Salaries [Section 192] under Deduction of tax at source from non-resident’s income :

If the non-resident renders technical services in the capacity of an employee to the Indian enterprise and the payment for such technical services becomes liable to be taxed in India under the head “salaries‟, the tax payable thereon should be deducted at source by the Indian enterprise before making the payment of remuneration or crediting the amount thereof to the account of the non-resident under section 192.

Failure on the part of the Indian enterprise to deduct the tax at source would disentitle it to claim the remuneration paid or payable to the non-resident employee as an expenditure in computing its taxable income because of the mandatory provisions for disallowance contained in section 40(a)(iii) of the Income-tax Act, 1961. Further, the Indian enterprise would also attract liability for prosecution besides the liability to penalty and fine over and above the obligation to pay the amount of tax which ought to have been deducted, with interest, to the government. For this purpose all the provisions for collection and recovery of tax would be applicable since the employer in India would be deemed in such a case to be the assessee in default.