Remittances for Director Fees & Remuneration

Hello All,

Sunday Special Class on Taxation of Foreign Remittances

Hope you like my previous class on taxation on Remittances for Students.

Today we will study purely for Remittances for Director Fees & Remuneration

It is very important to understand.

It applies to all Directors and top level officials of the company.

1.      What does DTAA says:

Firstly, the same is not deal with Article 15 of DTAA.

It is covered under Article 16 of DTAA.

Article 16(1) says Director and other similar payment derived by the resident of other country (let says UK) in the capacity of Board of Director of Indian Company, may be taxed in India. It means India has the right to tax.

Article 16(2) talk about Top Level Officials. It says salary & wages derived by an Foreign Residential (lets say UK residential) in the capacity of Top Level Official position of an Indian company. It also taxed in India.

There is no requirement of services being rendered in India. (it can be rendered from anywhere in the world, Since it is very difficult to test what services the Director has rendered for the company & from where.)

There is a short exemption in Article 15 of DTAA which is available for employees.

It state as if a foreign employee , NR employee comes to India to work for a short time, generally less than 6 months, then such kind of salary is not taxable for short period of time.

Such exemption is not available in Article 16 of DTAA.

2.     Meaning of Board of Director :

It is same as defined in Companies Act 2013, but includes a body in charge for supervision of company management.

3.     What incomes are include :

• ·         Sitting fees
• ·         Director fees
• ·         All remuneration paid for supervising kind of services.
• ·         Payment could be done either in cash or in kind (i.e. use of car, house etc.

4.     Certain Issues to understand :

• ·         Issue 1: Most of Indian DTAA has only Article 16(1).  In such cases if we have Top Level Official to whom we have paid remuneration, then the same is deal with Article 15 of DTAA.

•  ·         Issue 2: Suppose if the services are rendered by the Director in India for a short period of time, assume we also have Article 16(2) with that country, then we scan tax only that part of salary for which the Director comes to India.

• ·         Issue 3: If an Indian company employees a person who is a Director or a Top Level Official (i.e. they has sign a contract with an Indian company in India), has rendered serves from sitting anywhere else in India, the same is still taxable in India, even if service is rendered form outside India, since the source remain in India as the contract is sign in India. 
• This is the parts which normally miss out by most of us.

• ·         Issue 4: If an Indian company has a Branch Office or a Set up outside India, where a separate employment agreement entered into, the section 5 and section 9 will not attracted.

Hope this is found interesting and useful to you and the same is clear. Next we will discuss on some more remittances.

Looking forward for a feedback and open discussion.

You can reach me at :

Thanks & Regards,

CA Mohit Bansal

+91-9045773456

mhtbsnl@gmail.com