Pre-immigration tax strategies and planning for expatriates coming to India

Tax planning for expats can be split into two parts as follows:

1. Direct tax

The following issues should be considered in pre-immigration tax planning of expatriates:

a. Residential status
If a foreign national stays in India for more than 182 days, for tax purposes, they are considered a resident, and if not, they are considered a non-resident.

b. Chargeability
For the resident, global income earned/accrued is taxable. For the non-resident, only income earned/accrued in India is taxable.

c. Double Tax Avoidance Agreement (DTAA)
If India has entered into a DTAA with the foreign national’s country of residence, then the following benefits may be available:

• Tax credit: Tax paid on the double taxed income can be claimed as credit in payment of tax in the expat’s country of residence.
• Tax exemption benefit to salary income of a non-resident Indian: If the salary is paid by a company not permanently established in India, then salary income earned in India is also not taxable here.

2. Contributions to social security and retirement benefits in India

Any foreign national employed in India with an employer who is registered with the Employees Provident Fund Organisation (EPFO) of India must contribute 12% of their salary income to the EPFO. India has entered into social security agreements with various countries where there is exemption for foreign employees to contribute to their own country’s social security instead of India’s Provident Fund if:

1. They are employed by an employer of the other contracting state;
2. A certificate of coverage is obtained from the social security offce of their home country.

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