Indian Salary as well as Perdiem allowance in GBP on UK trip

Hi Anil,

I have specific questions on 2 different stages of my status in FY 2014-15. And also some question for FY 2015-16 as often the income spills over to the next financial year.

Stage 1. I was in UK on Tier 2 Short Term Work Permit starting 25th January 2014 until 4th May 2014. During this tenure of exactly 100 days I was getting my Indian Salary as well as Perdiem allowance in GBP. In 100 days I could save approximately 50% of my perdiem which I transferred by way of Western Union Money transfer into my India saving account. All these transfers were done after 1st April 2014. During this time my Indian salary continued and TDS was deducted on it as per the scale.

a. Do I need to include whatever savings I transferred into my Indian account from UK in my Income for FY 14-15?

b. I am specifically not aware of whether my organization had paid any taxes on perdiem paid to me either to the UK or Indian Government though there have been some verbal communication which suggested that they had. Do I need to dig in and find out?

c. Does the fact that my organization had paid taxes on my perdiem to UK or Indian Government relieve me of the Indian tax burden on my perdiem savings and I don’t have to declare it in my ITR?

Stage 2. I again travelled to UK in the last week of February 2015 and this time on Tier 2 Long Term Work Permit. This time round my Indian Salary had stopped and I am getting only UK Salary.I will be returning back to India in the month of August 2015. Although regular tax is being deducted from my UK salary, no tax was deducted from my salary for the last week of February and the month of March 2015 as it falled within tax free bracket of UK. Starting April regular tax is getting deducted from my salary.There has been no transfers of unspent amount to India either cash or online untill the end of FY 2014-15.

a. Do I need to pay any tax to Indian Government on my Salary earned in UK for last week of February and full month of March 2015 for the FY 2014-15 which has already gone through the tax gates of UK Governemnet, although no tax deducted owing to low income earned in FY 2014-15 in UK?

b. I will be returning to India in August 2015 and therefore my stay in UK for FY 2015-16 would be less then 182 days. I will have savings converted and transferred to my Indian accounts in the month of August. Will all of these savings be considered as income for the FY 2015-16 and I have to pay tax to Indian Government considering the fact that I have already paid tax on this income to the UK government?

c. Also, the tax deducted by UK Government is basis that I will staying in UK for full financial year of 15-16. However, I will return by August and would therefore be entitled to tax refund from UK Government.I would eventually be converting and transferring this amount to INR. Do I need to pay tax on this amount also?

Paying the tax is not a problem but all I am trying to do is to adhere to regulation of both the countries and have legitimate money in my kitty. So please excuse me if it is too complicated :slight_smile:

Looking forward for a response from you.

Hi Peeyush,
This is what I think to the best of my knowledge:

Stage 1:
a. Yes, you should include it in your income for FY 2014-15. It can be tracked via banking account.
b. If your company has paid any taxes for per diem, they should be able to provide you with the paper document. If you can produce that paper document to prove that you have already paid or you do not owe anything on the amount to Indian taxes, you are good.
c. The tax document is important to prove the money’s source in your account. Just like you get Form 16 for all the income and tax paid by company on your behalf, the tax paid doc for per diem is also needed.

Stage 2:
a. Tax-ability of income in Feb-march in India will depend on your Tax residency status in the FY 2014-15. Since, you had spent more than 182 days in India, this income has to be reported in India and you have to pay taxes. It does not matter if it was not taxed in UK due to low income.

If you are tax resident in India for a given year, all your global income has to be shown and taxed in India.

b. Yes, you will have to declare the income in India for FY 2015-16. The tax that you have already paid in UK can be shown too and you can get double taxation treaty benefit. I am not sure if UK has that treaty. USA certainly has it.

c. You will have to reconcile everything - UK taxes paid and refunds, Indian taxes paid and due at the time of filing Indian income tax return. UK tax refunds does not mean income tax free money. It has to be counted as income and then taxed as per Indian tax laws.

I would suggest you to contact a CA to prepare your tax returns due to the complexity.