salary deposited in NRE account
October 7, 2006 7:54am CST
Dear Member, 'X" is a company registered under the Companies Act, 1956. The subject company is a consultancy company and engaged in providing consultancy services in the field of Engineering. The Company is having project site offices in India as well as abroad. The query is related to employees working at site office outside India. The Company is having one site office abroad at which some of the employees are working. The employees are citizen of India and having NRE Account in India. The employees are getting part of their salary in INR, part in US$ and rest in cash in local currency in abroad. The INR salary is being deposited in their INR salary Account, the US $ part is being deposited in their NRE Account by way of Dollar DD made from company’s EEFC/INR Account and the local currency part is paid in cash in local currency in abroad itself. Query Following are the queries on above case study: 1. Whether the salary deposited in NRE Account by way of Dollar DD made from Company’s EEFC/INR Account in India is income deemed to accrue and received outside India? If yes, whether the same is subject to TDS till the time employee is resident (in other words till the time the stay outside India is less than 182 days). 2. If the employee and company declare that the employee will stay outside India for more than 182 days in the year, can the Company pay the salary without deducting Income Tax on the basis of declaration and in case the employee leaves the company before staying more than 182 days outside India what will be the consequence? In case this salary is subject to TDS what can be the way out to pay tax-free salary (not subject to T.D.S.) in the hands of recipient. Whether there is any allowance that can be paid as tax-free. 3. Whether consultant or employee makes any difference in status and change in rate of TDS? Some big companies are paying salaries to their employees working outside India in the name of subsistence allowance as tax-free allowance.