

 

Summary of Taxability of Incomes under Income Tax Act, 1961
Nature Of Income	ROR	RBNOR	NR
Income Received or Deemed to be received in India	√	√	√
Income Accrue or Deemed to Accrue in India	√	√	√
Income from a business controlled from India or from a profession set up in India but not received or accrued in India	√	√	×
Income not received or not deemed to be received in India	√	×	×
Income not Accrue or not deemed to accrue in India	√	×	×

When Individuals go outside India on employment or business work they may be liable to taxation or withholding of taxes as per domestic law of that foreign country. In these cases there arises a possibility of double taxation on the same income earned by the Individual in the Source Country and in the Residence Country.

 

In order to prevent such double taxation, government of India & government of other contracting states (Foreign Countries) have entered into DTAAs Double Taxation Avoidance Agreements (Tax Treaties) empowered by section 90 of the income tax act, 1961.

 

Section 90 provides the relief on the taxes paid on the income in both the countries, in India according to the provisions of DTAA with the respected foreign country.
 

Further where no agreement exists with the foreign country ITA provides unilateral benefit under section 91 to Resident of India to claim deduction of tax on such doubly taxed Income.
 

General Legal Compliances by person going abroad:

·         The person leaving India shall furnish form 30C under rule 43 under section 230(1A) of Income Tax act, 1961, with his concerned assessing Officer.

·         After becoming NRI the person should inform its bank in India about his residential status so that his accounts are designated as NRO account.

·         The employees who are working in the host country on behalf of the home country to avail benefit of exemption of social security contribution (like provident fund in India) can obtain COC in India with respect to the countries with which India has Social Security Agreement. A CoC is a confirmation from home country social security authority that the individual is covered under home country social security and continues to be covered during the period of assignment.

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