Expatriate tax ebook - India
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Facts and figures
Pre arrival procedures
Employment visas
Tax year
Tax returns and compliance
Income tax rates
Sample income tax calculation
Pre arrival procedures
Expatriates (especially non Indian nationals) who require a work visa must apply for this before taking up employment in India. It is, therefore, important that the expatriate’s employment contract and benefit package are structured tax efficiently before the contract is submitted to the immigration department.
Employment visas
Non Indian nationals coming to India to take up employment should apply for an employment visa or work permit first.
Tax year
The Indian tax year runs from 1 April until 31 March.
Tax returns and compliance
Employer’s obligations:
- Employers are required to obtain a registration with the Indian Income-tax authorities by obtaining a Permanent Account Number (‘PAN’). PAN is a unique identification number given by the Indian tax authorities. PAN is required to be quoted on all the correspondence with the tax authorities.
- Employers are required to obtain a Tax Deduction Account Number (‘TAN’).
- Employers are required to withhold tax from salary payments to expatriates and pay to the Government treasury within seven days from the last day of the month in which the tax is withheld for salary paid before the month of March. For salary paid in the month of March the due date shall be on or before April 30.
- The employer’s reporting obligations are to file withholding tax return for each quarter as shown below:
| Quarter | Due date |
|---|---|
| April – June | July 15 |
| July – September | October 15 |
| October – December | January 15 |
| January – March | May 15 |
- Employers are also required to issue certificates for tax deducted on salary annually to the employees.
- It is mandatory to quote TAN in the payment challan of the tax withheld, withholding tax returns and the certificates for tax deducted.
Employee’s obligations:
- If the proposed period of stay in India of the expatriates (who have come on employment visas) is more than 180 days, they shall be mandatorily required to get themselves registered with concerned Foreigners Regional Registration Officer (‘FRRO’) within 14 days of their first arrival. It is compulsory for such employees to personally appear at the FRRO office, Delhi for obtaining any visa related services.
- Employees are required to obtain PAN from the Indian-tax authorities.
- Employees have to file an Individual Tax Return each year, normally by 31 July.
Failure to comply with requirements can result in penalties and/or interest liability.
Income tax rates
Charge to tax for Financial Year (FY) 2011-12
In India, the individuals are taxed at progressive slab rates which are as follows:
Slab rates for a male individual who is less than 60 years of age:
| Taxable income (INR) | Rate of income tax |
|---|---|
| 0-180,000 | Nill |
| 180,001-500,000 | 10% of the amount by which the total income exceeds INR 180,000 |
| 500,001-800,000 | Rs.32,000 plus 20% of the amount by which the total income exceeds INR 500,000 |
| over 800,000 | Rs.92,000 plus 30% of the amount by which the total income exceeds INR 800,000 |
Slab rates for a female individual who is less than 60 years of age:
| Taxable income (INR) | Rate of income tax |
|---|---|
| 0-190,000 | Nill |
| 190,001-500,000 | 10% of the amount by which the total income exceeds INR 190,000 |
| 500,001-800,000 | Rs.31,000 plus 20% of the amount by which the total income exceeds INR 500,000 |
| over 800,000 | Rs.91,000 plus 30% of the amount by which the total income exceeds INR 800,000 |
Slab rates for an individual who is of the age of 60 years or more but less than 80 years:
| Taxable income (INR) | Rate of income tax |
|---|---|
| 0-190,000 | Nill |
| 190,001-500,000 | 10% of the amount by which the total income exceeds INR 190,000 |
| 500,001-800,000 | Rs.31,000 plus 20% of the amount by which the total income exceeds INR 500,000 |
| over 800,000 | Rs.91,000 plus 30% of the amount by which the total income exceeds INR 800,000 |
Slab rates for an individual who is of the age of 80 years or more:
| Taxable income (INR) | Rate of income tax |
|---|---|
| 0-500,000 | Nill |
| 500,001-800,000 | 20% of the amount by which the total income exceeds INR 500,000 |
| over 800,000 | INR 60,000 plus 30% of the amount by which the total income exceeds INR 800,000 |
Sample income tax calculation - 2009/2010
| INR | |
|---|---|
| Basic pay | 1,000,000 |
| Dearness allowances | 50,000 |
| Other allowances | 10,000 |
| Gross salary | 1,060,000 |
| Less | |
| Profession tax | |
| (if applicable)* | (2,500) |
| Exempt allowances | |
| (depending on the nature of allowance and subject to satisfaction of necessary conditions, as may be applicable) | (20,000) |
| Taxable income | 1,037,500 |
| Tax – In case of individual other than resident woman who is below the age of sixty five years | |
| At first 180,000 | nil |
| next 320,000 @ 10% | 32,000 |
| next 300,000 @ 20% | 60,000 |
| on balance 237,500 @ 30% | 71,250 |
| Tax bill | 163,250 |
| Add : Education cess @ 3% | 4,898 |
| Total tax bill | 168,148 |
*Professional tax is a tax on profession, trade, calling and employment. In India, professional tax is levied by the State Government. Different states have different rates of professional tax. At present, there is no professional tax in Delhi.
Information about India:
Last updated 6 April 2010
This information has been provided by Walker Chandiok Grant Thornton, the Indian member firm within Grant Thornton International Ltd and is for informational purposes only. Neither Walker Chandiok Grant Thornton or Grant Thornton International Ltd can guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice.
Disclaimer
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For further information on expatriate tax services in India, please contact Pallavi Bakhru.