Salary from a foreign Comapny

[Shama Sarin]

A RNOR receives salary from a foreign company not having any setup in India.He is the only employee in India working from his home in Delhi.He gets the salary credited to his bank account ever month.The employee wants to have the breakup of salary in such a manner that he gets the maximum benefit out of it.Is it necessary that the company issues Form 16 & Is it possible for a foreign company to take a PAN & TAN no?& What is the procedure for the same?

[CAGOPALJI AGRAWAL]

By virtue of section 9(1)(ii), salary is deemed to accrue or arise in India hence taxable even in the hands of non resident since services are being rendered in India. If it is possible for foreign company, it may give the remuneration in the form of consultancy so the recepient may treat it as business or profession and claim the relevant expenditure.

Employer is not required to take PAN or TAN as he is not under obligation under the Income Tax Act if it has no business connection or PE in India.

 

[Anuj Gupta]

If the amount so received is designated as SALARY then the foreign Company is required to deduct TDS u/s 192 and also obtain TAN for the same. Also the foreign company shall also be required to file the quarterly returns for the TDS so deducted.Obtaining of TAN has no connection with business connection or PE in India.If the foreign company pays salary even to a single employee which is chargeable to tax, then it is liable to have TAN.

Hence as suggested by Gopalji ,the foreign Company should designate the payment so made as consultancy charges and then it shall not be liable to deduct any TDS u/s 194J.(as per CBDT circular)

AI Summary

Taxability of salary in India: salary paid for services in India may require withholding unless recast as consultancy fees. Remuneration paid by a foreign company for services rendered in India is taxable as income arising in India; if designated as salary, the payer may be required to obtain TAN, deduct tax at source and file TDS returns. Alternatively, recasting payments as consultancy/professional fees allows the recipient to treat them as business income and may remove the payer's obligation to withhold tax, subject to relevant tax administration guidance.