Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: articles on VAT and GST in India :: ACCOUNTING STANDARD :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: due date for vat payment :: form 3cd :: Central Excise rule to resale the machines to a new company :: VAT RATES :: cpt :: TDS
 
 
« Indirect Tax »
 10 groups set up under senior taxmen to examine issues and report by April 10
 Indirect tax wing rejigged ahead of GST launch
 Grey areas remain for foreign investors on tax issues
 GST: New indirect tax regime to remove inter-state barriers, stimulate exports, says Nirmala Sitharaman
 Cabinet Approves 4 GST Supplementary Bills
 GST Council approves all five draft bills ahead of new indirect tax regime
 CAG questions income tax deparment’s ability to probe shell companies
 Income from MF investments must be shown in income tax returns
 Indirect tax higher than direct tax revenues in April-Feb
 Many foreign investors reach out to tax experts about indirect transfer of shares provisions
 How changes in capital gains norms impact your portfolio

Hypothetical Tax deductible from salary income in India
December, 21st 2012

In an order that will have a bearing on globally mobile employees, a division bench of Bombay High Court held that the hypothetical tax paid by an employee should be deducted from the income offered to tax in India.

The hypothetical tax was part of a Tax Equalisation Agreement signed between the employer and the employee. Under the agreement between taxpayer Jaydev H Raja and his employer Coca-Cola USA, tax liability arising out of his foreign assignment was to be borne by the company, but restricted only to the extent of liability arising out of such foreign assignment.

Therefore, the tax that would have been paid by the employee had he remained in his home country (known as hypothetical tax) was deducted from the salary. The tax that had to be paid over and above this amount was paid by the employer. The taxpayer offered his income which included his salary and the tax reimbursed by the company to the tax authorities.

The salary income of the taxpayer received in India during the relevant year was Rs 77 lakh, after the tax of Rs 50 lakh. The tax amount of Rs 50 lakh was reimbursed by the employer as per the agreement. However, the taxpayer did not offer the entire reimbursed amount, Rs 50 lakh, for tax in India.

He offered for tax the Rs 77 lakh he received in India as salary and only Rs 35 lakh, out of the Rs 50 lakh reimbursed by the company by way of reimbursement. This was on the premise that the remaining Rs 15 lakh had been already deducted from his salary as hypothetical tax.

The Indian tax authorities declined to permit the deduction of Rs 15 lakh, holding that deduction of hypothetical tax was an act after the accrual of income. The Income-tax Appellate Tribunal (ITAT) had upheld the taxpayer's argument and held that the taxpayer had already borne the tax burden to the extent of the hypothetical tax paid by him. The High Court, upholding the Tribunal order, ruled that only the incremental tax borne by the employer should be brought to tax in India.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Enterprise Resource Planning Solutions ERP Solutions Enterprise Resource Planning Software Solutions ERP Software Solutions Supply Chain Management Solutions SCM Solutions Supply Chain Management Software Solutions SCM Software Solutions Enterprise Resource Planning Solutions India ERP Solutions India Enterprise Resource Planning Software Solutions India ERP Software Solutions India Supply Chain Management Solutions India SCM Solutions India Supply Chain Management Software Solutions India SCM Software Solutions India

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions