As per section 5 (2) subject to the provisions of the Income tax act 1961, the total Income of any previous year of a person who is a non-resident includes all income from whatever source derived which-
- Is received or is deemed to be received in India in such year by or on behalf of such person; or
- Accrues or arises or is deemed to accrue or arise to him in India during such year.
Note: By the above section we can here by reach on the conclusion that if any salary of employee is received in India it will be taxable in India irrespective of accrual of salary.
As per section 9 (ii) income which falls under the head “Salaries”, if it is earned in India, it shall be deemed to accrue or arise in India.
Note: By above mentioned section 9(ii) it is clear that if Income is earned in India i.e. services by employee are rendered in India under the terms of employment it shall be taxable in India and if services under the terms of employment are rendered outside India it will be subject to receipt of income for the purpose of taxability.
Conclusion for salary paid outside India to NRI employee: If salary is received outside India and services by the employee are also rendered outside India it will be not taxable in India subject to section 9 (iii) of Income tax act 1961.—-DIT v. Prahlad Vijendra Rao annexed with this note.
Articled Clerk Tarun
RPL & Co.