Christmas cheer has come early for foreign nationals working in India. They can now take their entire post-tax salaries home, following a change in rules to this effect by the Reserve Bank of India (RBI). This will benefit sectors such as aviation, telecom and infrastructure, which employ a large number of expats, making it easier for them to attract talent from abroad. Earlier, expats could take only 75% of their salaries abroad.
The central bank has changed the regulations under the Foreign Exchange Management Act (Fema) in this regard. The decision will give flexibility to companies in structuring the salary packages of expats without bothering about forex laws. Indian citizens employed by foreign companies abroad but on deputation to India will also benefit from this move.
“This is a very positive move from RBI. However, the expatriates have to ensure that they pay proper Indian taxes and any non-compliance will expose them to penal provisions of Indian tax laws and exchange control laws,” said Amitabh Singh, partner at Ernst & Young.
The entire salary of expat employees is taxable in India, according to the current tax provisions. Experts said the move will insulate expats from exchange rate fluctuations.
A senior executive working with an insurance company in the national capital region said the move will certainly help expat employees working in India, especially those at the mid-to-senior levels. “One cannot remit the entire amount back home, but it will certainly give the freedom to have more cash in hand and thus be able to do more things with your money,” he said, requesting anonymity.
However, companies are not committing to anything yet. LG Electronics HR head YV Verma said it is a good move that will benefit expat employees. When asked if the companies will restructure the salaries following this announcement, he said it was too early to comment on that. “We will have to go through the details before making any such decisions,” he said.