International Assignments: Foreign individuals in India
The tax year starts from 1 April of the year to 31 March of the following year. The foreign individuals coming to India for work are taxed considering the tax year and the number of days they have actually stayed in India. According to the law, they are considered to be tax residents if they have either spent more than 182 days in India for the tax year considered or they have been present in India for 60 days or more for the year in consideration and for 365 days or more in the preceding four tax years. The rule concerning 182 days is only applicable if a person of Indian origin is living outside India or is on a visit or a situation in which a citizen of India leaves the country as a member of the crew of an Indian ship or merely for the purpose of employment. Any other circumstances qualify the individuals as non-residents (NRs) for the tax year in consideration.
The conditions to qualify as Residents but not Ordinarily Residents (RNORs) include being physically present in India for 729 days or less during seven tax years before the relevant year or have been NRs for 9 out of 10 tax years preceding the relevant year. The individuals not meeting this criteria automatically qualify as Residents and Ordinarily Residents (ROR) for a particular year. The date of departure and arrival are considered for computing the period of residence and the purpose of the visit is completely irrelevant. Further, the stay doesn’t need to be continuous or at the same place. If a situation arises in which individuals are considered tax residents of India and their home countries both, then the guidelines of the DTAA are referred to decide the residency between the two countries.
According to the Indian laws, the taxation varies from each category, for ROR, the global income of individuals is liable for tax. Whereas in case of RNOR, only the income earned from business controlled in India is liable for taxation. For NRs, the income received in India is considered and is liable for tax. Without consideration to where the income is received, the employment generated income for services carried out in India is liable for tax. The taxable income comprises of various payments received, both in cash and kind. Some other common ways of remuneration include payment of education, allowances, personal expenses or benefits provided free of cost or at lesser rates. Benefits that are related to the housing facilities are taxed at 15% under normal circumstances and hotel accommodation is taxed at 24% while the cost of laundry and meals is fully taxable. Moreover, car and driver facilities are also taxable. There are many other cases and situations to be considered when it comes to the taxation on employment generated income and as a result it is always advised to look for professional advice in the matter. Employers are also required to withhold tax on earning from the employees’ salaries at prescribed rates and pay this to the government. The employers do not have to be in India for this condition to be applicable. The actual residential status of an individual is determined through various guidelines and tests before concluding the individual is the resident of which country.
The applicable tax rates depend on the computed value of the taxable income. When the computed value to income exceeds 5 million but is still less than 10 million, a surcharge of 10% is applicable. In cases when the total income of individuals exceed 10 million, a surcharge of 15% becomes applicable. The exemption limits for individuals above the age of 60 and below the age of 80 is INR 3,00,000 and for individuals above the age of 80 is INR 5,00,000. It is also compulsory for individuals to register for a tax registration number or Permanent Account Number (PAN) that is needed to file tax returns and other processes. Also, at the end of each year a tax return needs to be filed with the Income Tax authorities in a specific format.
Visas in India are issued by the Indian Consulates or High Commissions in the home country of the foreign national and they are not allowed to take employment in India without valid employment visas. This kind of visa is issued generally for a period of one to two years but can be extended. Business visas are different from employment visas. Moreover, the foreign nationals with valid employment visas must also register themselves with the FRROs (Foreigners’ Regional Registration Officers) within 14 days of their arrival in the country. Subsequently, residential permits are issued to these foreign nationals. Foreign nationals in India are also required to contribute to various social security schemes in India. However, if they contribute to the social security schemes in the home countries, they are exempted from this contribution.
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