Expatriate Taxation (Inbound & Outbound)

What is expatriate taxation?

When people move across borders for work, two or more countries can claim the right to tax them. Inbound expatriates — foreign nationals working in India — face Indian tax on their Indian salary and possibly worldwide income once resident. Outbound employees — Indians moving abroad — need to manage their Indian tax status as they leave.

Expatriate taxation covers residency, the taxation of salary and benefits, treaty relief, social security, and employer obligations like TDS on salary paid from abroad, tax equalisation and compliance for secondments.

The key terms

What globally mobile people need to know:

Residential status

Decided by days in India; foreign nationals don't get the extended tests available to Indian citizens.

Short-stay exemption

Salary of foreign nationals employed by foreign companies can be exempt if the stay is short (generally under 90 days) and conditions are met.

Treaty relief

Tax treaties can exempt salary for short stays, generally under 183 days, if the employer and cost are foreign.

International workers (PF)

Foreign employees in India are generally covered by PF from the first rupee of salary, unless a social security agreement exempts them.

Social security agreements

Agreements between India and some countries that avoid double social security contributions.

Tax equalisation

An employer policy that keeps the employee's tax burden the same as at home.

Secondment

An employee sent to work for an Indian entity, which can raise permanent establishment and withholding issues.

Why it matters

Mobility creates tax risks for both sides:

Double taxation

Two countries may tax the same salary without planning.

Employer TDS

Indian entities must deduct tax even on salary paid abroad for Indian work.

PF from day one

International workers are covered by PF unless exempt.

Permanent establishment

Secondments can create a taxable presence for the foreign employer.

Worldwide income

Residents who become ordinarily resident are taxed on global income.

Exit issues

People leaving India need to manage accounts, investments and final returns.

Immigration link

Visa and FRRO registration interact with tax compliance.

Who is this for?

Returning NRIs are covered by our NRI and residency services, and can be combined with this.

Inbound and outbound compared

Different issues in each direction:

What we'll need from you

Assignment letter

Terms, duration and cost arrangements.

Travel dates

Days in each country.

Compensation details

Salary, bonus, allowances and equity.

Payroll arrangements

Who pays what, and recharges.

Social security

Certificates of coverage, if any.

Home country returns

For credit and coordination.

Pricing is per assignee per year, with policy work quoted separately.

How we support mobility

Our approach:

1. 1

   Pre-assignment briefing

   We explain the tax and social security position before the move.

2. 2

   Structure

   Payroll, recharges and documentation are designed.

3. 3

   Social security

   PF coverage or exemption is arranged.

4. 4

   Payroll and TDS

   Monthly TDS is set up, including shadow payroll where needed.

5. 5

   Annual returns

   Indian returns are filed, with treaty relief and foreign tax credit.

6. 6

   Exit

   Departure compliance is handled at the end of the assignment.

At the end of an assignment

Leaving India properly:

Final return

File the Indian return for the departure year.

PF withdrawal

International workers can withdraw PF on leaving, subject to rules.

Bank accounts

Redesignate or close accounts as needed.

Tax clearance

Check whether any tax clearance is required.

Equity

Track unvested equity that may be partly taxable in India later.

Equalisation

Settle tax equalisation calculations.

Benefits and responsibilities