Archive · 21 Jul 2026
ITAT Rules Foreign Salary in NRE Account Not Taxable
An NRI named Pralay Pradyotkanti Ghosh received a foreign salary of ₹45.66 lakh in his NRE account in India.
He claimed this salary was exempt from tax because he earned it while working in international waters.
The Assessing Officer accepted his claim after detailed scrutiny.
However, the Principal Commissioner of Income Tax later argued that the salary was taxable and initiated revision proceedings.
The ITAT ruled that the salary was not taxable in India just because it was credited to an NRE account or because tax was deducted using an Indian TAN.
The ITAT also emphasized that the Assessing Officer had conducted thorough enquiries and verification, so the revision order could not stand.
This ruling reaffirms that foreign salary earned by a non-resident for services rendered outside India is not taxable in India.
The ITAT ruled that foreign salary credited to an NRE account is not automatically taxable in India.
Pralay Pradyotkanti Ghosh, an NRI, received ₹45.66 lakh as foreign salary and claimed it as exempt.
The Assessing Officer accepted the exemption claim after detailed scrutiny under Section 143(3).
The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, arguing the assessment order was erroneous.
The ITAT set aside the PCIT's order, stating that the Assessing Officer had conducted thorough enquiries and verification.
- Who
- Pralay Pradyotkanti Ghosh, a non-resident Indian (NRI)
- What
- The Income Tax Appellate Tribunal (ITAT) ruled that foreign salary credited to an NRE account is not automatically taxable in India.
- When
- The case pertains to the assessment year 2016-17.
- Where
- The ruling was made by the ITAT, Ahmedabad.
- Why
- The Principal Commissioner of Income Tax (PCIT) invoked powers under Section 263, arguing that the assessment order was erroneous and prejudicial to the interests of the Revenue.
Tax Department's View
Taxpayer's View
Taxability of Foreign Salary
Tax Department's View
The Principal Commissioner argued that the salary was taxable in India because tax was deducted using an Indian TAN and the salary was credited to an NRE account.
Taxpayer's View
The taxpayer claimed the salary was exempt because he was a non-resident and earned it while working in international waters.
Adequacy of Enquiries
Tax Department's View
The Principal Commissioner believed the Assessing Officer had not carried out adequate enquiries.
Taxpayer's View
The taxpayer and the ITAT argued that the Assessing Officer had conducted detailed enquiries and verification.
- Taxpayer
- Pralay Pradyotkanti Ghosh
- Assessment Year
- 2016-17
- Foreign Salary
- ₹45.66 lakh
- Tax Demand
- Over ₹12 lakh
- Section 263
- Allows Principal Commissioner to revise assessment if erroneous and prejudicial to Revenue
- Section 5
- Governs taxability of salary earned by a non-resident for services rendered outside India
- NRE Account
- Non-Resident External Account
- TAN
- Tax Deduction and Collection Account Number