The Reserve Bank of India released a Notification in early December which amended the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations 2000 affecting both:
The Notification replaces the earlier sub-regulation (8) of regulation 7 and now allows an approved category of persons who are on secondment in India or employed there to receive or remit their entire post-tax salary outside India.
Prior to this amendment, an employee of a foreign company, who was on secondment to an Indian entity could receive up to 75% of his salary into a foreign currency bank account outside
India subject to the following conditions:
Key changes to the regulations
1.Employees on secondment to India :- The Notification has increased the amount of salary that may be received outside India from 75% to 100%. The requirement to pay Indian income tax remains unchanged.
The Notification also indicates that the post-tax salary can be paid to the employee fully by either the foreign or Indian entity or partly by both. Previously, only the foreign entity was permitted to pay 75% of the individual’s salary outside India.
2.Foreign nationals employed directly by an Indian company :- The Notification permits a foreign national who is employed by an Indian company to remit overseas his entire post-tax salary received in India, i.e., the Indian company can pay their salary in Indian Rupees into the individual’s Indian bank account and they can then remit the entire amount to their overseas bank account.
This only applies to foreign nationals who are employed by Indian companies, i.e., foreign nationals who are employed by the Indian branch of a foreign company will not be eligible for this unless their employment in India is by way of a secondment.
Employers should review their existing secondment and employment arrangements which involve foreign nationals in India, to ensure that: