|Taxable Income Band INR||National Income Tax Rates|
|1 - 250,000||0%|
|250,001 - 500,000||5%|
|500,001 - 1,000,000||20%|
These rates are applicable up to the age of 60, thereafter until 80 years old, the first INR300,000 is taxed at 0%, and all other rates remain the same. After 80, the first INR500,000 is taxed at 0%.
An education 'cess' (a tax or levy) of 3% is levied on the tax payable.
If total annual income is INR10 million or less the maximum marginal tax rate is effectively 30.9% (30% + 3% education cess).
If total annual income is more than INR10 million, the maximum marginal tax rate on annual income is effectively 34.608% (30% + 12% surcharge + 3% education cess).
This surcharge applies to individuals with total income in excess of INR10 million.
Resident expats are subject to tax on their worldwide income.
Persons who are resident but not ordinarily resident are taxed only on Indian-source income, income deemed to accrue or arise in India, income received in India or income received outside India arising from either a business controlled, or a profession established, in India.
Non-residents are taxed only on Indian-source income and on income received, accruing or arising in India.
Non-residents expats may also be taxed on income deemed to accrue or arise in India through a business connection, through or from any asset or source of income in India, or through the transfer of a capital asset situated in India (including a share in a company incorporated in India) according to expat tax rules.
In general, all income received or accrued in India is subject to tax.
Employment income - All salary income relating to services rendered in India is deemed to accrue or arise in India regardless of where it is received or the residential status of the recipient.
Expat employees of foreign enterprises who are citizens of foreign jurisdictions are not subject to expat tax if all of the following conditions are satisfied:
Similar exemptions are available under tax treaties if the stay is less than 183 days, but conditions vary. In general, most elements of compensation are taxable in India. However, certain benefits may receive preferential tax treatment.
Self-employment and business income tax rules for expats - All individuals who are self-employed or in business in India are subject to tax.
Business losses incurred in the current year can be set off against income under any other head except the salaries head. If business losses in the current year cannot be wholly set off, such business losses may be carried forward for 8 years if the income tax return for the year of the losses is filed on time. However, the losses carried forward can be set off against business income only. Unabsorbed losses from speculative transactions may be carried forward for 4 years only and can be set off against profits from speculative business only. Unabsorbed depreciation may be carried forward indefinitely.
Expat investment income - Dividends are taxed in the following manner (all must be declared via expatriate tax returns):
Interest earned on securities, investments, advances and bank deposits in India is assessable based on the relevant expat tax rules. Taxes are withheld at source by the banks, cooperative societies and post offices if the interest exceeds INR10,000 (INR5,000 in other cases) in the tax year except in certain specified cases. The rate of the withholding tax is 10% (plus cess).
This withholding tax is not a final tax for expats.
Interest earned on certain types of accounts is exempt from tax for non-residents but advice from an expat tax adviser should be sought before embarking upon expat tax preparations.
Non-resident Indian nationals (including persons of Indian origin) may exercise an option to be taxed at a flat rate of 20% on gross investment income (without any deductions) arising from foreign currency assets acquired in India through remittances in convertible foreign exchange.
Expat directors' fees - Directors' fees are taxed at the usual progressive rates. Tax is required to be withheld at source at a rate or 10% from directors' fees paid to residents. Expenses incurred wholly and exclusively for earning fees are allowed as deductions.
Expat rental income - Rental income received by an individual from the leasing of house property (including buildings or land appurtenant thereto) is taxable at the value determined in accordance with specific provisions. The following deductions from such value are allowed according to expatriate tax rules:
Tax treaties provide varying relief for tax on income derived from personal services in specified circumstances. In certain circumstances, the treaties also provide tax relief for business income if no permanent establishment exists in India. India has entered into comprehensive double tax treaties with 91 countries.
If no double expat tax treaty applies, resident taxpayers may claim a tax credit on foreign-source income equal to the lower of the tax imposed by the foreign country or the tax imposed by India on the foreign income.
Expats are considered resident if they meet either of the following criteria:
Individuals who do not meet the above criteria are considered to be non-residents.
Individuals are considered not ordinarily resident if, in addition to meeting one of the above tests, they satisfy either of the following conditions:
India does not impose tax on expat’s estates, inheritances or gifts.
However, any sum of money received by an individual in excess of INR50,000 without consideration is taxable in the hands of the recipient.
Finally on this point, do not assume that just because you've expatriated to live in India that your estate will not be liable to inheritance tax (IHT) in your old home nation, or any nation where you hold assets. For example, those domiciled in Britain remain liable for IHT on their worldwide estate.
If you are concerned about mitigating your IHT liability, we'd like to offer you a free initial consultation to determine whether we can help you.
Capital gains on assets other than shares and securities - Capital gains derived from the transfer of short-term assets are taxed at normal rates.
Long-term capital gains for expats are gains on assets that have been held for more than three years. Long-term capital gains are exempt from expat tax in certain cases if the gains are reinvested within a prescribed time period.
The Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act) contains the following schemes:
The Ministry of Labour and Employment has issued a notification extending the applicability of the Provident Fund and Pension Scheme rules to a new class of employees called "International Workers." Under the EPF Act, the following employees are considered to be "International Workers":
An "excluded employee" is not covered by the EPF Act. An expat employee is considered to be an "excluded employee" if the following conditions are satisfied during expat tax preparation:
India has entered into social security agreements with 13 countries with a further five agreements soon to come into force.
Every covered employer is required to contribute 24% (12% each for the employer's and the employee's share) of the employee's “monthly pay” (as defined) towards the Provident Fund and Pension Fund. The employer has the option to recover the employee's share from the employee.
For expat employees (including International Workers) who become members on or after 1 September 2014 and draw monthly salary exceeding INR15,000, the entire contribution is allocated to the Employees' Provident Fund.
Local employees who draw a monthly salary of INR15,000 or more are excluded from the legislation, but this exclusion does not apply to International Workers even if the monthly pay of the employee exceeds INR15,000.
We believe the above information is accurate, however tax rates and rules can change, and we are NOT tax experts. Therefore, please do not rely exclusively on the information to determine your liability for tax.
Speak to a local tax expert for personalised advice, or consult an international taxation consultancy.
If you'd like our help to source someone to assist you, please get in touch and we will do all we can to help.
“Have much greater security and confidence”
“AES International makes it a priority to take care of our financial goals”
“In the short time that I’ve been using AES I’ve made nearly ten thousand pounds and couldn’t be happier!”