Expats moving to India or planning to work temporarily in India often find that local accountants are not familiar with the international concepts, double taxation treaties or the tax rules that are applicable to Expat Tax in India.

Tax rates in India

Taxable Income Band INR National Income Tax Rates
0 – 0.25 Million 0%
0.25 Million – 0.50 Million 5%
0.50 Million – 1.0 Million 20%
Above 1.0 Million 30%

These rates are applicable up to the age of 60, thereafter until 80 years old, the first INR 300,000 is taxed at 0%, and all other rates remain the same.  After 80, the first INR 500,000 is taxed at 0%.

Education Cess

An education ‘cess’ (a tax or levy) of 4% is levied on the tax payable.

Surcharges

Income Surcharge Maximum Marginal Tax Rate
Up to 5 Million NIL 31.20%
5 million to 10 Million 10% 34.32% 
Above 10 Million 15% 35.88% 

Indian Permanent Account Number (PAN)

​PAN stands for Permanent Account Number. PAN is a ten-digit unique alphanumeric number issued by the Indian Income Tax Department to all taxpayers and act as unique identification number for all tax payers in the country. All the expats coming to India are mandatorily required obtain this PAN which shall help them comply laws relating to Expat tax in India.

​​​​PAN is to be obtained by following persons:

  • Every person if his total income or the total income of any other person in respect of which he is assessable during the previous year exceeds the maximum amount which is not chargeable to tax.
  • Every person who is entitled to receive any sum/income after deduction of tax at source
  • Every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory

It is mandatory to quote PAN on the return of income.

​​Application for PAN is to be made in Form 49A (in the case of Indian Citizen/Indian Companies/Entities incorporated in India/Unincorporated entities formed in India) or Form 49AA (in the case of individual not being a citizen of India/Entities incorporated outside India/Unincorporated entities formed outside India) along with prescribed fee at PAN application centers.

One should intimate your PAN to the deductor i.e. person deducting tax. Non-furnishing of PAN to deductor results in TDS at much higher rate of 20% or even more.​  ​​PAN obtained once is valid for life-time of the PAN-holder throughout India.

​​​​Who pays tax in India?

  • 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.

Expat tax in india

Residential Status for Person of India Origin (PIO) & Indian Citizens

As per the current provisions of the Income-tax Act 1961 (Act), an individual is qualified as Resident of India, if he satisfies either of the following conditions:

Stay in India is at least 182 days during the FY; or

Stay in India is at least 60 days during the FY and at least 365 days during 4 preceding FYs.

The relaxation is provided to an Indian citizen or a Person of Indian Origin (PIO) who, being outside India, comes on a visit to India by providing an extended period of 182 days instead of 60 days as mentioned in point (ii) above.

To the above existing condition laid down under the Act , for an individual to qualify as a NOR, additional condition has been inserted this year which states that an Indian citizen or a PIO, who, being outside India, comes on a visit to India in any FY shall be considered Not Ordinary Resident if –

  • His total income, other than the income from foreign sources, exceeds INR 1.50 million; and
  • His stay in India is 120 days or more but less than 182 days.

Individuals who do not meet the above criteria are considered to be non-residents.

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 host of 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.

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