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Is Salary earned in UAE taxable in India?

Dr. Jones (Director) (253 Points)

20 January 2011

Is Salary earned in UAE taxable in India for a Ordinary Resident?

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10 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 20 January 2011

Yes salary earned in UAE will be taxable in Indian for an ordinary resident.

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Nitesh Battu (CA Final) (104 Points)
Replied 20 January 2011

Yes....... Every kind of income earned by Resident Indian is taxable

sanjeev (student CA CS) (295 Points)
Replied 20 January 2011

Salary received in India shall be taxable due to first receipt in India,hence taxable.

C.A Akash Gupta (C.A ICWA Final CS Professional) (242 Points)
Replied 20 January 2011

ut you have to see the double taxation agreement with that country so that u will get exemption till that part of tax paid in UAE............

Simranjeet Singh (Proprietor at S Simranjeet & Associates Company Secretaries) (4396 Points)
Replied 20 January 2011

Originally posted by : Nitesh Battu
	Yes....... Every kind of income earned by Resident Indian is taxable

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Om Prakash Regmi (Subject Matter Expert) (582 Points)
Replied 21 January 2011

yes, its taxable

Bhav Bhuti Sharma (Towards Professionalism ) (823 Points)
Replied 21 January 2011

Originally posted by : Nitesh Battu
	Yes....... Every kind of income earned by Resident Indian is taxable

INDIA'S DOUBLE TAXATION AVOIDANCE AGREEMENTS

The constitution of India has conferred the sovereign powers to levy taxes and to enforce collection and recovery thereto on the State under Article 265 by providing that no taxes shall be levied or collected except by authority of law. The power to levy taxes are conferred on the Union of India in respect of matters falling within its domain in list 1, schedule VII of the Constitution. Power to levy taxes, conferred on the State Legislative fall within the scope of list 2 of schedule VII. Entry (4) of list 1 under schedule VII to the Constitution of India empowers the Union of India to enter into treaties and agreements with foreign countries and implement such treaties, agreements and conventions and entry (10) of list 1, dealing with foreign affairs and entry (9) of list 1 of Schedule VII covers Diplomats, Councils and trade representation and, therefore, the tax treaties including those for Avoidance of Double Taxation fall within the exclusive domain of the Central Government in view of the Constitutional Authority conferred on it.

7.1 To remove any doubt and to avoid any confusion, the Income-Tax Act, 1961 contains explicit statutory provisions to confer on the Central Government the power to enter into Agreements with foreign countries for Avoidance of Double Taxation as contained in Chapter IX of the IT Act. Section 90 of this Chapter reads as under :

["Agreement with foreign Countries.
90: The Central Government may enter into an agreement with the Government of any country outside India—

for the granting of relief in respect of income on which have been paid both income-tax under this Act and income-tax in that country, or
for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country, or
for exchange of information for the prevention of evasion or avoidance of income- tax chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion or avoidance, or
for recovery of income-tax under this Act and under the corresponding law in force in that country

and may, be notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement.]"

Corresponding to section 90 of the IT Act, section 44A of the Wealth tax Act, 1957 and section 44 of the Gift tax Act, 1958, contains identical provisions to empower the Central Government to enter into agreements for avoidance of double taxation in regard to the levy of wealth tax or gift tax or for exchange of information for the prevention of evasion or avoidance etc. or for recovery of tax etc.

7.2 Section 9 of the IT Act provides for unilateral relief in the certain cases and circumstances specified therein. According to it, if any person who is resident in India in any previous year proves that in respect of his income accruing or arising in the previous year outside India on which he has paid tax in a country with which there is no Double Taxation Avoidance Agreements, he shall be entitled to the deduction from the Indian Income-tax, a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country which ever is lower. There are also specific provisions in respect of income earned in Pakistan by a resident in India.

There are specific instructions and also decided rulings/judgements¹ which make clear that in respect of matters which are governed both by the Income-tax Act and the Double Taxation Avoidance Agreements (DTAA), provisions of DTAA would prevail.

Whether there is no provision in the agreement for avoidance of double taxation on the subject matter, falling within the purview of Income-tax Act, the relevant provisions of IT Act would apply. In another ruling², AAR has clarified and laid down that the specific provisions of DTAA will override the general provisions of IT Act.

The relief of DTAA can be sought only when a person has paid the tax in one of the countries and the same income is liable to be taxes in another country. But if the person is exempt from taxation in one country then he cannot claim the benefit of DTAA to get scot free from paying any tax.³

Under the authority of law, the Central Government has so far entered into Agreements with countries listed below, as on 1.1.2000, which have become operative with effect from the assessment year mentioned against each.