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Taxability & other aspectSalary in INR to an employee abroad

CA Satyen Sharma (Head - Accounts and Finance) (71 Points)

04 March 2011

Hi !! My company has deputed employees in Indonesia as we have our business place over there.

My query is that whether the salary of these indian employees, working in Indonesia, can be paid in their Indian bank account in INR or can it be paid in Indonesia in US Dollars.

Please advice, it is urgent

Thanks

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3 Replies

Rachit (Ca-Final Article.) (565 Points)
Replied 04 March 2011

Dont have any expert knowledge in ssuch context but mainly as io think in your books you will record these salary in INR but you have to pay them in Dollas. or you can also deposit a sum of money in INR form and can say your bank to pay the same to your employees in the specified currency..........

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U S Sharma (glidor@gmail.com) (21056 Points)
Replied 04 March 2011

payment of salary in forex depends on various issues between company and the govt there, check your service contract for more details.

if employer has deputed the employees for a temp period then they can pay in indian rupees in india even.

Maneesh (Partner) (109 Points)
Replied 06 March 2011

Satyen, as I understand it, the employees are on deputation and thus, they continue to be employees of the Indian office.

Per RBI Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000 - Notification No.FEMA 10 /2000-RB dated 3rd May 2000

7. Opening, holding and maintaining a Foreign Currency Account outside India :-

(6) A person resident in India who has gone abroad for studies or who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India.

Thus you may get in touch with your authorised dealer to understand the documentation requirements for opening and transferring balances to such accounts.

As for taxability of such deputed personnel, please consider the provisions of the Indian Income-tax regarding residence status, provisions of section 192 of the Indian income-tax and the relevant provisions of the Indonesian tax act. This link may help you with the Indian side of things https://www.incometaxindia.gov.in/publications/2_TDS_On_Salaries/Chapter09.asp