ITAT Ruling: Non-Taxability of Salary for Services Rendered Abroad by a Non-Resident

In a significant ruling, the ITAT Mumbai in the case of Mridula Jha Jena [TS-18-ITAT-2025(Mum)] clarified that salary earned by a non-resident Indian for services rendered outside India is not taxable under Section 9(1)(ii) of the Income Tax Act.

Case Snapshot:

• The taxpayer, an employee of an Indian company, was deputed to Egypt for 24 months starting August 2012.
• Salary for services rendered in Egypt was credited to her Indian bank account by the Indian company after deducting TDS.
• The taxpayer filed her return, claiming exemption for the portion of salary earned abroad.

Key Observations: 1. Section 9(1)(ii): Salary is taxable in India only if services are rendered in India or if it relates to rest/leave periods linked to Indian employment. 2. As the services were performed outside India, the Tribunal held that the salary did not qualify as taxable income in India.

Outcome: The ITAT ruled in favor of the taxpayer, reaffirming that income taxation aligns with the place of service. This decision underscores a critical principle: income sourced and earned abroad by non-residents is not subject to Indian taxation.

A noteworthy judgment offering clarity and relief to non-residents working overseas!