Working in UK? Per diem payments are not taxed

Indian employees sent to work in the United Kingdom who receive per diem payments from their Indian employer are typically taxable in the UK under the India-UK DTAA, unless specific conditions are met. However, for the Indian employee, these payments are usually not taxable under the DTAA under certain circumstances. One case involved an MNC employee who received Rs 16 lakh in per diem payments while working in the UK, and the Indian Income Tax Department sought to tax this amount.

The employee, however, did not separately report the per diem payments in his UK tax return, leading to the tax assessment. The court held that because the employment was exercised in the UK and the employee qualified as a UK tax resident, the per diem payments should have been taxed in the UK and not in India.