Tax Issues in India for Expats

In a previous post we discussed the various forms of bank accounts that a non-resident Indian can maintain during his stay in India. We also discussed Non-Resident External (NRE) account that is exempted from tax on income earned. The question is whether other incomes in form of salary, pension, gratuity etc are also exempted from Income Tax for a non-resident Indian? The answer is – it depends.

Taxation rules in India can be highly intimidating. You need to have a full grasp of what you are getting into in order to file for your income tax returns. That is why it is highly recommended to get the following documents as soon as possible after landing in India for the purpose of long term work and accurate taxation procedures.

• Registration with the “foreigner’s regional registration office” within first 14 days from arrival
• Stamped residency permit
• A PAN especially where you are an inbound expatriate earning salary and other income inside India

Taxation Rules for Expats in India:

A significant percentage of human resource working in India comes from foreign land. Their salary and other compensation can be fully paid by a foreign employer and it could be partially shared with a resident Indian employer. In case of the latter, the issues of taxation may arise.

• Firstly, you need to check your stay in India during any fiscal year. As an expatriate working in India, you will be liable to pay  if your stay increased the stipulated 183 days during April 1 to March 31 of any financial year.

• Secondly, you need to check the origin of salary due, received or accrued in India by a resident Indian employer. Income generated within India by providing services to a resident Indian, is generally taxable.

• Thirdly, you need to check income other than salary which is due, received or accrued in India such as provident fund increments and pension increments. Other income generated within India by providing services to a resident

Indian is also taxable by law.

For expatriates trying to get a permanent residency status in India the tax exemption terms vary accordingly. The best way to go about submitting your income tax returns in India would be through consultation with professional help. An expert tax management agency will help you understand the taxation laws taking away the frustration and fulfilling the legality of Indian taxation procedures. Visit http://www.gti.org/Services/Tax-services/Expatriate-tax/Expatriate-tax-ebook/India.asp and other similar links to get up to date information on tax laws and regulations for expats working in India.