Unspent Per Diem is Taxable In India if brought back as cash

Unspent per diem is taxable in India if brought back and declared in ITR. Only business expenses allowed. Buy laptop, mobile, garment with cash to avoid tax.

Written by Anil Gupta
  By Anil Gupta          Updated  10 Feb, 20

  168    


What is the meaning of per diem or daily allowance?

Daily allowance or per-diem is an amount which is only meant to cover your daily needs of housing, travel and food. Since it is an allowance, it is not taxable in the country you are travelling to for short term business assignment.

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 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?

It is neither taxable in Indian nor abroad if it is fully spent for the purpose it has been given to you. But do remember that any unspent amount, if brought back in your home country makes it eligible for income taxes in your home country.

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: Lets assume that you received $100 per day in USA and you saved $40 per day by staying there for 30 days. When you returned back to India, you had cash worth $1200, 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 your 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 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 monthly salary received abroad taxable in India?

If you received monthly salary abroad, it is taxable as per that country’s income tax laws. So, if you are in USA, you will pay income in USA and not India.

But in case, due to some trivial situation, you have been charged taxes both in India and USA the double taxation treaty may help you. India has a double taxation treaty with 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 certain income in both USA and India.

Buy Laptop, iPhone using Per Diem?

You can buy anything that you want with your per diem unless your employer wants 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.

Bring Per Diem to Indian in Cash

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.

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.


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   168 Useful Questions & Answers from comments



  1. Hrishikesh Bhardwaj
    Hrishikesh Bhardwaj 10 Feb, 20 at 9:25 am

    Dear Sir,
    I have a question regarding my per diem taxation.
    My company doesn’t ask for any bills on my expenditure abroad.
    If my total per diem is $2500 out of which I have spent $1500 and saved $1000.
    Since my company doesn’t ask for any bills, right now they detect tax for the complete per diem amount of $2500 instead of $1000.
    In this case, how can I save the tax for my overseas spent amount of $1500?

    Thanks & Regards,
    Hrishikesh


    • Anil Gupta
      Anil Gupta 10 Feb, 20 at 9:25 am

      You cannot save tax in this situation unless your company is ready to give you options of submitting bills.


  2. Manish Bhaskar
    Manish Bhaskar 21 Jul, 19 at 1:03 pm

    Hello Anil,

    I have a query regarding Per Diem.
    As per my offer letter I’m supposed to get “X” amount per month whenever I’m travelling to Japan.
    My question is do I need to submit the bills to my organisation?
    As per my knowledge per Diem is amount which is given to me to take care of my expenses and I’m not liable to submit bills of it.
    Now my company is asking for bills of expenses.
    Please correct me if I’m wrong.

    Regards,
    Manish


    • Anil Gupta
      Anil Gupta 21 Jul, 19 at 6:34 pm

      It depends on individual company policy.
      Legally, company would pay you per diem and would request the bills to make that portion of per diem as business expense.

      Rest of the portion with no bills cannot be claimed in income tax as business expense.


  3. Vaibhav Deshmukh
    Vaibhav Deshmukh 19 Jul, 19 at 4:52 am

    Hi Sir,

    I have a one question with regards to tax saving on Per Diem saved. Let’s say after 3 months of On-site assignment I save around $2000 on my forex card and then encash the same in INR with my concerned bank in India. Now if I don’t deposit the cash back to my savings bank account then still do I need to pay tax on the saved amount. Or is this a way I can save tax on saved Per Diem amount?

    Thanks,
    Vaibhav


    • Anil Gupta
      Anil Gupta 19 Jul, 19 at 6:24 am

      I think you already know the golden rule in India. Don’t you?

      Cash income, if not declared is called ‘black money’ and offcourse you can evade income on it if you don’t declare it.

      If you declare it and deposit in bank, it becomes white and you should pay income tax on it to be on safe side.

      Your choice.


      • Vaibhav Deshmukh
        Vaibhav Deshmukh 19 Jul, 19 at 7:05 am

        Got your point. Thanks a lot .. Also I guess my company deducts tax on remaining amount once I submit the card to them.


  4. Aakash
    Aakash 23 Mar, 19 at 12:06 am

    Hi Sir
    Actually I have joined new Org from mid Dec 18, in my last org they were deducting 10% income tax from my salary. But now I am getting my salary from outside India and they are not deducting anything (giving 100% as per the contract), Secondly Perdiem is fixed from the the org side and it is sometimes more than salary. I only travel in India, and we dont have to show bills and anything to claim the perdiem. Travel reimbursement is being paid on the basis of actual bills. How would I calculate my income tax for this quarter?


    • Anil Gupta
      Anil Gupta 23 Mar, 19 at 6:57 am

      Please contact a CA for tax calculation.


  5. KonarkG
    KonarkG 17 Feb, 19 at 3:50 am

    Is it applicable for recent years or it is applicable for long time back ( 2012-2013) financial year. If you get notice how should i respond


    • Anil Gupta
      Anil Gupta 17 Feb, 19 at 12:10 pm

      Income tax on per diem allowance saving and brought back is applicable today also.
      You will get income tax notice only if you converted the savings into white and deposited in bank. That’s the only way Income tax authority can track your income and then match it what you have declared in your ITR.


  6. Arun Prasanth
    Arun Prasanth 14 Jan, 19 at 9:47 am

    Hi Anil,
    Need your clarification,
    I am an business traveler who travel every month abroad to different countries.
    I am getting Indian salary and Per-diem from my company.The problem is my company is deducting tax from my salary based on the per-diem I am getting every month.My company is deducting tax for the entire money I will be getting in a month, my company is not asking for any expenditures that i made out of my per-diem, The perdiem is meant for meal expenditure abroad, my company is deducting the tax even for the money I spent abroad, do you see any mistakes in this system and what will be your suggestion for me to save my tax. Because it seems unfair for me, my whole salary is gone every month as tax adding to this I am paying extra money for the tax every month, so please help me on this!


    • Anil Gupta
      Anil Gupta 14 Jan, 19 at 10:05 am

      Ideally, the business expenses should be borne by your employer and you should not pay tax on it. You should talk to your employer on their policy and why is it done this way.


  7. Avinash Pandey (Avi)
    Avinash Pandey (Avi) 2 Aug, 18 at 1:52 pm

    Hello Anil Sir
    Need your help for the below matter.
    I am working as an IA consultant. I am based out of Mumbai office but working in Middle East at client location.

    **During AY 2018-19, I was out of India for more than 182 days and I am a Non-Resident as per Income Tax Act.**

    I received salary in India. And per diem Kuwait for my stay abroad.(The per diem has accrued to me as well as received outside India.)
    I remitted the unspent per diem every month in my NRE bank account.

    My query is that whether the unspent per diem which I have remitted to India, will it be treated as my income as per Sec 10(14) of the act and would be taxable?

    Thanks in advance for your help.

    Best Regards,
    Avinash


    • Anil Gupta
      Anil Gupta 2 Aug, 18 at 2:59 pm

      Money in NRE account is counted as being already taxed in foreign country as per their laws. You should be good.
      But, i would suggest to consult a CA if the amount is good enough to raise tax inspector’s eye brows.


  8. Bhadri
    Bhadri 18 Jul, 18 at 11:21 pm

    Hello Anil Gupta,

    Am being paid Per Diems from last 7 months, by going through your blog, i came to know that the per diems are taxable in India. Though i have collected the bills, some bills have lost their print and seems to be almost blank.
    I wanted to know if the below purchases are considered for tax exemption.
    Dental Treatment(Tooth Correction / Tooth Braces)
    Garment Purchases
    Gold Purchases
    Electronic Items(Mobiles, Laptops,etc..) Purchases

    Please advice.


    • Anil Gupta
      Anil Gupta 19 Jul, 18 at 7:27 am

      Per diems are taxable if you save them and bring them back to India.
      If your company has already paid you the per diem, then any expenses you make are okay.
      If your company has NOT already paid your per diem and is going to reimburse you based on the bills, then most probably your personal expenses will not be reimbursed. Only business related expenses are allowed. But your company policy may be different. Check with your HR.


      • Bhadri
        Bhadri 21 Jul, 18 at 10:55 pm

        Hello Anil Gupta,
        Thanks for your reply –
        In my case, company has already paid the per diems, but asking me to submit only Food,Laundry and telephone bills. Saying that other / Personal expenses are not to be submitted for getting tax exemption.


        • Anil Gupta
          Anil Gupta 22 Jul, 18 at 3:43 pm

          OK, so your company is basically going to calculate the tax after you submit the bills.
          Yep, personal expenses are not reimbursable.


  9. rehan
    rehan 13 Jul, 18 at 1:48 pm

    Dear Mr. Anil,

    I am at onsite and have a specific query regarding double taxation. Is it possible to reach you through email. Please share your email ID. Else please let me know any other by which I can share my query.

    TIA.

    Regards,
    Rehan


    • Anil Gupta
      Anil Gupta 13 Jul, 18 at 2:02 pm

      You can send your query at IHSIndia (AT) am22tech.com


      • rehan
        rehan 14 Jul, 18 at 1:27 pm

        Thanks for sharing your contact. I have sent the mail with subject “Regarding double taxation at onsite”. Looking forward to your reply


  10. BforBall G
    BforBall G 29 Jun, 18 at 11:30 am

    Hi Mr. Anil,
    Its very much clear from artcile that any foreign allowance brought to India is taxable.
    But, can you please still tell me which are the methods by which we can save the tax in India?
    e.g. If somebody comes to India after foreign trip and he is carrying the Travel card (Multicurrency Card) in which there are 1000USD.
    But the person was there only for 3 to 4 months.
    Now, if he encashes this USD from the card owned bank into INR then, whether the money in INR will be taxable?
    If yes, is there any mechanicsm, we can save the tax on this money?
    Can you please help me to clarify my three doubts?
    Thanks,


    • Anil Gupta
      Anil Gupta 29 Jun, 18 at 12:46 pm

      When you en-cash the travel card, there is no tax deducted by bank.
      It is up-to you to declare this cash as your income while filing ITR. If yo do not declare, you save full tax.
      If you declare, it is added to your income and taxed as per the relevant slab.

      Your choice. There is no other way i know that can make this saved money tax free.


      • BforBall G
        BforBall G 5 Jul, 18 at 6:56 am

        Thanks again for giving crystal clear answers.
        One little doubt, I have spent the Indian currencies while abroad. i.e. I did some flight booking using Indian Credit Card. Thse flights were the abroad travelled flights. As I my multicurrency travel card did not get swiped may be due to some technical problem, I was forecd to use the Indian Credit Card. So, when I return to India, can I deduct this spent amount from the converted USD to INR amount? I mean when I come to India, I’ll convert the money in the card in to INR from the Bank. Say I have 50000 INR. And while submitting ITR, I will deduct the amount spent amount on flight say INR 30000. Thus, in ITR, I can show the amount 50000-30000 = 20000. Thus, I will show the 20000 INR as my extra income. Is this correct?


        • Anil Gupta
          Anil Gupta 5 Jul, 18 at 7:51 am

          Ya, you can do that.
          See, the whole thing revolves around declaring and not declaring it in your ITR.
          If you declare and if the amount is substantial enough to raise eye brows in IT department, then they might ask for proofs.

          For smaller amount (usually less than 10 lakhs), nobody even bothers!
          So, even if you do not declare and keep the money in cash in hand, you will be good.

          But, if you want to declare it the way you have explained, you can do it and keep the proofs like credit card statement, in case the IT officer brings your case to Audit.


          • BforBall G
            BforBall G 5 Jul, 18 at 4:02 pm

            Thank you very much!
            Thanks a lot!


            • Anil Gupta
              Anil Gupta 5 Jul, 18 at 5:18 pm

              You are welcome.


  11. J kaur
    J kaur 11 Jun, 18 at 12:25 am

    Sir

    Am abroad for training purpose from my company. As per agreement am claiming $30 per day as food allowance from company. So company is not deducting any tax for that at present.

    Am not spending that whole money here in abroad. So how I can declare the money as non-taxable that I spent here?
    *As here in abroad every restaurant don’t provide bills for food.*
    So how I can declare the actual amount I spent here for tax exemption on that amount?

    Please help


    • Anil Gupta
      Anil Gupta 11 Jun, 18 at 8:22 am

      You cannot declare any amount that is NOT supported by a receipt (or bill) as non-taxable. There has to be some proof that you spent that amount.


      • J kaur
        J kaur 11 Jun, 18 at 11:19 am

        It is a big trouble for me. Even if we spent money to recharge metro travel card they don’t provide any bills to us. 🙁


        • Anil Gupta
          Anil Gupta 11 Jun, 18 at 11:30 am

          Well, then you have to talk to your company on how to take care of these expenses.


          • disqus_7hlYqa93kg
            disqus_7hlYqa93kg 12 Jun, 18 at 4:53 am

            Sir
            In my daily routine I buy my food from convenient store (7-11). They provide such type POS generated slips. These slips have details of store and tax as you can see in picture. But don’t have any detail about customer.
            Other picture is of Bus Ticket.

            Can I use these to show my overseas allowance to get Tax Exemption ?


            • Anil Gupta
              Anil Gupta 12 Jun, 18 at 8:25 am

              Yes, you can.
              I know that many people collect these kind of receipts even though they have not made the purchase themselves to claim the tax exemption from their employer.
              Usually, many people either request other people to share their receipts or collect them from outside the store where other people might have thrown them.
              It is okay if there is no customer information.


              • J kaur
                J kaur 15 Jun, 18 at 1:48 am

                Just last question sir

                These bills for claiming expenses of per day allowance should be on my name or on company name?


                • Anil Gupta
                  Anil Gupta 15 Jun, 18 at 9:08 am

                  I don’t think there is any name printed on the receipts that you have shared.
                  Also, this has to be told by your company HR as to what they will accept as a valid bill. I cannot guess what your company policy is.

                  Normally, the bill can be on anyone’s name. It does not matter.


  12. Surya
    Surya 7 May, 18 at 4:17 am

    Hi Anil,
    I have been in Dubai for two months on a short term assignment. During the time I have received per diems.
    Do I need to submit the bills for the whole perdiem amount that I have spent there, so I can avoid taxation on the whole amount?

    Thanks in Advance


    • Anil Gupta
      Anil Gupta 7 May, 18 at 7:00 am

      If you have to make it tax free, your employer has to take those bills and consider them as business expense.
      If your employer gives the money to you as your income, then you have to pay tax on it.

      Talk to your employer.


  13. Siva M
    Siva M 4 Apr, 18 at 11:09 pm

    Hi Anil,

    Thanks for such a nice and clear article, it helped a lot. But my case is slightly different from this.

    My parent company transfered me to their partner company for 2 years as Onsite-Coordinator in Japan. But my indian salary and per-diem allowance is paid by Indian company in INR to my indian bank account only. They are considering the whole amount(salary+allowance) as my CTC and deducted the 30% TDS according to my salary slab. They are not ready to accept the food and other bills also. I feel like, we are being fooled by my company.

    What is your opinion on this?

    Regards
    Sivalingam M


    • Anil Gupta
      Anil Gupta 5 Apr, 18 at 6:20 am

      Well, you would have signed a deputation agreement before going to Japan. You probably would have signed on the agreement which had the details of how you would be paid for working in Japan.
      It depends on each company policy.

      What did they pay you in Japan for lodging? Was there anything paid in Japan for your expenses there? Was any income tax deducted as per Japanese laws?
      I can’t really comment on what set up you had with your company but normally companies do pay some per diem to take care of daily expenses.


  14. Siva M
    Siva M 4 Apr, 18 at 11:10 pm

    Hi Anil,

    Thanks for such a nice and clear article, it helped a lot. But my case is slightly different from this.

    My parent company transfered me to their partner company for 2 years as Onsite-Coordinator in Japan. But my indian salary and per-diem allowance is paid by Indian company in INR to my indian bank account only. They are considering the whole amount(salary+allowance) as my CTC and deducted the 30% TDS according to my salary slab. They are not ready to accept the food and other bills also. I feel like, we are being fooled by my company.

    What is your opinion on this?

    Regards
    Sivalingam M


    • Anil Gupta
      Anil Gupta 5 Apr, 18 at 6:21 am

      Well, you would have signed a deputation agreement before going to Japan. You probably would have signed on the agreement which had the details of how you would be paid for working in Japan.
      It depends on each company policy.

      What did they pay you in Japan for lodging? Was there anything paid in Japan for your expenses there? Was any income tax deducted as per Japanese laws?
      I can’t really comment on what set up you had with your company but normally companies do pay some per diem to take care of daily expenses.


  15. lakshmi narasimhan
    lakshmi narasimhan 11 Feb, 18 at 5:34 am

    Hi Anil,

    I am on deputation to Russia for six months, but it comes to 150 days outside India. My salary is paid in Russian rubbles in citibank account here. My home entity does not pay any income for these period. In Russia the salary component is inclusive of equivalent salary amount in India + allowance + Per diem. Company pays 13% tax for the amount credited here in Russia. They have no where shown the separation and all the amount are paid in bank and not by cash. I have spent some money in Russia and Dubai. Do i need to pay tax for only the amount sent to India or for the whole amount credited here. How to calculate the amount of tax to be paid in India. During start of contract they have also got my Indian PAN number, will the income in Russia will replicate in form 26AS.


    • Anil Gupta
      Anil Gupta 11 Feb, 18 at 8:30 am

      You will be considered an Indian resident for Filing Indian income tax since you will be spending 180+ days in India.
      Your company should issue you form 16 and use it to file Indian ITR.
      I am not sure if Indian and Russia have double taxation treaty or not. You can check with your company’s finance department.


  16. Gopinath
    Gopinath 29 Jan, 18 at 6:19 am

    Hi Anil,

    I was in travel to UK last year for 3 months. Company bared the food and accommodation. They gave 40$ for out of packet expenses. So for 3 months i got 3600$. where as, I have spent 1200$ for my personal expenses like site seeing,etc. where as my company has already deducted IT for 3600$ whole. Can I able to file the return for the for 1200$?


    • Anil Gupta
      Anil Gupta 29 Jan, 18 at 9:15 am

      What do you mean by ‘return’ for $1200?
      Do you want REFUND for $1200 from income tax department?

      Is yes, then you cannot claim the $1200. Your company has already paid taxes on $3600 and should give you form 16 for the same.
      This was supposed to be added to your income and they probably have already done it.

      You can just use the form 16 to show the same income on your income tax return.


  17. RADHAKRISHNAN P NAIR
    RADHAKRISHNAN P NAIR 23 Jan, 18 at 5:39 am

    Hi Anil,
    I had a foreign short term assignment to Hong Kong for 6 Months, the period was December 2015 to June 2016. I was paying salary in India account only which duly taxed as per by Indian Income Tax law. When I came back from the trip the left out amount of daily allowance was near about 30K HKD and I kept that amount in HKD currency only till few months back. I have filed my return for FY 2016-17 without showing this income due to my ignorance and the ITR computation was showing a refund due to the excess tds deducted from the salary income. The refund of FY 16-17 is also credited in my account few months ago. The left out HKD cash converted into INR during the financial year of 2017-18 through normal currency exchange in HDFC Bank account. My question is that whether I have to show the left out HKD as income in FY 16-17 ITR itself by doing a revised return or the same could considered in FY 2017-18 ITR only as the conversion accounted for in the bank account in current year only. Please advise


    • Anil Gupta
      Anil Gupta 23 Jan, 18 at 8:18 am

      Since, you have already filed the 2016-17 ITR and got the refund, you will add complexity to your case by filing a revised return.
      Although, filing a revised return is the legal way due to the income you earned belong to that year.

      At this time, it is your choice about what you want to do.