Hi Anil,
Lets say the 40 USD * 30 ~ 1200 USD is saved and before i return i just withdraw the amount and carry it back in the form of cash.
Will this mean there is no unspent amount and i do not have any tax liability?
No, It does not work that way.
Whatever amount you save (cash or still in your ATM card or your credit card provided by company) is taxable.
Normally, people do take out the cash and bring it back with them.
It is up-to you if you declare the cash in your ITR (Income Tax return) that you bring back. This is same as selling something in cash and not declaring it to evade income tax.
- If you don’t declare, it is an income that you have not paid tax on.
- If you declare, it is added to your income in India and taxed accordingly.
If you have money left on your ATM card (foreign currency card provided by your company), you can bring it back without cashing it. You can get it cashed here in India with the bank.
They won’t charge any tax when you en-cash it. But, again the above scenario would be applicable with the cash.
Let me know if you need more information.
Thanks for this, but i am slightly confused maybe because of so many papers and examples in internet.
I referred to the link in KPMG site provided here in another discussion .
What is the conclusion of these cases?
I understand from what you have replied there is if my company ( where i am deputed) paid the taxes for my per diem then i need not do anything and there is no tax implication. If they have not paid anything then i might need to pay . This is based on the country i am travelling to and the duration.
Secondly from your response - “It is up-to you if you declare the cash in your ITR (Income Tax return) that you bring back. If you don’t declare, it is an income that you have not paid tax” - my question is if i do not declare anything does it not mean that i have spent it all for my daily expenses.
I understand there is an aspect of ethics which ideally should drive me to declare unspent amount but i am just trying to have clarity on the definition.
Thanks again…great work helping us understand the complicated tax processes.!!
The declaration/non-declaration of un-spent per diem only affects you and not the company. Company is doing everything legally and declaring the amount they have paid you as per-diem in their accounts. So, they are not affected by your decision to declare or not.
Also, the amount that they pay you as per-diem is meant to take care of your daily expenses for living while on an assignment away from your base working location. This is considered an expense in company’s account and hence they get tax deductions for it.
Coming to the question of saving money out of this in your hand, the company does not really care about what you do with this money. You save or spend all, is all up-to you. The question of declaration only comes up if you save and want to use the money for some other purpose.
Now, think this way: Whatever salary you get (earn) from your company is taxable in your hand even though company has accounted for it in their accounts.
Thinking on same lines, the amount you save from the per-diem has to be an income for you (The cash or whatever form it is in). It has to be taxed somewhere before considering it as white money for you as an individual.
Regarding the case study published by KPMG and Deloitte.:
The case study is also correct in the sense that the tax officer might not really care about the small amount that you bring back. This is based on an assumption that you would probably just be able to save about 10-20% of total per-diem.
But, it does not give you complete immunity. The tax officer would have all the rights to consider it as your income, if the amount you bring in as cash is a considerable amount and then deposit it in your bank account here in India.
How will you prove that the cash was indeed saved abroad and then brought into India? They always try to find if the income passed through tax gates before reaching your hands. In this case, it will be difficult to prove since the per-diem was initially meant to be spent abroad on actuals (meaning real bills and was never meant to be saved).
Also, if the amount is big, please do consider taking an expert opinion from a qualified CA.
I have shared my experience above based on my earlier stint with per-diem and travelling abroad on short assignments.
Does that answer your confusion?