As the employer-employee relationship existence is necessary between payer and payee to determine a particular receipt as Salary, the place of accrual of salary has also its importance as per Income Tax Act, 1961.

The simple rule is that Salary accrues at the place where the services are rendered. Therefore, even if a non-resident is paid salary outside India in respect of services rendered in India, it is deemed to accrue or arise in India.

Consequently, salary becomes taxable in those cases subject to exemption available to foreign nationals. However, if a citizen of India service outside India and receives salary from India, it would be taxable as salary to have accrued in India like salary paid to an Indian citizen by the Government is deemed to accrue or arise in India even though it is for the services rendered outside India. However, exemption is provided in respect of allowances and perquisites granted in such a case.

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