Taxation of Expats: Expert Assistance for Expats in India
Ahuja & Ahuja Chartered Accountants is a full-service Indian Chartered Accountants Firm located in Delhi/NCR, India. We specialize in providing taxation services to expatriates or expats working in India. With over two decades of industry experience, our expert and experienced Chartered Accountants are well-equipped to provide expat professionals with various services associated with repatriation assistance for employees, annual tax equalization calculations, services tax compliance services, tax return preparation, assessment, appeal, opinions, and litigation matters.
What is an Expat or Expatriate?
An expatriate, commonly known as an expat, is a person who resides and works in a country different from their native country. Taxation of such expat employees requires a slightly modified computation than the tax computed for a routine employee of an Indian organization.
Taxation of Expats in India
For any foreign expat employed in India, the salary is deemed as earned in India, if they are paid for the services rendered in India as per Section 9(1) (ii) of the Income Tax Act. The said rule is suitable irrespective of the resident status of the expat employee. Besides, the income earned is subjected to tax deducted at source (TDS) regardless of where the salary is credited.
In such cases, if the salary is paid in foreign currency in the country of expat’s citizenship then, such salary is turned into Indian Rupees (INR) and tax is computed on total Indian currency value. The rate used to calculate tax applicable is telegraphic transfer buying rate used by State Bank of India (SBI). The rate used is the rate on which tax is calculated on that day based on the Deduction of tax (Rule 26), Section 192(6) of the Indian Income Tax Act.
Computation of Tax on Expat’s Salary
An expat’s salary is calculated as the sum of the net salary and tax liability on it. This is known as tax grossing-up. In India, the higher income tax rate is 30%, and over this 30% tax rate, 4% health and education cess is levied on the cumulative total income tax rate to 31.2%.
Avoidance Of Double Taxation
In cases of expats, there is always a chance of double taxation in each of the country where the employee is a resident and his/her worldwide income is taxable. In some cases, where the income is earned in any country but is not on the list of DTAA, the tax has been paid in the said country in accordance with Section 91. In such cases, the expat employee will be entitled to a deduction from the income tax in India payable by the expat employee for the sum computed on taxed income at Indian rate of Income-tax or the tax in the country where the income is earned, whichever is lower.
Expert Assistance for Taxation of Expats in India
Taxation of expats in India is a crucial matter, and our team of expat professionals at Ahuja & Ahuja Chartered Accountants are skilled in providing expert assistance for expat tax-related matters. In addition to our taxation services, we also provide accounting and bookkeeping, auditing & assurance, internal audit, tax audit, management audit, statutory audit, stock audit, income tax, tax planning, direct taxes, indirect taxes, and other related services.
Contact Us for Expert Assistance
If you are an expatriate working in India and are looking for expert assistance in matters related to expat tax, you may reach us at firstname.lastname@example.org. Our team of expert Chartered Accountants will be happy to assist you in all your taxation and accounting needs
Frequently Asked Questions (FAQs) for expats on taxes in India:
What tax rates are applicable to me as an expat in India?
As an expat, you will be taxed according to the prevailing slab rates for non-residents as per the Income Tax Act. You can choose to get taxed either as per the old tax regime or as per the new tax regime of the Income Tax Act.
What deductions and exemptions can I claim to lower my taxable income if I opt for the old tax regime?
If you opt for the old tax regime, there are various deductions and exemptions that you can claim to lower your taxable income. Some of these include deductions under section 80C for investments in certain schemes such as Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity Linked Savings Scheme (ELSS).
What are the tax rates according to the old tax regime in India?
The tax rates according to the old tax regime are as follows:
- Up to Rs. 2,50,000: Nil
- Rs. 2,50,000 – Rs. 5,00,000: 5%
- Rs. 5,00,000 – Rs. 10,00,000: 20%
- Above Rs. 10,00,000: 30%
What are the tax rates according to the new tax regime in India?
The tax rates according to the new tax regime are as follows:
- Up to Rs. 2,50,000: Nil
- Rs. 2,50,001 to Rs. 5,00,000: 5%
- Rs. 5,00,001 to Rs. 7,50,000: 10%
- Rs. 7,50,001 to Rs. 10,00,000: 15%
- Rs. 10,00,001 to Rs. 12,50,000: 20%
- Rs. 12,50,001 to Rs. 15,00,000: 25%
- Above Rs. 15,00,000: 30%
Can I remit the salary income earned in India to abroad?
Yes, resident individuals in India who are citizens of a foreign state can make remittance up to their net salary earned in India after deducting all taxes, contribution to provident fund, and other deductions.
What should I do if my income is getting taxed both in India and abroad?
If your income is getting taxed in India as well as a foreign country, you can claim relief either as per the provisions of the Double Taxation Avoidance Agreement (DTAA) entered into with that country (if any) by the Indian Government or by allowing relief according to section 91 of the Act in respect of tax paid in the foreign country.
How can I claim credit for tax paid in a foreign country in India?
If you wish to claim credit for foreign tax paid in a country outside India, you will be required to submit Form 67 to the Income Tax department at the time of filing your return of income. The form requires you to provide details of the foreign tax paid, the country where it was paid, and the income on which it was paid.