Per diem means a daily allowance for business expenses.
Daily allowance or per-diem is an amount that is
Per diem is a business allowance that is not taxable for the employee if you use it for your daily needs of housing, travel, and food while on a business trip.
Your employer will show it as a business expense in the country you are traveling to, for a short-term business assignment.
The per diem amount is not taxable in India if you spend all of it while you are on a business trip outside India.
But do remember that any unspent amount, if brought back to your home country like India, is counted as your income which should be taxed.
You can buy a laptop, iPhone, or anything that you want with your per diem unless your employer wants you to submit receipts for the purchases.
It all varies with each company policy as they use the receipts for accounting in their own company tax as a business expense.
If your company is paying you per diem without asking for any receipts, then you can buy anything with your per diem savings abroad.
This article will discuss:
Per Diem Taxable
When you travel abroad for long term assignments (generally greater than 3 months), your company actually deputes you or transfers you to their subsidiary or sister company or parent company as the case may be in that country.
In this case, they pay you a monthly salary abroad and stop paying you your Indian salary. This salary is then taxable in the respective country as per their income tax laws.
Unspent per diem is Taxable in India?
As per income tax rules, the amount you brought back in India should be considered as your income and added to your Indian income for calculating income tax. If you do NOT do this, it is considered as BLACK money or undeclared income.
Example:
Let’s assume that you received $100 per day in the USA and you saved $40 per day by staying there for 30 days.
When you returned back to India, you had cash worth $1200, the rest $1600 was spent on your daily needs. Then this amount of $1200 would be taxable in India as per your income tax slab.
Please note that your company would normally NOT care about what you did with your daily allowance. They assume that you would have spent the full amount while you were abroad. It is your responsibility to declare the unspent amount (if any) in your Income-tax return when you return back to India.
Also, note that while you were abroad and were receiving a salary in India, your Indian salary would be taxable as per Indian income tax rules and your company would deduct the TDS as it used to do it when you were in India.
Is Salary Received Abroad Taxable in India?
If you received a monthly salary abroad, it is taxable as per that country’s income tax laws. So, if you are in the USA, you will pay income there and not in India.
But in case, due to some trivial situation, you have been charged taxes both in India and the USA the double taxation treaty may help you. India has a double taxation treaty with the USA and some other countries to make sure that you do NOT pay tax twice on the same income.
So, you can get the tax return if you paid taxes on a certain income in both the USA and India.
Bring Per Diem to India
Many people save the daily allowance on their deputation and then bring it back to India. They convert it to Indian cash using money conversion services from banks like ICICI, HDFC, etc, or from private money changers.
Bring Cash To India
The fact is that if you keep the cash and leave no trace of this money, you can save tax. But, note that it is considered black money.
Legally, you should declare the money saved abroad on your ITR as your income and pay tax as per your tax slab.
Encash Forex Card
If your employer paid per diem using the Forex card, you should cash it while you are outside India. Most forex cards only work for extracting foreign currency.
- You can use an ATM at the international airport to take out US dollars and then convert them to Indian rupees in the open market.
- I do not suggest bringing Euros or Swedish Kroner as their conversion rate is lower.
The first preference should always be the US dollar as it is considered a global currency and will fetch you a good rate in the cash market. The second should be UK pounds.
Almost every city has a currency exchange open market. The most popular is the ‘Gaffar’ market in Delhi.
Another easy option is to exchange your foreign currency at a Gold Jewelry shop in India. They will be eager to take Dollars in exchange for the Indian currency.
Spend Cash or Deposit in Bank Account?
Some people suggest spending it as cash to avoid any tracking and others have deposited it in their parent’s account to skip taxation. These may work if the amount is small like less than 2 lakhs.
If the amount is more, it is better to buy some expensive items like gold jewelry while you are abroad.
I recommend buying:
- One PAMP 30g Pure Gold Bar from Amazon per person as it’s allowed without custom duty. The bar/s can be easily sold to jewelers at the current market price since this is a pure 24-carat bar. You can even make a profit as the rate in India is usually 10% higher due to import taxes.
- You can also buy electronic goods, and bring them open box and chances are high that you may clear customs easily.
Just try to mix and match and spend it outside Indian rather than bringing it.
Indian income tax tracks all transactions by debit or credit card above 2 lakhs. Cash deposits above 50K also need your PAN and get reported to the Income-tax department automatically.
Indian Customs Duty on Laptop, iPhone
Many people visiting Europe, the USA, or Dubai would suggest you buy an expensive laptop, iPhone, Xbox, or PS4 since they are available for a lower price.
You can certainly buy these items but note that you may need to pay customs duty if the total items you are bringing in are more than the free allowance at Indian customs.
