Many of us go on business trips abroad. During such trips we are paid a fixed amount of allowance per day, to take care of our day to day expenses. Some might go on single trips in a financial year, some on multiple. In both these cases we would need to know what is the total time spent outside India.
Out of the allowance received, some amount is saved. Is this amount taxable?
As per the IT Act any unspent amount shall be taxable.
Since the company has sent the employee on foreign assignment, his/her salary is TAXABLE in India.
However in 2005 the income tax department came with a circular with respect to Fringe Benefit Tax (FBT) and allowance received.
As per the circular the employee is not liable to pay income-tax on any amount saved from the allowance received. If your company deducts the FBT on those sums of money paid to you as allowance, the same is not taxable in your hand under I T Act.
Now that we are clear if it is taxable or not, the question is how we convert the foreign currency into Indian Rupees. Always use the official route, since its legal and not taxable. This way you could also invest the money. You have gone through a lot of sacrifices to save the money, now that you have saved it, would you like to just spend?
The main reason we talk about using the official route is, you do not just spend the money.
Where do you invest? There are many choices; lets have a look as some of our options.
Conventional: Bank Fixed deposits, NSC’s, Company Fixed Deposits, PPF, Insurance
These are safe returns and capital is guaranteed. The downside is the taxable part.
Share / Stock Market / Commodities / Futures and options:
You need to be really careful. Don’t go by hearsay, do your own study before you invest.
Mutual Funds: Equity / Debt / Sector specific / Income.
Though risky, the risk is somewhat less compared to the option above.
Real Estate:
This is quite safe. But the amount required is quite high.
Business: Is this everyone’s cup of tea?
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