Taxation of Expatriates Working in India: Residency, Salary and Social Security

Foreign nationals coming to India for work — on secondment, as local hires, or on short business trips — need to understand their Indian tax position, and so do their employers. This guide covers the main rules.

Residency

A foreign national is resident in India for a financial year if they're in India for 182 days or more, or 60 days in the year plus 365 days over the previous four years. Newly arrived residents are usually 'not ordinarily resident' for a period, so their foreign income isn't taxed in India during that time.

What's Taxable

• Salary for work done in India is taxable in India, wherever it's paid.
• Once ordinarily resident, worldwide income becomes taxable.

Short-stay Exemptions

• Under Indian law, salary of a foreign national employed by a foreign enterprise not carrying on business in India can be exempt if the stay doesn't exceed 90 days and other conditions are met.
• Under tax treaties, salary can be exempt if the stay is under 183 days in the relevant period, the employer isn't Indian, and the cost isn't borne by an Indian establishment.

Employer TDS

The Indian entity must deduct TDS on salary for Indian work, including amounts paid by the foreign employer where it effectively bears or reimburses them. Tax paid by the employer on the employee's behalf is itself taxable, so gross-up calculations are needed.

Provident Fund

Foreign employees working in India for Indian establishments are generally covered by PF as international workers, from the first rupee of salary, with withdrawal restricted. Employees from countries with a social security agreement with India can be exempt with a certificate of coverage from their home system.

Leaving India

Before departure, file the final return, settle PF, and deal with bank accounts and any unvested equity that may be partly taxable in India later.

Getting Help

Think Filing handles expatriate tax, shadow payroll, PF and exit compliance.