Section 7 mentions that ‘amount transferred from URPF to RPF will be deemed to be received in India’. Because of this it will become Indian income and therefore will be taxable in the hands of NR , ROR and RNOR. but why this transfer is taxable now as the same was not an allowed exp to employer due to sec 40A(9) so tax was already paid on it earlier at the time of contribution. But now at the time of transfer if we apply sec 7 will it not lead to double taxation on the same amount?
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But we will get deduction on the amount if the tax is already paid on it
By lower of the amount tax paid in that country or the tax in India
Can you please explain it again with an example may be. the reply is not much understandable to me. Thanks
Suppose income of ₹10 is added on which you have already paid tax in foreign country say ₹ 1
Now in India since the same ₹10 is added and relevant tax in India on ₹10 is ₹2
So you will get deduction of lower of ₹1 or ₹2 i.e ₹1 to avoid the double taxation
ohh, foreign tax credit. So in my ques if Mr X (employer) paid Rs 100 to URPF for the benefit of NR employee . X could not claim deduction of the same due to Sec 40A(9) so he paid tax of Rs 20 (say) on his entire income of Rs 500 (say). After this, the amount in URPF was transferred to RPF. now as per Sec 7, Rs 100 will be deemed to be received in India in the hands of the NR employee. now will he be taking credit of :
Rs 20* (100/500) = Rs 4 (i.e. proportionate tax on URPF amount).
is this what your explanation says?
Now in you this situation let’s go for Normal Income Tax provision which was disallowed earlier but if it was rectified by the time of Filing of return or in subsequent year toh uska allowed hota hai right ?
So payment to UPF and later transferring to RPF is a transaction toh uska deduction milega .
Now next part Mr X ka Non resident employee ka PF mai contbn allow and disallow toh waha ke law ke hisab se hoga right how can both get juggled .
But to answer your question if it gets allowed toh future mai usko deduction mil jayega but credit milne ke liye toh usko us law pe tax Dena padega