Income tax oaid by employer on behalf of employee
This query is : Resolved
17 August 2012
hi all
my query is
what will be the computation if Employer pays the Income tax of Employees.
will the amount of Tax paid by employer be added in total salary as Perquisite ?
my query is
what will be the computation if Employer pays the Income tax of Employees.
will the amount of Tax paid by employer be added in total salary as Perquisite ?
17 August 2012
No,Income tax paid by employer on behalf of employee is exempt in his/her hands u/s 10(10CC)
17 August 2012
Pls also read recent case law in this regard-
HIGH COURT OF UTTARAKHAND AT NAINITAL
Income Tax Appeal No. 10 of 2010
Director, Income Tax (International Taxation)
Versus
Sedco Forex International Drilling Inc & Others.
HIGH COURT OF UTTARAKHAND AT NAINITAL
Income Tax Appeal No. 10 of 2010
Director, Income Tax (International Taxation)
Versus
Sedco Forex International Drilling Inc & Others.
17 August 2012
Thank you sir ..
i have read the same but bit confused about the computation . whether to take the tax amount in total income or not .
And i am trying to search a sample computation regarding the same but not getting it . sir can you illustrate it with an example, so that the same would be clear
i have read the same but bit confused about the computation . whether to take the tax amount in total income or not .
And i am trying to search a sample computation regarding the same but not getting it . sir can you illustrate it with an example, so that the same would be clear
17 August 2012
Tax paid by the an employer on behalf of the employee ic considered as a perquisite and is chrgeable to tax.
w.e.f. assessmentbyear 2003-04, an employer has been given an option to pay tax on the whole and part of the perquisite(not provided by way of monetary payments) on behalf of an employee, clause 10(10CC) was inserted w.e.f. A.Y.2003-04to exept the amount of tax actually paid by an employer, at his option, as the income in the nature of an perquisite on behalf of an employee. Such tax paid by the employer shall not be treated as an allowable expenditure in the hands of employee.
The above exemption is not available on monetary payment
w.e.f. assessmentbyear 2003-04, an employer has been given an option to pay tax on the whole and part of the perquisite(not provided by way of monetary payments) on behalf of an employee, clause 10(10CC) was inserted w.e.f. A.Y.2003-04to exept the amount of tax actually paid by an employer, at his option, as the income in the nature of an perquisite on behalf of an employee. Such tax paid by the employer shall not be treated as an allowable expenditure in the hands of employee.
The above exemption is not available on monetary payment
18 August 2012
Sunil Kr Sir ..
what actually my case is ..
ABC company from outside India sending some expats to work in india. Now they are liable for income tax on salary drawn from the company for the service rendered in India . as income tax was exempt on Expats' home country, Company is paying their Income tax in India .
NOw my query is whether in calculation of tax for expats to include the amount of tax paid by the company or not? how to deal with this particular case?
what actually my case is ..
ABC company from outside India sending some expats to work in india. Now they are liable for income tax on salary drawn from the company for the service rendered in India . as income tax was exempt on Expats' home country, Company is paying their Income tax in India .
NOw my query is whether in calculation of tax for expats to include the amount of tax paid by the company or not? how to deal with this particular case?
31 July 2024
When dealing with expatriates (expats) working in India, there are specific rules and guidelines under the Indian Income Tax Act that apply to their income and taxation. Here’s how to handle the tax calculation in this scenario:
### **1. Taxation of Expatriates in India:**
Expatriates working in India are generally taxed as per the Indian Income Tax Act if they qualify as residents under Indian tax laws. The salary income earned for services rendered in India is taxable in India, regardless of the tax treatment in their home country.
### **2. Tax Payment by the Company:**
If the company is paying the income tax on behalf of the expatriates, the tax paid by the company will typically be considered a perquisite and added to the taxable income of the expatriates. Here’s how it works:
- **Taxable Income Calculation:**
The salary paid by the company, along with any other benefits or allowances, including the tax paid by the company on behalf of the expatriate, should be included in the gross taxable income of the expatriate.
- **Tax Calculation:**
The expatriate’s total taxable income in India will be calculated based on the salary received, including any additional amounts like tax paid by the employer. This total will be subject to Indian tax slabs.
- **Perquisite Taxation:**
The amount of tax paid by the company on behalf of the expatriate will be considered a perquisite and should be included in the expatriate's income for tax calculation. This is because the company’s payment of the tax is a benefit provided to the expatriate.
### **3. Tax Filing and Compliance:**
- **Income Declaration:**
Expatriates should declare their entire income, including the tax paid by the company, in their income tax returns in India.
- **Tax Returns:**
Expatriates need to file their tax returns in India, where they will need to include all income and perquisites received, including any tax payments made by the employer.
### **Example Calculation:**
Assume an expatriate has a salary of ₹100L and the company pays ₹20L as income tax on behalf of the expatriate.
**Gross Income: ₹100L + ₹20L (tax paid by the company)**
**Total Taxable Income: ₹120L**
The total taxable income of ₹120L will be subject to tax as per Indian tax slabs. The expatriate will need to file an income tax return reflecting this total income and claim any applicable deductions or exemptions.
### **4. Tax Treaties:**
India has Double Taxation Avoidance Agreements (DTAAs) with many countries. If the expatriates are from countries with which India has a DTAA, they might be eligible for relief or exemptions under the treaty. The company and expatriates should check the specific DTAA provisions to see if any relief is available.
### **Steps for Handling This Case:**
1. **Calculate Total Taxable Income:**
Include all salary and perquisites (including tax paid by the company).
2. **File Tax Return:**
The expatriate should file a tax return in India including all sources of income.
3. **Consult a Tax Professional:**
Engage a tax advisor or consultant who specializes in international taxation to ensure compliance with all applicable laws and treaty provisions.
4. **Verify DTAA Benefits:**
Check if the expatriates are eligible for any tax relief under the DTAA between India and their home country.
By following these guidelines, you can ensure proper compliance with Indian tax regulations for expatriates.
### **1. Taxation of Expatriates in India:**
Expatriates working in India are generally taxed as per the Indian Income Tax Act if they qualify as residents under Indian tax laws. The salary income earned for services rendered in India is taxable in India, regardless of the tax treatment in their home country.
### **2. Tax Payment by the Company:**
If the company is paying the income tax on behalf of the expatriates, the tax paid by the company will typically be considered a perquisite and added to the taxable income of the expatriates. Here’s how it works:
- **Taxable Income Calculation:**
The salary paid by the company, along with any other benefits or allowances, including the tax paid by the company on behalf of the expatriate, should be included in the gross taxable income of the expatriate.
- **Tax Calculation:**
The expatriate’s total taxable income in India will be calculated based on the salary received, including any additional amounts like tax paid by the employer. This total will be subject to Indian tax slabs.
- **Perquisite Taxation:**
The amount of tax paid by the company on behalf of the expatriate will be considered a perquisite and should be included in the expatriate's income for tax calculation. This is because the company’s payment of the tax is a benefit provided to the expatriate.
### **3. Tax Filing and Compliance:**
- **Income Declaration:**
Expatriates should declare their entire income, including the tax paid by the company, in their income tax returns in India.
- **Tax Returns:**
Expatriates need to file their tax returns in India, where they will need to include all income and perquisites received, including any tax payments made by the employer.
### **Example Calculation:**
Assume an expatriate has a salary of ₹100L and the company pays ₹20L as income tax on behalf of the expatriate.
**Gross Income: ₹100L + ₹20L (tax paid by the company)**
**Total Taxable Income: ₹120L**
The total taxable income of ₹120L will be subject to tax as per Indian tax slabs. The expatriate will need to file an income tax return reflecting this total income and claim any applicable deductions or exemptions.
### **4. Tax Treaties:**
India has Double Taxation Avoidance Agreements (DTAAs) with many countries. If the expatriates are from countries with which India has a DTAA, they might be eligible for relief or exemptions under the treaty. The company and expatriates should check the specific DTAA provisions to see if any relief is available.
### **Steps for Handling This Case:**
1. **Calculate Total Taxable Income:**
Include all salary and perquisites (including tax paid by the company).
2. **File Tax Return:**
The expatriate should file a tax return in India including all sources of income.
3. **Consult a Tax Professional:**
Engage a tax advisor or consultant who specializes in international taxation to ensure compliance with all applicable laws and treaty provisions.
4. **Verify DTAA Benefits:**
Check if the expatriates are eligible for any tax relief under the DTAA between India and their home country.
By following these guidelines, you can ensure proper compliance with Indian tax regulations for expatriates.
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