Foreign salary taxation

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During FY 2015-16, Mr. A (Employee) received Salary for all 12 months in India. His Company send him to Abroad during November 2015. There he received 5 months Salary & paid taxed to that Foreign Govt. (Upto 31.03.2016). So, totally he earned 17 Salaries but Form 16 issued by employer contains only Indian Income & employer forgot to calculate Tax as per DTAA provisions. (Employee returned to India in FY 2016-17). Our query is while filing IT Return for FY 2015-16,if we include 17 salaries, Mr.A will end-up paying high tax & interest in India. To avoid this, can we file IT Return with 12 Indian Salaries & 2 Foreign Salaries? Foreign Salary of Jan-Mar 2016 can we shift to FY 2016-17? FY in India is Apr-Mar FY in Abroad is Jan-Dec Is there any provision which facilitate this? Pls mention any Case Laws to support this...
Replies (3)

DECIDED THIS FACTOR AFTER  ANALYSING HIS BANK A/C 

Amount was paid by Compnay as Salary (as per Payslips & Deputation Letter) and not as Allowance. Also, employee has paid Tax on that earning in abroad.

So, i am of the view that entire earnings is taxable (subject to DTAA rebate) and tax liability in India cannot be restricted to only amount brought back to India as Savings from Foreign Salary.

From the facts mentioned above, I assume employee was > 181 days in India during FY 2015-16 and he qualifies as "resident of India". In such a case, it is undisputed that full income (India + USA) need to be offered to tax in India. Respective schedules for FSI and FA need to be also filled for Indian tax return.

As regards other country (assuming USA as you've mentioned FY being Jan-Dec) - it needs to be seen whether the three conditions in respective Article in India USA DTAA are satisfied. If yes, USA income can be claimed as fully exempt in US tax return quoting the article and tax withheld can be claimed as refund. If not, USA income need to be fully disclosed in USA and in the Indian tax return, federal income tax paid in USA can be claimed as tax credit. 

This is my personal interpretation of tax provisions and DTAA and not to be taken as tax advice. Please consult a local CA/CPA with detailed facts. 

Thanks!


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