India – Taxation of international executives

Taxation of international executives

Taxation of international executives

  

Overview and Introduction

Taxation varies based on the residential status of the individual in a tax year. Individuals can be classified as resident and ordinarily resident, not ordinarily resident, or non-resident in a particular tax year.

Residents and ordinarily residents are taxed on worldwide income and are required to report their global assets in the India tax returns. Non-residents and not ordinarily residents are taxed only on income received, accrued, or deemed to accrue or be received in India. Not Ordinarily residents are also taxed on income derived from a business controlled or a profession set up in India. Consequently, their income accruing outside India or received outside India is not taxable in India, unless the same is received directly in India. Salary for services rendered in India is deemed to accrue in India and hence, taxable in India for all individuals, irrespective of the place of payment, subject to benefits available under the Indian domestic tax law or the double taxation avoidance agreement India has entered with respective countries/jurisdictions. The leave period before or after services rendered in India and which forms part of the employment contract is deemed to have been earned for services rendered in India.

The official Indian currency is the Indian National rupee (INR).

Herein, the host country/jurisdiction refers to the country/jurisdiction to which the employee is assigned. The home country/jurisdiction refers to the country/jurisdiction where the assignee lives when they are not on assignment.

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Income Tax

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

An individual’s tax return must be filed by 31 July immediately following the end of the tax year. An individual, whose total income includes business income and where the accounts are required to be audited, has to file the return by 31 October following the tax year.

There is no concept of extended return in India. However, belated return (i.e. after due date) can be filed. From Tax Year (TY) 2020-21 onwards, belated tax return can be filed at any time before 3 months prior to the end of TY or before the completion of assessment (audit of India tax return), whichever is earlier.

Where a taxpayer files a return after the due date, interest is levied at 1 percent per month (or part thereof) for each month of delay on the balance tax payable. Further, where a person fails to file India Tax Return within the time prescribed, late filing fees shall be charged as follow:

  • INR5,000, if the return is furnished on or before 31 December of the assessment year*

*Further, if the total income of the person does not exceed INR500,000, the fee payable for late filing of India Tax Return shall not exceed INR1,000.

What is the tax year end?

The TY begins on 1 April and ends on 31 March of the immediate following year. The income earned during a year is taxable in the relevant year. The year in which income is earned is known as the previous year or tax year or financial year. From a tax perspective, the 12-month period subsequent to the tax year is known as the assessment year.

What are the compliance requirements for tax returns in India?

An individual is required to obtain a registration with the tax authorities [i.e. a Permanent Account Number (PAN)]. PAN is a unique ten-digit identification number given by the Indian tax authorities. PAN is required to be quoted on all the correspondence with the tax authorities.

As per the domestic tax law in India, every individual is required to file India tax return for the respective financial year with the Indian-tax authorities by 31 July following the financial year end if:

  • His/her income chargeable to tax in India, without giving effect to exemption claimed upon sale of a Capital Asset, exceeds basic exemption limit (i.e. INR 250,000); or
  • Expenditure has been incurred by the taxpayer of an amount or aggregate of the amounts exceeding INR200,000 for self or any other person for travel to a foreign country/jurisdiction; or
  • Expenditure has been incurred by the taxpayer of an amount or aggregate of the amounts exceeding INR100,000 towards consumption of electricity; or
  • He/she qualifies as Ordinary Resident of India and
    • holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India; or
    • has signing authority in any account located outside India; or
    • is a beneficiary of any asset (including any financial interest in any entity) located outside India.

As per the Finance Act, 2021, in order to provide relief to senior citizens who are of the age of 75 year or above and to reduce compliance burden for them, a new section has been added to provide a relaxation from filing the return of income, if the following conditions are satisfied:-

(i) The senior citizen is resident in India and of the age of 75 or more during the previous year;

(ii) The senior citizen has pension income and no other income. However, in addition to such pension income, the individual may have also have interest income from the same bank in which he is receiving his pension income;

(iii) This bank is a specified bank. The Government will be notifying a few banks, which are banking company, to be the specified bank; and

(iv) The individual shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.

Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act, for the relevant assessment year and deduct income tax on the basis of rates in force. Once this is done, there will not be any requirement of furnishing return of income by such senior citizen for this assessment year.

Further, for an individual of age 80 years or older at any time during the previous year, and who furnishes the India tax return in ITR 1 or ITR 4, it is not mandatory for the individual to e-file the return of income i.e. a paper return can be filed. For all other cases, e-filing of India tax return is mandatory.

It may further be noted that obtaining and quoting Aadhaar is mandatory for an individual. However, the said requirement shall not apply to an individual who does not possess the Aadhaar or the Enrolment ID and is:

  • Residing in the States of Assam, Jammu and Kashmir and Meghalaya.
  • A non-resident as per the Act.
  • Of the age of 80 years or older at any time during the previous year.
  • Not a citizen of India.

Tax is required to be withheld at source on salaries, professional fees, rent, interest, dividends, etc. at the time such income is credited to the account of the payee or at the time of payment, whichever is earlier. In case the amount of tax withheld at source is short of the actual tax liability, an individual is liable to pay advance/self - assessment tax.

Advance tax is payable by the taxpayer during the tax year if the estimated taxes (net of taxes withheld at source) exceeds INR 10,000. Advance tax payable is the tax on estimated income of the tax year, reduced by tax withheld at source. Advance tax is payable in four installments by individuals as follows:

  • 15 percent is payable by 15 June of the tax year
  • 45 percent is payable by 15 September of the tax year
  • 75 percent is payable by 15 December of the tax year
  • 100 percent by 15 March of the tax year.

It may be noted that advance tax on Capital Gains and Dividend income are required to be deposited once the same is earned in accordance with the above referred timelines.

In case of default in filing of a tax return, interest is levied on the amount of unpaid tax at the rate of 1 percent for every month or part thereof for the period during which the default continues and is payable along with the self-assessment tax before filing of the tax return. In case of default in payment of advance tax, interest is levied on the shortfall of advance tax and the deferment of advance tax at the rate of 1 percent for every month or part thereof, during which the default occurs. Such interest is payable before filing of the tax return.

Further, a resident senior citizen (i.e. 60 years and older), not having any income from a business or profession, shall not be liable to pay advance tax.

Tax rates

What are the current income tax rates for residents and non-residents in India?

Tax rates for individuals are common for all, irrespective of their residential status. The income tax rates for assessment year 2021-22 (i.e. tax year 2020-21) are as follows:

Income tax rates for the tax year 2020-21

Normal Provisions:

From (INR)

To (INR)

Basic Tax (INR)

% on Excess

 0

250,000*

0

0%

250,001**

500,000

0

5%

500,001

1,000,000

12,500

20%

Above 1,000,000

-

112,500

30%

* 300,000 in case of a resident individual of the age of 60 years or older but under 80 years.

** 300,001 in case of a resident individual of the age of 60 years or older but under 80 years.

* 500,000 in case of a resident individual of the age of 80 years or older.

** 500,000 in case of a resident individual of the age of 80 years or older.

  • For resident individuals with taxable income of INR 500,000 or below, a rebate of 100 per cent of such income tax or INR12,500, whichever is less shall be allowed.
  • Surcharge for individuals at 10 percent on total income tax, if total taxable income is between INR 5,000,001 to INR 10,000,000. Marginal Relief is available.
  • Surcharge for individuals is applicable at 15 percent on total income tax, if total taxable income is between INR 10,000,001 to INR 20,000,000. Marginal Relief is available.
  • Surcharge for individuals is applicable at 25 percent on total income tax, if total taxable income is between INR 20,000,001 to INR 50,000,000. Marginal Relief is available.
  • Surcharge for individuals is applicable at 37 percent on total income tax, if total taxable income exceeds INR 50,000,000. Marginal Relief is available.
  • Health and Education cess is applicable at 4 percent on total income tax (inclusive of surcharge, if any).

Note: There are certain prescribed incomes (i.e. Capital Gains taxable under section 111A, 112A and Dividend income from shares of a Company) which are taxable at special rate of taxes. Also, for certain incomes, surcharge is capped at 15 percent, even in case where the income exceeds INR 20,000,000.

New Optional Tax Regime:**

This regime is introduced by the Finance Act, 2020 for individuals with modified tax slabs and rates. On satisfaction of certain prescribed conditions**, an individual may opt to compute tax in respect of total income (without considering prescribed exemptions/ deductions), as per the new slab rates, instead of the Normal Provisions (existing tax regime).

From (INR)

To (INR)

Basic Tax (INR)

% on Excess

0

250,000

0

0%

250,001

500,000

0

5%

500,001

750,000

12,500

10%

750,001

10,00,000

37,500

15%

10,00,001

12,50,000

75,000

20%

12,50,001

15,00,000

125,000

25%

Above 15,00,000

-

187,500

30%

  • For resident individuals with taxable income of INR 500,000 or below, a rebate of 100 per cent of such income tax or INR 12,500, whichever is less shall be allowed.
  • Surcharge for individuals at 10 percent on total income tax, if total taxable income is between INR 5,000,001 to INR 10,000,000. Marginal Relief is available.
  • Surcharge for individuals is applicable at 15 percent on total income tax, if total taxable income is between INR 10,000,001 to INR 20,000,000. Marginal Relief is available.
  • Surcharge for individuals is applicable at 25 percent on total income tax, if total taxable income is between INR 20,000,001 to INR 50,000,000. Marginal Relief is available.
  • Surcharge for individuals is applicable at 37 percent on total income tax, if total taxable income exceeds INR 50,000,000. Marginal Relief is available.
  • Health and Education cess is applicable at 4 percent on total income tax (inclusive of surcharge, if any).

Note: There are certain prescribed incomes (i.e. Capital Gains taxable under section 111A, 112A and Dividend income from shares of a Company) which are taxable at special rate of taxes. Also, for certain incomes, surcharge is capped at 15 percent, even in case where the income exceeds INR 20,000,000.

**Conditions under the New Optional Tax Regime

The choice of the New Optional Tax Regime, albeit, comes with a few pre-requisite conditions such as:

Foregoing prescribed exemptions:

(i) Leave travel concession [section 10(5) of the Act]

(ii) House rent allowance [section 10(13A) of the Act]

(iii) Allowances prescribed under section 10(14) of the Act, which illustratively includes Children Education Allowance, Children hostel Allowance, etc. However, the following list of allowances (being indicative) continue to be exempted, subject to conditions and notification in Rules:

(a) Transport Allowance granted to specified employee to meet expenditure for the purpose of commuting between place of residence and place of duty

(b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office

(c) Any Allowance granted to meet the cost of travel on tour or on transfer

(d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from their normal place of duty

(iv) Allowance for income of minor [section 10(32) of the Act];

(v) Exemption such as towards free food and beverage through vouchers provided to the employee (rules yet to be notified in this regard).

Foregoing prescribed deductions:

(i) Standard deduction, deduction for entertainment allowance and employment/professional tax [section 16 of the Act]

(ii) Interest under section 24 of the Act in respect of self-occupied or vacant property referred to in section 23(2) of the Act

(iii) Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law

(iv) Deduction from family pension [section 57(iia) of the Act]

(v) Specified deductions under chapter VI-A of the Act (such as section 80C, section 80D, Section 80G, 80TTA etc.) except deduction on account of employer’s contribution toward new pension scheme [section 80CCD(2) of the Act]

Apart from the above-mentioned employee specific exemptions / deductions which are not available under the new Tax regime, following are other prescribed exemptions / deductions which are not available under the new Tax regime:

  • Exemptions under section 10(17) [i.e. exemption for specified members of government authorities], Section 10AA [i.e. exemption available to newly established Units in Special Economic Zones] are not available.
  • Few prescribed deductions from the income under the head business and profession shall not be available.
  • Any Deductions under chapter VI-A of the Act except for deduction under section 80CCD(2) and 80JJA shall not be available.
  • Certain prescribed set off of loss are not permissible.

The New Optional Tax Regime (subject to above prescribed conditions and compliances) can be exercised every year, if the individual does not have business income. In case of individual having business income, option once exercised would be applicable for all subsequent years (with a one-time option to change), except where such person ceases to have any business income.

Subsection (5) of Section 115BAC of the Act read along with Rule 21AG requires filing of Form 10-IE while exercising/ opting for section 115BAC tax rate. As per the specified Form 10-IE, the same is required to be filed for taxpayer exercising section 115BAC tax rates and falling u/s 115BAC(5)(i) i.e. the same is applicable only where individual has income under the head business and profession.

An employee may, for the purpose of tax withholding on salary income, intimate the employer to withhold tax as per the Optional New Tax Regime prescribed under section 115BAC of the Act, Once opted, the employee will not be permitted to change the option during that particular financial year. The employee may, subsequently, select either of the two regimes, while preparing and filing their personal tax return, notwithstanding the choice intimated to the employer.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of India?

Tax Residential status for the tax year 2020-21 onwards shall be determined as follows:

An individual is taxed in India, based on their residential status under the Act. Residential stats as per the Act is determined, inter alia, based on the number of days of physical presence of the individual in India during the FY. Please note that part of a day, date of arrival/ departure from India are considered as full day of presence in India. The principles governing the determination of residential status are laid down in Section 6 of the Act.

As per the Act1, an individual is said to be ‘Resident’ in India in any tax year if they satisfy either of the following conditions:

  • He is present in India in that fiscal year for a period of 182 days or more; or
  • He is present in India for a period of 60 days* or more during the tax year and a total of 365 days or more during the four tax years immediately preceding the relevant tax year.

*The period of 60 days stands gets extended to 182 days / 120 days in the following cases:

  • For a citizen of India who leaves India for the purposes of employment outside India or as a member of the crew of a prescribed Indian ship, in the year of departure, the 60 days condition is replaced with 182 days;
  • For a citizen of India or a person of Indian origin who being outside India, comes on a visit to India in any tax year and their income, other than income from foreign sources, does not exceeds INR1.5 million the 60 days condition is replaced with 182 days;
  • For a citizen of India or a person of Indian origin who being outside India, comes on a visit to India in any tax year and their income, other than income from foreign sources, exceeds INR1.5 million the 60 days condition is replaced with 120 days.

If none of the above conditions are satisfied, the individual will qualify as a Non-Resident (NR) of India for that FY, unless they qualify as a Resident based on the deemed residency clause as mentioned below.

Deemed Resident

An individual, being a citizen of India, shall be deemed to be resident in India in any tax year, if they are not liable to tax in any other country/jurisdiction by reason of their domicile or residence or any other criteria of similar nature and their income, other than income from foreign sources, exceeds INR1.5 million.

A Resident individual could be Ordinarily Resident (OR) in India or Not Ordinarily Resident (NOR) in India as per the Act2 as explained below:

If the individual qualifies as a resident only based on the deemed residency clause or based on the reduced stay of 120 days or more as explained in the above paragraphs, and does not satisfy any other basic condition, they would qualify as a NOR.

In other cases, the individual will qualify as an Ordinarily Resident (OR), if both the following additional conditions are satisfied:

  • they have been “resident” in India in at least two out of the ten tax years immediately preceding the relevant tax year; and
  • their stay in India during the seven preceding tax years immediately preceding the relevant tax year is 729 days or more.

If they do not satisfy either one or both the above-mentioned additional conditions, they would qualify as a NOR.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

There is no de minimus number of days rule in respect of residency start/end date. The expatriate can freely move in and outside India provided they hold a valid visa.

What if the assignee enters the country/jurisdiction before their assignment begins?

In India, the residential status is determined based on the individual's total physical stay in India during the relevant tax year. Accordingly, the days spent in India prior to start of the assignment (irrespective of purpose of stay) are considered for determining the residential status of the individual in India.

Termination of residence

Are there any tax compliance requirements when leaving India?

Subject to notified exceptions, every person who is not domiciled in India; who visits India in connection with business, profession, or employment and who derives income from any source in India, is required to, prior to their departure, obtain a no objection certificate from the tax authorities about their departure in Form 30A along with other relevant documents.

Further, every person who is domiciled in India, at the time of their departure from India, shall furnish Form 30C to the income tax authorities, which shall inter-alia, include the following:

  • their PAN
  • purpose of their visit outside India
  • the estimated period of their stay outside India.

What if the assignee comes back for a trip after residency has terminated?

In India, there is no concept of termination of residency.

The residential status is determined each year based on the total physical stay of the individual in the concerned tax year. This is irrespective of the purpose of stay of the individual in India. Also, there is no concept of part/split residency in India under the domestic tax law of India.

Communication between immigration and taxation authorities

Do the immigration authorities in India provide information to the local taxation authorities regarding when a person enters or leaves India?

There is no formal system under which immigration authorities in India provide information to local taxation authorities. However, recently tax authorities have started requesting such details from the immigration authorities on a regular basis.

Further, since local taxation authorities and immigration authorities are moving towards online process, same may be integrated in due course of time.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

As per the domestic tax law in India, every individual is required to file India tax return for the respective financial year with the Indian-tax authorities by 31 July following the financial year end if:

  • His/her income chargeable to tax in India, without giving effect to exemption claimed upon sale of a Capital Asset, exceeds basic exemption limit (i.e. INR 250,000); or
  • Expenditure has been incurred by the taxpayer of an amount or aggregate of the amounts exceeding INR200,000 for self or any other person for travel to a foreign country/jurisdiction; or
  • Expenditure has been incurred by the taxpayer of an amount or aggregate of the amounts exceeding INR100,000 towards consumption of electricity; or
  • He/she qualifies as Ordinary Resident of India and
    • holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India; or
    • has signing authority in any account located outside India; or
    • is a beneficiary of any asset (including any financial interest in any entity) located outside India.

Economic employer approach

Do the taxation authorities in India adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in India considering the adoption of this interpretation of economic employer in the future?

There are no defined rules in this respect. However, OECD commentary is commonly referred by tax authorities while interpreting the treaty provisions.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

There is no de minimus number of days for applying the economic employer approach.

Types of taxable compensation

What categories are subject to income tax in general situations?

In general, income from employment includes all compensation, in-cash or in-kind, which is due to or received by an employee in a tax year. Taxable compensation includes the following:

  • salary, wages, bonuses, allowances, and other cash compensation income tax paid by the employer on behalf of the employee;
  • specified perquisites (such as Rent-Free Accommodation, club membership, reimbursement of utilities, etc.).

Intra-group statutory directors

Will a non-resident of India who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in India) trigger a personal tax liability in India, even though no separate director's fee/remuneration is paid for their duties as a board member?

The portion of the compensation which relates to services rendered in India will be taxable in India. Services rendered in India, is generally equated with physical presence in India.

Hence, compensation commensurate with the days that they actually spend in India should be taxable in India under the head “salary” subject to availability of short stay exemption under the Act / under the relevant Treaty.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in India?

If the individual does not come to India at all for any for the board meetings, a position can be taken that the same is not subject to tax in India, unless they qualify as an ‘Ordinarily’ resident of India.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in India (i.e. as a general management fee where the duties rendered as a board member is included)?

As discussed above, salary commensurate with the days that they actually spend in India would be taxable in India subject to availability of short stay exemption under the Act / under the relevant Treaty. In the instant case, we understand that cross charge / recovery would be in the nature of general management fee, accordingly, the possibility of claiming the short stay exemption under the Act / under the relevant Treaty may need to be analyzed on case to case basis.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

As mentioned above, compensation commensurate with the days that they actually spend in India should be taxable in India under the head “salary”. This is subject to availability of short stay exemption under the Act / under the relevant Treaty.

Tax-exempt income

Are there any areas of income that are exempt from taxation in India? If so, please provide a general definition of these areas.

Generally, subject to certain conditions and limits, the following items of compensation are not taxable:

  • House Rent Allowance
  • certain travel/tour allowances
  • reimbursement of medical expenses up to specified limits
  • medical expenses of an employee or any member of their family incurred outside India
  • leave travel concession
  • allowance granted to meet payment of rent towards accommodation tax borne by the employer on non-monetary perquisites reimbursement of telephone expenses including cost of the telephone.
  • gratuity
  • leave encashment
  • gift from employer up to specified limit
  • Superannuation Employer contribution.

It may be noted that, in case where the individual opts for New Tax Regime, the said individual is not eligible to avail prescribed exemption and deductions.

House Rent Allowance (HRA):

HRA is an allowance granted to meet the housing costs of the employee. Direct tax implications

  • A tax exemption is available to employee towards HRA, limited to least of the following1:
    • 40 per cent of salary2 (50 per cent in case the house is situated in Mumbai, Delhi, Kolkata or Chennai);
    • HRA actually received by employee; and
    • Excess of actual rent paid over 10 per cent of salary.
  • HRA exemption is not available if the employee resides3:
    • in their own house; or
    • in a house for which they do not incur any rent (this could cover instances where the house is available to an individual even without payment of rent).

HRA exemption may be availed only for the period during which the employee occupies the house during the relevant tax year.

If the taxpayer (other than those covered under audit of books of account) paying rent exceeding INR50,000 per month or part of the month to a resident, the taxpayer is required to deduct Tax Deducted at Source (TDS) at 5 percent.

It may be noted that, in case where the individual opts for New Tax Regime, the said individual is not eligible to avail HRA exemption.

Certain travel/tour allowances

Allowances granted to meet the cost of travel on tour or on transfer, including sums paid in connection with the transfer, packing, and transportation of personal effects on such transfer, are exempt to the extent to which such expenses are actually incurred.

Reimbursement of medical expenses

Reimbursement of medical expenses is generally taxable in the hands of the employee. However, in following case the reimbursement of medical expenses is not taxable, subject to prescribed condition:

  • Any expenditure actually incurred by the employee on their medical treatment or treatment of any member of their family
    • in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; or
    • in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed guidelines.

Medical expenses of an employee or any member of their family incurred outside India

Medical expenses of an employee or any member of their family incurred outside India is exempt to the extent permitted by Reserve Bank of India. The cost of a stay abroad of the employee or a family member and one attendant is also exempt to the extent permitted by the Reserve Bank of India.

Leave travel concession

Leave travel concession granted to the employee for themselves and their family for proceeding on leave to any place in India is exempt with respect to two journeys performed in a block of 4 calendar years, subject to fulfillment of certain conditions. The current block is calendar years 2018 to 2021.

Subject to specific conditions, one unutilized eligibility of Leave Travel concession of current block can be carried forward to first year of subsequent block.

It may be noted that, in case where the individual opts for New Tax Regime, the said individual is not eligible to avail this exemption.

Tax borne by the employer on non-monetary perquisites

Tax borne by the employer on non-monetary perquisites provided to the employee is exempt from tax provided the employer does not claim it as a deduction against its taxable income.

Telephone expenses

Telephone (including the mobile phone) expenses, paid by the employer on behalf of the employee or reimbursed by the employer based on actual expenses of the employees, is exempt from taxation.

Gratuity

Gratuity received (in accordance with Payment of Gratuity Act, 1972) by employee on retirement/termination of employment or by family on death of employee taxpayer from employer is exempted from tax subject to specified limit (presently INR2,000,000) w.e.f. 29 March 2018.

Leave encashment

Leave encashment received by employee on retirement from employer is exempted from tax subject to specified limit (presently INR300,000).

Gift from employer

Any gift received by employee from employer in kind is taxable in the hands of employee only in case where the aggregate value of gift(s) is INR5,000 or above. Gifts made in cash or convertible into money (like gift cheques) will be entirely taxable in the hands of the employees.

Superannuation Employer contribution

Employer’s contribution towards specified approved Superannuation is taxable, subject to amount of aggregate contribution exceeds INR750,000*

*Under the erstwhile provisions, the employer contribution to Provident Fund in excess of 12 percent of specified salary, employer contribution to Superannuation Fund in excess of INR150,000 and employer contribution to National Pension Scheme in excess of 10 percent of specified salary is taxable as salary. As per the amended law, from FY 2020-21 onwards, aggregate of such employer contributions exceeding INR750,000 to all these 3 funds, is taxable as perquisite. Further, annual accretion (interest, dividend or other income) to the extent it relates to the taxable employer’s contribution as above, is treated as a taxable perquisite.

Employer Provident Fund contribution

Employer’s contribution towards Provident Fund is exempt from tax subject to fulfillment of certain conditions*.

*Under the erstwhile provisions, the employer contribution to Provident Fund in excess of 12 percent of specified salary, employer contribution to Superannuation Fund in excess of INR 150,000 and employer contribution to National Pension Scheme in excess of 10 percent of specified salary is taxable as salary. As per the amended law, from FY 2020-21 onwards, aggregate of such employer contributions exceeding INR 750,000 to all these 3 funds, is taxable as perquisite. Further, annual accretion (interest, dividend or other income) to the extent it relates to the taxable employer’s contribution as above, is treated as a taxable perquisite.

Effective FY 2021-22, Interest accrued on contribution in excess of INR 250,000 by employee to Employees Provident Fund account now taxable.

The amount received upon withdrawal of Provident Fund would be taxable in the tax year of withdrawal at specified tax rates, However, in case prescribed conditions are met, the amount received upon withdrawal of Provident Fund would be exempt from income tax in India.

Expatriate concessions

Are there any concessions made for expatriates in India?

Certain exemptions are available to foreign nationals and/or non-residents, subject to fulfillment of prescribed conditions. The exemptions available include the following:

  • Remuneration for services rendered by a foreign national, employed by a foreign enterprise during their stay in India, is exempt if:
    • the total period of the stay in India does not exceed 90 days in a tax year
    • the foreign enterprise is not engaged in any trade or business in India; and
    • the remuneration is not cross charged to an entity subject to Indian income tax.
  • Remuneration received by or due to a non-resident foreign national for services rendered in connection with employment on a foreign ship, where the total period of the stay in India does not exceed an aggregate period of 90 days in a tax year, is exempt from tax.
  • Remuneration received by a foreign national working as an employee of a foreign government is exempt from tax, if the remuneration is received in connection with training activity in an undertaking, office, or company owned by the government.
  • Remuneration from any cooperative technical assistance program in accordance with an agreement entered into by the central government with a foreign government is exempt from tax, provided:
    • the remuneration is received from the foreign government
    • the employee is required to pay income tax to another foreign government on income arising outside India.

In addition, concessions/benefits such as short-stay or exclusions are also available under the Double Tax Avoidance Agreement between India and host country/jurisdiction.

Salary earned from working abroad

Is salary earned from working abroad taxed in India? If so, how?

Compensation for work performed by an employee abroad, which is not in connection with the services being rendered in India, is not taxable in India, unless the same is received in India, where the employee qualifies as NR or NOR in India.

If the expatriate qualifies as a resident and ordinarily resident of India, the salary earned for working abroad may be taxable in India even if the same is received outside India, and subject to Treaty benefits or benefits under the domestic tax laws of India.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in India? If so, how?

Income from the transfer of a capital asset situated in India is deemed to accrue in India. Hence, all individuals are liable for tax on capital gains arising from the transfer of capital assets in India. Securities Transaction Tax (STT) is leviable on transactions of equity shares in a company, units of an equity oriented Mutual Fund and derivatives which are routed through any recognized stock exchange in India.

TY 2020-21

Long Term Capital Gains

Specified Securities:

It may be noted that if a security (other than a unit) listed on recognized stock exchange in India or a unit of equity oriented fund or UTI unit or zero coupon bond is held for a period of more than 12 months, it becomes a long term capital asset and any gain arising on sale of such long-term capital asset will be long term capital gains. Long Term Capital Gains from sale of listed equity shares/unit of equity-oriented fund/unit of business trust (subject to Securities Transaction Tax having been paid at specified times) computed without giving indexation benefit, exceeding INR100,000, shall be taxed at 10 percent (plus applicable surcharge and cess). Relief is provided in respect of unrealized gains until 31 January 2018, in case of shares/units already held by taxpayers. The tax calculation needs to be done in the specified manner.

Other Capital Securities:

If a capital asset (other than mentioned in above para) is held for a period of more than 36 months*, then it would be a long-term capital asset and any gains arising on account of sale of such capital asset will be considered as long term capital gains. These long-term capital gains are taxable at a special rate of tax at 20 percent. Further, the benefit of indexation can be availed. This is law in general and is subject to few exceptions. If there is a long-term capital loss, then it can be carried forward to 8 subsequent assessment years for set-off against taxable long-term capital gains.

Short Term Capital Gains

Specified Assets:

If a security (other than a unit) listed on recognized stock exchange in India or a unit of equity oriented fund or UTI unit or zero coupon bond is held up to 12 months, it becomes a short term capital asset and any gains arising on account of such sale will be considered as short term capital gains*. The short-term capital gains are taxable at special rate of tax at 15 percent. Further, if there is any loss incurred on such transaction, then it can be carried forward to 8 subsequent assessment years for set-off against taxable capital gains.

Other Capital Assets:

If a capital asset (other than mentioned in above para) is held for less than 36 months*, then it would be a short-term capital asset and any gains arising on account of sale of such capital asset will be considered as short term capital gains. These short-term capital gains are taxable at normal slab rate of tax of the assessee. Further, if there is any loss incurred on such transaction, then it can be carried forward to 8 subsequent assessment years for set-off against taxable capital gains.

Common points for both long term and short-term Capital Gains:

* As per Finance Act 2016, with effect from 1 April 2016, in case of share of a company (not being a share listed in a recognized stock exchange in India), for the words ’36 months’, words ’24 months’ have been substituted.

Further, as per the Finance Act 2017, long-term capital gains arising from sale of listed shares if Securities Transaction Tax (STT) was not paid at the time the shares were acquired will be taxable.

* Also, Immovable property (Land or building or both) would need to be held only for 24 months (earlier 36 months) to be treated as long-term capital asset as per Finance Act, 2017.

As per Finance Act 2018, long term capital exemption from sale of equity shares, unit of equity-oriented fund or units of business trust under Section 10(38) has been withdrawn. And new section 112A has been inserted, to tax long-term capital gains in case of transfer of the following long-term capital assets (held for a minimum period of 12 months):

  • equity shares of a company listed on a recognized stock exchange; or
  • a unit of an equity-oriented fund; or
  • a unit of a business trust.

Tax payable on such capital gains shall be computed as follows:

  • Tax on such long-term capital gains exceeding INR100,000 at 10 percent (without indexation)
  • Tax on balance income as per the normal provisions.
  • Cost of acquisition, in respect of assets acquired on or before 31 January 2018, shall be higher of:
    • Actual cost of acquisition of such assets or
    • Lower of:
      • fair market value of such assets as on 31 January 2018; or
      • full value of consideration received or accruing as result of transfer of the capital asset
      • Cost of acquisition for bonus and right shares acquired before 31 January 2018 – fair market value. Gains accrued up to 31 January 2018 will continue to be exempt.

Dividends, interest, and rental income

Dividend income from shares of companies in India and income from equity oriented mutual fund units (fully exempt), which were earlier subject to a dividend distribution tax in the hands of company / mutual fund now fully taxable in the hands of individual receiving the same. However, Dividend Distribution Tax has not been abolished effective 1 April 2020 and consequently the dividend income is now taxable in the hands of the recipient. Further, interest expenses incurred specifically for earning such dividend income is deductible up to 20 per cent of such dividend income.

Interest income earned in respect of the investments made in India is subject to tax in India. Also, in case of Resident and Ordinarily residents, interest income from foreign investment is taxable, subject to treaty benefits.

Rental income from a house property is taxable in the hands of its legal owner. The net rental income (i.e. gross rent less municipal taxes) is chargeable to tax after making the following deductions:

  • Standard deduction – 30 per cent of the net rental income;
  • Interest on loan taken for purchase of House property. – INR200,000/INR30,000/Amount of interest paid or payable during the tax year, depending on the facts and circumstances of each case.

No other deductions are permissible from the said rental income.

As per the Finance Act 2017 onwards, the maximum amount of house property loss which can be set off against other income is capped at INR200,000. The unadjusted loss during the tax year can be carried forward for se-off against house property income up to 8 subsequent years.

As per the Finance Act, 2019, the taxpayer can treat two house properties owned by the taxpayer as self-occupied property. Accordingly, notional rent from such second self- occupied/vacant property is not required to be offered to tax. Further, the aggregate tax deduction in respect of the interest paid on housing loans with respect to both the aforesaid self-occupied/vacant properties would be capped to INR200,000 per FY.

As per the Finance Act, 2020, where the taxpayer opts for new tax regime, no deduction towards interest payment and principal repayment shall be available. Further, any brought forward loss shall also not be available for set off against the income from house property.

Gains from stock option exercises.

Benefits from Employees Stock Option Plan (ESOP) are taxed as perquisite in the hands of employees. The taxability of a benefit arising out of ESOPs is triggered at the time of allotment of the specified securities. The perquisite value is determined as the Fair Market Value (FMV) on the date on which the “option” is exercised by the employee as reduced by the amount actually paid by or recovered from the employee in respect of such ESOPs. FMV means the value determined in accordance with the method prescribed by the Central Board of Direct Taxes.

Further, if after exercising the options, the employee holds the shares for some time and sells the same subsequently, the difference between the sale consideration and the FMV considered for calculating the perquisite value would be subject to capital gains tax.

Depending on the period of holding of the shares, capital gains would be considered either as short-term or long-term.

In case of eligible start-up employers issuing specified securities (e.g. ESOP etc.), from FY 2020-21 onwards, tax on perquisite on exercise of ESOP shall be payable within 14 days of the earliest of the following :

  • Expiry of 60 months from the end of the relevant tax year in which the options are exercised; or
  • The date of sale of such shares by the individual; or
  • The date the individual ceases to be an employee of such start-up.

The rate for such tax shall be the rate applicable in the tax year in which the specified security is allotted to the employees.

Principal residence gains and losses

There is no specific provision governing the taxability of gains and losses of principal residence.

Capital losses

Subject to certain conditions, the capital losses incurred by the assignee can be set-off only against the capital gains during the tax year. If the loss cannot be set-off, the amount can be carried forward to 8 subsequent financial tax years to be set-off against specified capital gains.

Gifts

Any sum(s) received (except for sums received from specified relatives and in certain other specified situations) by an individual from any person in cash/cheques/draft/any other mode or by way of credit or otherwise than as adequate consideration for goods and services, aggregate of inadequate value of such sums received during the tax year is taxable in the hands of the recipient as "income from other sources." However, where the total of such receipts does not exceed INR50,000 in the aggregate during the tax year, the said sums are not taxable.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in India? If so, please discuss?

For non-residents, capital gains arising from transfer of shares or debentures of an Indian company are calculated in the same foreign currency which was initially used to purchase such shares or debentures and the cost inflation index is not applied to such gains. Long-term capital gains arising from the transfer of specified bonds or Global Depository Receipts issued in foreign currency are taxed at the rate of 10 percent.

Are there capital gains tax exceptions in India? If so, please discuss?

Exemption from long-term capital gains may be claimed by making investment in a residential house property in India and/or certain bonds, and/or equity of an Eligible Business subject to specified conditions.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Not applicable.

General deductions from income

What are the general deductions from income allowed in India?

Deductions are allowed in India against the taxable income (restricted to taxable income) based on nature of investments, expenses incurred, income earned, etc.

Particulars

Limitation for tax year 2020/2021

Limitation for tax year 2021/2022

Life insurance premiums**

INR150,000

INR150,000

Subscriptions and accrued interest to National Savings Certificates

INR150,000

INR150,000

Contribution to recognized Provident Funds/approved superannuation fund by employees/Public Provident Fund in India

INR150,000

INR150,000

Contribution to National Pension System (NPS)

INR150,000***

INR150,000***

Repayment of a loan towards cost of purchase/construction of new residential house

INR150,000

INR150,000

Amount paid as Stamp Duty and Registration charges at the time of purchase of a house.

INR150,000

INR150,000

Term Deposit for a fixed period of not less than 5 years with a scheduled bank as per the scheme framed and notified by Central Government

INR150,000

INR150,000

Subscription to Units of specified Mutual Fund or United Linked Insurance Plan 1971 (ULIP) of Unit Trust of India

INR150,000

INR150,000

Subscription to equity shares or debentures of public company/public financial institution, proceeds of which will be utilized for any business related to infrastructure/power/industrial park/telecommunications/reconstruction of power generating plant/laying and operating natural gas distribution network subject to certain conditions

INR150,000

INR150,000

Tuition fees (excluding any development fee or donation or payment of similar nature) to any university/school/educational institute within India for each child subject to maximum of two children)

INR150,000

INR150,000

Payment for non- commutable deferred annuity, or notified annuity plan of LIC or other prescribed insurer(s)

INR150,000

INR150,000

Contribution to Unit Linked Insurance Plan of LIC Mutual Fund

INR150,000

INR150,000

Contribution to Pension Fund of notified Mutual Fund or of the Unit Trust of India

INR150,000

INR150,000

Subscription to notified Deposit Scheme/Contribution to any notified deposit scheme Pension Fund of National Housing Bank

INR150,000

INR150,000

Subscription to deposit schemes of Public Sector Undertakings providing long term finance for housing or any authority constituted in India for purpose of dealing with or satisfying the need for housing accommodation (any such scheme must be notified by Central Government by notification in the official gazette)

INR150,000

INR150,000

Investment in Senior Citizen Savings Scheme Rules

INR150,000

INR150,000

Subscription of any bonds issued by National Bank for Agriculture and Rural Development (NABARD) as notified by Central Government

INR150,000

INR150,000

5-year time deposit in an account under the Post Office Time Deposit Rules, 1981

INR150,000

INR150,000

Any sum deducted from salary payable to a Government employee for the purpose of securing them a deferred annuity for the benefit of the individual, their spouse or children (subject to a maximum of 20 per cent of salary)

INR150,000

INR150,000

Contribution to Sukanya Samriddhi Account

INR150,000

INR150,000

*All the above payments have been clubbed together without any sub limit and may be subject to further conditions. The maximum deduction allowed for all of the above payments cumulatively is INR150,000. (Section 80C of Income Tax Act, 1961)

** Deduction towards premium paid for life insurance policies shall apply only to so much of premium paid as is not in excess of ten per cent of the actual capital sum assured (issued on or after 1 April 2012) and twenty per cent of the actual capital sum assured (before 1 April 2012).

*** The aggregate deduction in respect of contribution to NPS is INR200,000 and the same is available in two parts as follows:

  • Within the overall limit of INR150,000 per annum for all the above listed deductions;
  • Additional deduction of up to INR50,000 per annum is available in respect of the individual’s contribution to NPS for the tax year 2014-15 onwards.

In respect of certain investments/deposits/contributions as given above, which are eligible for deduction, a minimum period of holding has been prescribed. The same should be adhered to. Such cases are given below:

Name of investments/deposits

Minimum period of holding

Unit-linked insurance plan (ULIP)

5 years

Life Insurance premium

2 years

Contribution to Public Provident Fund

15 years (premature withdrawals up to specified amounts are permitted subject to certain conditions)

Repayment of a loan towards cost of purchase/construction of new residential house

5 years

Deposits under Senior Citizen Saving Scheme

5 years

Time deposit in Post Office

5 years

Equity Linked Saving Scheme (ELSS)

3 years

Contribution to Sukanya Samriddhi Account

Minimum tenure of contribution is 14 years from the date of opening of account

*As per the Finance Act, 2020, when an individual opts for new tax regime taxation, specified deductions under chapter VI-A of the Act (such as section 80C, section 80D, Section 80G, etc.) cannot be claimed. The only deductions that can be claimed are decoction under sub-section (2) of the section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment)

Deduction in respect of maintenance including medical treatment of a dependent who is a person with disability (Section 80DD of the Act)

Deduction of INR75,000 available to resident person for expenditure incurred towards medical treatment and maintenance of a dependent who is a person with disability and INR125,000 in case the said dependent is a person with severe disability

Deduction in respect of expenses incurred for medical treatment of person with specified disease (Section 80DDB of the Act)

Deduction up to INR40,000 available to resident person for expenditure incurred towards medical. Further, in respect of expenditure incurred for senior citizen (i.e. age of 60 or above) deduction of INR0.1 million is available. In case, any amount is recovered from insurance for such medical expenses, deduction needs to be reduced for such insurance amount.

Deduction in respect of interest on loan taken for higher education (Section 80E of the Act)

In accordance with the domestic tax law in India, in computing the total income of an individual, the amount paid by the individual (out of their income chargeable to tax) by way of interest on loan taken by them from specified financial institutions (including banks)/charitable institutions for the purpose of higher education of themselves/their relatives is an eligible deduction.

Deduction for interest paid on loan shall be available for earlier of the following period:

  • for the period of 8 years starting from the tax year in which taxpayer start paying interest; or
  • until the interest on such loan is paid in full.

Deduction in respect of interest payable on loan taken for the purpose of purchase of electric vehicle (Section 80EEB of the Act)

Deduction up to INR150,000 is available to any individual taxpayer towards interest payable on loan taken for the purpose of purchase of electric vehicle. This deduction is applicable only in cases where the loan is sanctioned by prescribed financial institution during the period beginning on 1 April 2019 and ending on 31 March 2023.

Deduction for rent paid (Section 80GG of the Act)

Individuals paying rent in excess of 10 percent of taxable income for an accommodation (furnished/unfurnished) but not receiving a house rent allowance from employer, can claim a deduction of lower of following:

Rent Paid – 10 percent of taxable income; or INR5,000 per month (or INR60,000 per annum); or 25 percent of taxable income

Deduction in respect of interest on deposits in savings account (Section 80TTA of the Act)

Additional deduction up to INR10,000 per annum towards interest on deposits (excluding time deposits) in a savings account with specified banks, co-operative societies and post offices, for individuals/HUFs from tax year 2012/13 onwards.

Deduction in respect of interest on deposits in case of senior citizens (Section 80TTB of the Act)

Deduction up to INR50,000 per annum towards interest on deposits (including time deposits) with specified banks, co-operative societies and post offices, for senior citizen individuals from tax year 2018/19 onwards. However, no deduction under section 80TTA shall be allowed in these cases

Deduction in case of person with disability (Section 80U of the Act)

Deduction of INR75,000 available to resident person with disability and INR125,000 to a resident person with severe disability certified with medical authority.

Deduction for interest in relation to house property:

Particulars

Limitation for tax year 2020/2021

Limitation for tax year 2021/2022

Deduction of interest payable on capital borrowed for acquisition, construction, repair etc. of a self-occupied house up to

INR200,000*

INR200,000*

Deduction of interest for a let-out house property/deemed let out house

Actual interest payable

Actual interest payable

Loans should be taken on or after

and Acquisition or construction of house is completed

1 April 1999

Within 5 years from end of financial year in which loan was taken.

1 April 1999

Within 5 years from end of financial year in which loan was taken.

In any other case

INR30,000

INR30,000

*Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the 4 immediately succeeding previous years.

*If an individual is holding more than one house property during the FY, the maximum House property loss that can be set off against other specified income is INR200,000 only in the same FY. Balance House property Loss can be carried forward for maximum 8 FYs to adjust with House Property income if any.

*As provided by the Finance Act 2019, the taxpayer can treat two house properties owned by them as self-occupied property. Accordingly, notional rent from such second self- occupied/vacant property is not required to be offered to tax. Further, the overall tax deduction in respect of the interest paid on housing loans with respect to both the aforesaid self-occupied/vacant properties would be capped to INR200,000/- per tax year.

*As per the Finance Act, 2020, where the taxpayer opts for new tax regime, no deduction towards interest payment and principal repayment shall be available. Further, any brought forward loss shall also not be available for set off against the income from house property.

 *As per the Finance Act, 2021, deduction of INR 150,000 with respect to interest paid on affordable housing i.e. housing loan below INR4.5 million (for loan approved during 1 April 2019 to 31 March 2020) has now been extended for loans approved up to 31 March 2022. However, where the taxpayer opts for new tax regime, no deduction is available under this section.

Taxability of an employer provided car:

Nature of benefit provided by the employer

Value of perquisite for tax year 2020/2021

Value of perquisite for tax year 2021/2022

Motor car is owned/hired by employer

(a) Car used exclusively in performance of official duties

No value, provided specified documents3 are maintained by employer

No value, provided specified documents4are maintained by employer

(b) Car used exclusively for personal purpose by the employee or any member of their household5 and expenses on maintenance and running are met/ reimbursed by employer

 

Actual amount of expenditure incurred including the remuneration paid to the chauffeur by the employer

plus, amount representing normal wear and tear of the car6

as reduced by any amount charged from the employee

Actual amount of expenditure incurred including the remuneration paid to the chauffeur by the employer

plus, amount representing normal wear and tear of the car7

as reduced by any amount charged from the employee

(c) Car used partly for official duties and partly for personal purpose by employee or any member of their household

(i) Expenses on maintenance and running are met/ reimbursed by employer

 (ii) Expenses on maintenance and running for personal use are fully met by employee

 

 

INR1,800*/INR2,400** per month (plus INR900 if chauffeur is provided)

 

INR600*/INR900** per month (plus INR900 if chauffeur is provided)

 

 

 

INR1,800*/INR2,400** per month (plus INR900 if chauffeur is provided)

 

INR600*/INR900** per month (plus INR900 if chauffeur is provided)

Motor car is owned by employee and running expenses met or reimbursed by employer

(a) Car used exclusively in performance of official duties

No value provided the specified documents are maintained by employer

No value provided the specified documents are maintained by employer

(b) Car used partly for official duties and partly for personal purpose by them or any member of their household

 

Actual amount incurred by employer as reduced by INR1,800*/Rs 2,400** per month (plus INR900 if chauffeur is provided) (Refer Note 38)

Actual amount incurred by employer as reduced by INR1,800*/INR2,400** per month (plus INR900 if chauffeur is provided) (Refer Note 39)

Any other automotive conveyance is owned by employee, and running and maintenance expenses are met/reimbursed by employer

a) Used exclusively in performance of official duties

No value provided the specified documents are maintained by employer

No value provided the specified documents are maintained by employer

(b) Used partly for official duties and partly for personal purpose by them

 

Actual amount of expenditure incurred by employer as reduced by INR900 per month

* Refer Note 1

Actual amount of expenditure incurred by employer as reduced by INR900 per month

* Refer Note 1

 * Where cubic capacity of engine does not exceed 1.6 liters

** Where cubic capacity of engine exceeds 1.6 liters

The value of unfurnished rent-free accommodations:

Nature of benefit provided by the employer

Value of perquisite for tax year 2020/2021

Value of perquisite for tax year 2021/2022

Motor car is owned/hired by employer

(a) Car used exclusively in performance of official duties

No value, provided specified documents10 are maintained by employer

No value, provided specified documents11are maintained by employer

(b) Car used exclusively for personal purpose by the employee or any member of their household12 and expenses on maintenance and running are met/ reimbursed by employer

 

Actual amount of expenditure incurred including the remuneration paid to the chauffeur by the employer

plus, amount representing normal wear and tear of the car13

as reduced by any amount charged from the employee

Actual amount of expenditure incurred including the remuneration paid to the chauffeur by the employer

plus, amount representing normal wear and tear of the car14

as reduced by any amount charged from the employee

(c) Car used partly for official duties and partly for personal purpose by employee or any member of their household

(i) Expenses on maintenance and running are met/ reimbursed by employer

 (ii) Expenses on maintenance and running for personal use are fully met by employee

 

 

INR1,800*/INR2,400** per month (plus INR900 if chauffeur is provided)

 

INR600*/INR900** per month (plus INR900 if chauffeur is provided)

 

 

 

INR1,800*/INR2,400** per month (plus INR900 if chauffeur is provided)

 

INR600*/INR900** per month (plus INR900 if chauffeur is provided)

Motor car is owned by employee and running expenses met or reimbursed by employer

(a) Car used exclusively in performance of official duties

No value provided the specified documents are maintained by employer

No value provided the specified documents are maintained by employer

(b) Car used partly for official duties and partly for personal purpose by them or any member of their household

 

Actual amount incurred by employer as reduced by INR1,800*/Rs 2,400** per month (plus INR900 if chauffeur is provided) (Refer Note 315)

Actual amount incurred by employer as reduced by INR1,800*/INR2,400** per month (plus INR900 if chauffeur is provided) (Refer Note 3[14])

Any other automotive conveyance is owned by employee, and running and maintenance expenses are met/ reimbursed by employer

a) Used exclusively in performance of official duties

No value provided the specified documents are maintained by employer

No value provided the specified documents are maintained by employer

(b) Used partly for official duties and partly for personal purpose by them

 

Actual amount of expenditure incurred by employer as reduced by INR900 per month

* Refer Note 1

Actual amount of expenditure incurred by employer as reduced by INR900 per month

* Refer Note 1

 * Where cubic capacity of engine does not exceed 1.6 liters

** Where cubic capacity of engine exceeds 1.6 liters

5. The value of unfurnished rent-free accommodations:

Nature of benefit provided by the employer

Perquisite Value for tax year 2020/2021

Perquisite Value for tax year 2021/2022

Where unfurnished accommodation is provided by employer other than Central/State Government

(a) Accommodation is owned by the employer

 

-15% of salary in cities where population is more than INR2.5 million

-10% of salary in cities where population is more than INR1 million but does not exceed INR2.5 million

- 7.5% in cities in other areas

as reduced by the rent, if any, paid by the employee.

* Refer Note 217 and Note 3

-15% of salary in cities where population is more than INR2.5 million

-10% of salary in cities where population is more than INR1 million but does not exceed INR2.5 million

- 7.5% in cities in other areas

as reduced by the rent, if any, paid by the employee.

* Refer Note 218 and Note 3

(b) Accommodation is taken on lease or rent by the employer

 

Lower of:

-actual amount of lease rent payable by the employer;

Or

-15% of salary;

as reduced by the rent, if any, paid by the employee.

* Refer Notes 2

 Lower of:

-actual amount of lease rent payable by the employer;

Or

-15% of salary;

as reduced by the rent, if any, paid by the employee.

* Refer Notes 2

Accommodation is provided by the employer in a hotel19

(a) Accommodation is provided for a period of up to 15 days in the aggregate on account of transfer of employee from one place to another

 

 

Not taxable

 

Not taxable

(b) Accommodation is provided for a period of more than 15 days in the aggregate on account of transfer of employee from one place to another

 

Lower of:

-Actual charges paid by the employer;

Or

-24% of salary;

as reduced by the rent, if any, paid by the employee.

Lower of:

-Actual charges paid by the employer;

Or

-24% of salary;

as reduced by the rent, if any, paid by the employee.

Employee Receives Cash Allowance (self-procured housing) (refer Note 4)

The least of the following is tax-exempt:

  • Allowance actually received
  • Actual rent paid by employee in excess of 10 percent of salary (Refer Note 3)
  • 50 percent of salary (Refer Note 3) if residing in Mumbai, Kolkata, Delhi, Chennai or 40 percent of salary (Refer Note 3) in other places.

The least of the following is tax-exempt:

  • Allowance actually received
  • Actual rent paid by employee in excess of 10 percent of salary (Refer Note 3)
  • 50 percent of salary (Refer Note 3) if residing in Mumbai, Kolkata, Delhi, Chennai or 40 percent of salary (Refer Note 3) in other places.

Note 3: “Salary” includes basic salary and dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

Note 4: No exemption shall be allowed for HRA in case:

  • the residential accommodation occupied by the assessee is owned by them; or
  • the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by them.

Charitable contribution deduction:

The contribution (i.e. donation) to specified institutions/funds is eligible for deduction at specified percentages (i.e. 50 percent or 100 percent) from the gross total income. The qualifying amounts of certain contributions are restricted to 10 percent of the gross total income. Cash donations exceeding INR2,000 is not eligible for deduction.

Deduction in respect of Health Insurance Premia (Section 80D of the Act):

The medical insurance premium paid in respect of approved insurance scheme and specified medical expenditure is eligible for deduction from the gross total income.

Particulars

For tax year 2020/2021 (refer to Notes A & B below)

For tax year 2021/2022 (refer to Notes A & B below)

 

 

 

Senior Citizen (resident individual 60 years or older)

The deduction is the lower of 100% premium or INR50,000.An additional deduction of the lower of 100% premium or INR50,000 for premium paid for senior citizen parent/parents

The deduction is the lower of 100% premium or INR50,000.

An additional deduction of the lower of 100% premium or INR50,000 for premium paid for senior citizen parent/parents

Other than Senior Citizen

The deduction is the lower of 100% premium or INR25,000.

An additional deduction of the lower of 100% premium or INR25,000 for premium paid for non-senior citizen parent/parents. In case the parent/parents are senior citizen, the limit is INR50,000 for the same.

The deduction is the lower of 100% premium or INR25,000.

An additional deduction of the lower of 100% premium or INR25,000 for premium paid for non-senior citizen parent/parents. In case the parent/parents are senior citizen, the limit is INR50,000 for the same.

Medical expenditure incurred for senior citizen family member (i.e. self, spouse or dependent children) is eligible for deduction up to INR50,000. Further, medical expenditure incurred for senior citizen parent(s) is also eligible for deduction up to INR50,000 provided no medical insurance premium is paid.

Payment made up to INR5,000 per annum (including cash payment) towards preventive health check-ups for self, spouse, dependent children, parent(s) included within the current overall deduction limits for health insurance premium/contribution payments.

Note A: In case of an individual who is below the age of 60 years and parent(s)’s age is 60 or older, the aggregate deduction in respect of health insurance premium and medical expenditure cannot exceed INR75,000.

Note B: In case of an individual who is above the age of 60 years, the aggregate deduction in respect of health insurance premium, and medical expenditure cannot exceed INR100,000.

Provident Fund (“PF”), Gratuity, and Superannuation Fund:

Particulars

Maximum Tax Benefits/ Deduction/ Limits available for FY 2020/2021

Maximum Tax Benefits/ Deduction/ Limits available for FY 2021/2022

Employee’s contribution to PF

INR150,000*

INR150,000*

Employer’s contribution to PF

12% of salary **

12% of salary **#

Gratuity maximum limit

INR2,000,000

INR2,000,000

Employer’s contribution Superannuation Fund

Up to INR150,000

Up to INR750,000#

Employee’s contribution to National Pension Fund

1. INR150,000*

 

2. Additional deduction of INR50,000

1. INR150,000*

 

2. Additional deduction of INR50,000

Employer’s contribution to National Pension Fund

10% of salary (Basic + Dearness Allowance)

10% of salary (Basic + Dearness Allowance)#

* part of overall limit of INR150,000 per annum for all investments including listed at point no.2 above i.e. section 80C of the Act.

**“Salary” includes basic salary, dearness allowance and cash value of any food concession if the terms of employment so provide but excludes all other allowances and perquisites.

#Under the old provisions, the employer contribution to Provident Fund in excess of 12 percent of specified salary, employer contribution to Superannuation Fund in excess of INR150,000 and employer contribution to National Pension System in excess of 10 percent of specified salary is taxable as salary. As per the changes made by the Finance Act, 2020, the aggregate of employer contributions towards Provident Fund, Superannuation fund, National Pension System exceeding INR750,000 will be taxable as a perquisite in the hands of the employee. Further, annual accretion (interest, dividend or other income) to the extent it relates to the taxable employer’s contribution as above, will also be treated as a taxable perquisite in their hands.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in India?

In case where the company bears the tax liability for the employees / expatriates, the company normally deposits the tax directly with the tax authorities by way of withholding taxes.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in India? For example, pay-as-you-earn (PAYE), pay-as-you-go (PAYG), and so on.

The India tax system runs on pay-as-you-earn basis in respect of salary payments. Accordingly, tax needs to be withheld and deposited with the tax authorities on a monthly basis. If the taxes are not deducted interest is levied at the rate of 1 per cent per month or part of the month for the months for which tax has not been deducted. If the taxes deducted are not deposited into the Government treasury, there would be an interest charged at the rate of 1.5 percent per month or part of the month leviable for all the months for which taxes have not been paid till date of the payment of tax. The tax withheld needs to be deposited within 7 days from the end of the month (for the month of March tax may be deposited on or before 30 April and 7 April where tax on non-monetary perquisites are borne by employer).

Pay-as-you-earn (PAYE) withholding

Every person responsible for making payment of employees' remuneration has an obligation to deduct tax on a monthly basis from the employees' remuneration at the time of payment thereof. Tax is to be deducted on the estimated income of the employee after allowing certain permissible deductions.

Even foreign employers are not exempt from such withholding tax obligations.

Advance tax installments

In case the amount of tax being withheld at source is short of the actual tax liability, an individual is liable to pay advance tax. Advance tax provisions have been discussed earlier above under “Tax Returns and Compliance”.

When are estimates/prepayments/withholding of tax due in India? For example: monthly, annually, both, and so on.

Any person making the payment of salary to an employee is liable to deduct tax at the time of payment of salary to its employees. The tax deducted is to be deposited with the central government within 7 days from the end of the month in which tax is deducted (except the tax deducted in the month of March may be deposited on or before 30 April, and 7 April where tax on non-monetary perquisites are borne by employer). The employer is also required to file quarterly withholding tax statements with Indian Revenue Authorities in respect of the tax deducted at source during the year as below

Quarter

Due Date

1 – April to June

31 July

2 – July to September

31 October

3 – October to December

31 January

4 – January to March

31 May

Furthermore, an annual salary certificate (namely Form 16) is required to be issued to the employee in respect of tax deducted at source by employer by 15 June of the end of the Financial Year.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in India? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

A resident and ordinary resident in India is entitled to claim credit for foreign taxes paid on foreign-sourced income against the Indian tax payable on such income:

  • where agreement for avoidance of double taxation exists between the two countries/jurisdictions, in accordance with the terms of that agreement.
  • in other cases, at the lower of the foreign or Indian rates of tax, or at the Indian rate of tax, if both the rates are equal.

Rules have been notified in India for availing Foreign Tax Credit (FTC) in India and the same are applicable from TY 2016-17. Accordingly, taxpayer availing FTC needs to provide declaration in Form 67 along with specified documents justifying taxes paid/deducted at source in foreign country/jurisdiction.

India has Double Taxation Avoidance Agreement (DTAA) with more than 100 countries/jurisdictions (Comprehensive and limited).

There is no specific provision for the employee to consider FTC benefit at the time of withholding taxes from salary income.

In the absence of aforesaid specific provision, the employee may consider claiming the said treaty benefit at the time of filing their personal tax return.

Further, FTC rules are applicable from FY 2016-17. FTC rules provide for following set of documents for claiming FTC in the India Tax Return:

  1. Statement of income from the country/jurisdiction or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in a prescribed Form No. 67 and verified in the manner specified therein. This Form is required to be submitted to the India tax authorities before filing of the India tax return for the particular FY.
  2. Certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee.
  3. From the tax authority of the country/jurisdiction or specified territory outside India; or from the person responsible for deduction of such tax; or Signed by the assessee.

Provided that the statement furnished by the assessee in 3 above shall be valid if it is accompanied by:

  • an acknowledgement of online payment or bank counterfoil or challan for payment of tax where the payment has been made by the assessee
  • proof of deduction where the tax has been deducted at source.

Relief under the DTAA (i.e. exclusion of income, lower tax rate, etc.) will be available only if a Tax Residency Certificate (‘TRC’) is obtained by a Resident taxpayer (under the tax treaty) from the Government of other country/jurisdiction or specified territory of which they are a resident. Additionally, the taxpayer is required to provide such other documents and information as may be prescribed in Form 10F.

Further, TRC would be regarded as a necessary but not sufficient condition to avail the benefits under the DTAA.

General tax credits

What are the general tax credits that may be claimed in your country/jurisdiction? Please list below.

The Indian tax law does not have any specific provisions for tax credit. Deductions from the taxable income, subject to certain limits are available (as discussed in the earlier sections).

Sample tax calculation

This calculation assumes a taxpayer non-resident in India with two children, whose 3-year assignment begins 1 January 2019 and ends 31 December 2021. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

 

2019

USD

2020

USD

2021

USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

0

20,000

0

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000

Exchange rate used for calculation: USD1.00 = INR73.00. Indian tax year runs from 1 April to 31 March.

Other assumptions

  • All salary income is attributable to services rendered in India.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • Interest income is not remitted to India.
  • The company car is used for business and private purposes and originally cost USD50,000. The cubic capacity of the car exceed 1.6 liters and chauffeur is also provided by the employer.
  • Moving expense reimbursement are paid at the time of relocation.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Year-ended

2019-2020

INR

2020-2021

INR

2021-2022

INR

Days in India during year

91

365

275

Earned income subject to income tax

 

 

 

Salary

18,64,754

75,00,000

56,50,685

Bonus

3,72,951

15,00,000

11,30,137

Cost-of-living allowance

1,86,475

7,50,000

5,65,068

Taxable housing allowance

1,86,475

7,50,000

5,65,068

Moving expense reimbursement

0

15,00,000

0

Home leave

0

3,75,000

0

Education allowance

55,943

2,25,000

1,69,521

Motor car

9,900

39,600

29,700

Total earned income

26,76,498

1,26,39,600

81,10,179

Other income (Income earned outside of India is not taxable in India in case of non-resident)

0

0

0

Total income

26,76,498

1,26,39,600

81,10,179

Deductions:

50,000

50,000

50,000

Total taxable income

26,26,498

1,25,89,600

80,60,179


Calculation of tax liability

 

2019-2020

INR

2020-2021

INR

2021-2022

INR

(Old Regime)

Taxable income as above

26,26,498

1,25,89,600

80,60,179

Taxes

6,00,449

35,89,380

22,30,554

Surcharge

NIL

5,38,407

2,23,055

Education Cess

24,018

1,65,111

98,144

Indian tax thereon

6,24,467

42,92,898

25,51,753

Less:

 

 

 

Domestic Tax rebates (dependent spouse rebate)

0

0

0

Foreign tax credits

0

0

0

Total Indian tax (rounded off)

6,24,467

42,92,898

25,51,753


Taxable housing allowance

 

2019-2020

INR

2020-2021

INR

2021-2022

INR

(Old Regime)

Actual rent (assumed INR 900,000 per year)

2,25,000

9,00,000

6,75,000

Actual housing allowance

2,25,000

9,00,000

6,75,000

Least of the following is exempt:

 

 

 

Excess of rent paid over 10% of salary

38,525

1,50,000

1,09,932

50% of basic salary*

9,32,377

37,50,000

28,25,342

Actual housing allowance

2,25,000

9,00,000

6,75,000

Housing allowance exempt

38,525

1,50,000

1,09,932

Taxable Housing Allowance

1,86,475

7,50,000

5,65,068

*Assuming that the expatriate is residing in a Metro city. In case of a non-metro city, the percentage is 40 percent.

Calculation of perquisite value in hands of employee

 

2019-2020

INR

2020-2021

INR

2021-2022

INR

(Old Regime)

Company car

1,12,500

4,50,000

3,37,500

Perquisite value

9,900

39,600

29,700


Total tax burden

 

2019-2020

INR

2020-2021

INR

2021-2022

INR

(Old Regime)

Total Indian tax

6,24,467

42,92,898

25,51,753

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Footnotes:

Rule 2A of the Income-tax Rules, 1962

2 "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

Specified Documents:

(a) Employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon

(b) The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for performance of official duties

Specified Documents:

(c) Employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon

(d) The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for performance of official duties

Member of household includes spouse(s), children and their spouses, parents and servants and dependents

The normal wear and tear of a motor car shall be taken at 10 percent per annum of the actual cost of the motor car(s)

The normal wear and tear of a motor car shall be taken at 10 percent per annum of the actual cost of the motor car(s)

Note 1: Wherein the employer or employee claims:

  • that motor car has been used exclusively in performance of office duties, or
  • actual expenses on running and maintenance of the car owned by employee is more than the amounts deductible as specified, then they may claim a higher amount attributable to such use and the value of the perquisite shall be actual amount attributable to official use of the vehicle, provided the specified documents are maintained by employer

Note 1: Wherein the employer or employee claims:

  • that motor car has been used exclusively in performance of office duties, or
  • actual expenses on running and maintenance of the car owned by employee is more than the amounts deductible as specified, then they may claim a higher amount attributable to such use and the value of the perquisite shall be actual amount attributable to official use of the vehicle, provided the specified documents are maintained by employer

10 Specified Documents:

(e) Employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon

(f) The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for performance of official duties

11 Specified Documents:

(g) Employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon

(h) The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for performance of official duties

12 Member of household includes spouse(s), children and their spouses, parents and servants and dependents

13 The normal wear and tear of a motor car shall be taken at 10 percent per annum of the actual cost of the motor car(s)

14 The normal wear and tear of a motor car shall be taken at 10 percent per annum of the actual cost of the motor car(s)

15 Note 1: Wherein the employer or employee claims:

  • that motor car has been used exclusively in performance of office duties, or
  • actual expenses on running and maintenance of the car owned by employee is more than the amounts deductible as specified, then they may claim a higher amount attributable to such use and the value of the perquisite shall be actual amount attributable to official use of the vehicle, provided the specified documents are maintained by employer

16 Note 1: Wherein the employer or employee claims:

  • that motor car has been used exclusively in performance of office duties, or
  • actual expenses on running and maintenance of the car owned by employee is more than the amounts deductible as specified, then they may claim a higher amount attributable to such use and the value of the perquisite shall be actual amount attributable to official use of the vehicle, provided the specified documents are maintained by employer

17 Note 2: In case of furnished accommodation, the perquisite value will be increased by 10 percent of the cost of furniture/actual hire charges, as reduced by the amount actually paid by the employee.

18 Note 2: In case of furnished accommodation, the perquisite value will be increased by 10 percent of the cost of furniture/actual hire charges, as reduced by the amount actually paid by the employee.

19 ‘Hotel’ includes licensed accommodation such as motel, service apartment or guest house

It may be noted that due to COVID-19 pandemic, respective authorities (Taxation / social security / immigration) may provide relaxations and extensions in the statutory requirements from time to time.

  

Special considerations for short-term assignments

Residency rules

Payroll considerations

Taxable income

Additional considerations

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year.

Residency Rules

Are there special residency considerations for short-term assignments?

There are no special residency rules prescribed for short-term assignments. The residency rules discussed in the above sections, hold valid even for an individual on a short-term assignment.

Payroll considerations

Are there special payroll considerations for short-term assignments?

 There are no special payroll considerations for short term assignments.

Taxable income

What income will be taxed during short-term assignments?

An individual is taxed in respect of income earned for services rendered in India irrespective of their residential status. However, in case of an individual on a short-term assignment in India, short stay exemption may be claimed in respect of India taxes subject to the fulfillment of the prescribed conditions in the relevant treaty/Domestic tax law.

Additional considerations

Are there any additional considerations that should be considered before initiating a short- term assignment in India?

Depending upon the treaty provisions, short-term assignments can be planned in a manner so as to avail the short stay exemption. However, if presence of an individual in India creates a Permanent Establishment (PE) for the foreign company then the individual may not be entitled to claim short stay exemption in India.

Per Diem allowance granted on tour, to meet ordinary daily living charges may be claimed as exempt to the extent the amount is actually incurred for the said purpose.

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It may be noted that due to COVID-19 pandemic, respective authorities (Taxation / social security / immigration) may provide relaxations and extensions in the statutory requirements from time to time.

  

Other taxes and levies

Social security tax

Are ther/e social security/social insurance taxes in India? If so, what are the rates for employers and employees?

The Ministry of Labour and Employment, in a notification dated 1 October 2008, amended the “Employees’ Provident Funds Scheme, 1952,” and the “Employees’ Pension Scheme, 1995,” collectively referred to as the Indian Social Security Scheme. Accordingly, the scope of the Indian Social Security Scheme was extended to specifically include a new concept of “International Workers” (IWs).

IWs include expatriates working for an employer in India to which the Provident Fund Act applies and Indian employees who have contributed to the Social Security program of a country/jurisdiction that has a Social Security Agreement (SSA) with India and are eligible for benefits under these SSAs. Accordingly, all the expatriates holding foreign passports will qualify as IWs in India.

Consequently, all employees who fall within the definition of IWs are required to become members of the Schemes under the Provident Fund Act unless they qualify as ‘excluded employees’

Recent amendment in PF and Pension Scheme

The Ministry of Labour and Employment, Government of India issued a notification providing that a Nepalese national and a Bhutanese national shall be deemed to be an Indian worker. This notification has been effective from 2 November 2016.

  • In view of the above notification, IWs are excluded from contributing towards PF in India: If, they are contributing to social security in their country/jurisdiction of origin and obtained a Certificate of Coverage (CoC) under the relevant SSA;

‘OR’

  • Deputed from a country/jurisdiction with which India has entered into a bilateral comprehensive economic agreement before 1 October 2008. (Currently with Singapore only)

OR’

  • They are Nepalese national on account of Treaty of Peace and Friendship of 1950 and the worker who are Bhutanese national on account of India-Bhutan Friendship Treaty of 2007, shall be deemed to be Indian workers. (Date of effect: 2 November 2016)

IWs (other than excluded employees) are required to contribute 12 percent of the specified salary (as defined under the EPF Act) to the Indian social security scheme. Employers are also required to contribute 12 percent of their employee’s specified salary to the scheme. A portion of employer’s contribution i.e. 8.33 percent of salary is mandatorily contributed into the pension scheme. However, an employee who is joining and becoming member of the fund on or after 1 September 2014 and has salary exceeding INR15,000 at the time of joining the fund is not required to contribute towards the pension scheme.

Amendments in the Employees’ Pension Scheme, 1995

As per notification issued by Government of India, Ministry of Labour & Employment dated 22 August 2014, the employee who is joining and becoming the member of the fund for the first time on or after 1 September 2014 and has a salary exceeding INR15,000 at the time of joining the fund is not eligible to become member of Employees’ Pension Scheme, 1995.

Therefore, the employer’s entire PF contribution of 12 percent will be contributed towards Provident Fund account and there will be no diversion of employer’s share to the Pension Fund.

Thus, all International Workers who would be becoming the members of the Provident Fund for the first time on or after on or after 1 September 2014 and have salary exceeding INR15,000 at the time of joining the fund would not be eligible to become member of Employees’ Pension Scheme, 1995.

Amendments in the Employees' Deposit Linked Insurance Scheme, 1976 (EDLI)

As per notification issued by Government of India, Ministry of Labour & Employment dated 22 August 2014; the wage ceiling has been enhanced from INR6,500 to INR15,000.

The contribution towards EDLI and its administrative charges will be subject to a salary cap of INR15,000 in case of International Workers.

The contribution must be deposited on a monthly basis by 15th of the following month for which contributions are payable. Necessary forms and returns must be filed with the authorities by the prescribed deadlines.

As on 1 January 2019, India has signed Social Security Agreement (‘SSA’) with 20 countries/jurisdictions viz., Belgium, Germany, Switzerland, Denmark, Luxembourg, France, Republic of Korea, Netherlands, Hungary, Norway, Czech Republic, Sweden, Quebec, Canada, Japan, Portugal, Finland, Austria, Australia and Brazil. Out of the 20 countries/jurisdictions, the countries/jurisdictions with which India has SSAs which are currently effective are as follows:

Sr. No

Name of the country/jurisdiction

Effective Date

1

Belgium

1 September 2009

2

Germany

1 October 2009

3

Switzerland

29 January 2011

4

Denmark

1 May 2011

5

Luxembourg

1 June 2011

6

France

1 July 2011

7

Republic of Korea

1 November 2011

8

Netherlands

1 December 2011

9

Hungary

1 April 2013

10

Sweden

1 August 2014

11

Finland

1 August 2014

12

Czech Republic

1 September 2014

13

Norway

1 January 2015

14

Austria

1 July 2015

15

Canada

1 August 2015

16

Australia

1 January 2016

17

Japan

1 October 2016

18

Portugal

8 May 2017

Further, Quebec, and Brazil has signed social security agreements, but they are yet to come into effect.

Withdrawal of social security contribution Provident Fund (PF) accumulations

The IWs who are covered under an operational SSA between India and any other country/jurisdiction can withdraw their accumulated PF balances on ceasing to be an employee in an establishment covered under the PF Act.

However, in case a person is not covered under SSA, they may withdraw the PF balance on retirement from service in the company at any time after 58 years of age or is faced with certain contingencies (death/specified illnesses/incapacitation).

Pension accumulations (Payable only if the employee is not eligible for Monthly Pension)

In relation to pension withdrawal, the lump sum refund will be available only to those employees who are covered under an SSA in force and who have not completed the eligible service of 10 years even after including the totalization of service under the respective SSAs. Employees not covered under an SSA will not get the lump sum refund.

NOTE: Employee who have joined or become members of EPFS on or after 1 September 2014 and have monthly salary (as defined in the EPF Act) in excess of INR15,000 would not be required to contribute towards pension scheme (EPS), therefore there would be no pension accumulation for those employees.

Monthly Pension

In case of employees (both from SSA as well as Non-SSA countries/jurisdictions) having 10 years or older contributory service, they would be qualified to receive a monthly pension.

The employees would also be entitled to receive monthly pension in cases where:

If they have rendered eligible service of 10 years or older and retires on attaining the age of 58 years; or

Early pension, if they have rendered eligible service of 10 years or older and retires or otherwise ceases to be in the employment before attaining the age of 58 years of age.

NOTE: Employee who have joined or become members of EPFS on or after 1 September 2014 and have monthly salary (as defined in the EPF Act) in excess of INR15,000 would not be required to contribute towards pension scheme (EPS), therefore there would be no pension accumulation for those employees.

It may be noted that the Government of India have notified 4 Labour Codes which upon being effective shall replace the existing Social Security laws and other prescribed laws. These Labour Codes are yet to be made effective.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes1 in India?

There is no estate tax levied in India.

Further, Wealth tax was applicable up to the tax year 2014-15 as the same has been abolished from tax year 2015-16 onwards.

Real estate tax

Are there real estate taxes in India?

Property tax/real estate tax is payable as per local municipal laws on commercial and residential property owned in the respective States.

Sales/VAT tax

Are there sales and/or value-added taxes in India?

India has introduced Goods and Services Tax (GST) with effect from 1 July 2017. GST applies on all supplies of goods and/or services unless otherwise exempted/excluded. GST has subsumed 17 indirect tax laws including VAT, Central Excise, Service tax, Central sales tax, entry tax etc.

India has a dual-GST model for levy of GST i.e. Central GST and State GST which is applied on all Intra-state supply of goods and/or services and for inter-state supplies (including imports) Integrated GST is levied.

Other taxes

Are there additional taxes in India that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

 The following goods are outside the purview of GST:

  1. Alcoholic Liquor for human consumption
  2. Petroleum Crude, High Speed Diesel, Motor spirit, Aviation Turbine fuel and Natural Gas.

In addition to the above, the Federal Government levies Customs Duty and Additional duties of Customs on import into/export out of India of specified goods. Apart for the above on few items viz. Motor vehicles, tobacco products etc., a GST compensation cess is applicable.

Profession tax

Certain states in India levy a profession tax on employees. This tax is to be withheld from salary by the employer and is also deductible in computing the taxable income of the employee. It may be noted that in case where the employee opts for New tax regime, the deduction for Profession tax is not available.

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country/jurisdiction’s fiscal or banking authorities?

Yes, every individual qualifying as a Resident and Ordinarily Resident of India is required to disclose all their foreign assets and incomes earned therefrom while filing the India tax return.

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It may be noted that due to COVID-19 pandemic, respective authorities (Taxation / social security / immigration) may provide relaxations and extensions in the statutory requirements from time to time.

  

Immigration

Following is an overview of the concept of India’s immigration system for skilled labor.

(E.g. which steps are required, authorities involved, in-country/jurisdiction and foreign consular processes, review/draft flow chart illustrating the process)

An Employment visa is granted to a foreigner who is a highly skilled and/or qualified professional. Employment Visa shall not be granted – (i) for jobs for which qualified Indians are available and (ii) for routine, ordinary or secretarial/clerical jobs. Employment visa is not granted to a citizen of Pakistan.

The foreign national being sponsored for an employment visa in any sector should draw a gross salary in excess of INR1.625 million per annum. However, this condition of annual floor limit on income will not apply to: (a) Ethnic cooks employed by foreign Missions in India (this will not apply to ethnic cooks employed in commercial venture), (b) Language teachers ( other than English language teachers)/translators (this will not include teachers employed to teach particular subjects in foreign language), (c) staff working for the concerned Embassy/High Commission in India, (d) foreigners, eligible for ‘E’ visa for honorary work with the NGOs registered in the country/jurisdiction without salary, (e) foreign teaching faculty employed in the South Asian University and the Nalanda University, and (f) Circus artists.

The salary threshold limit of INR1.625 million per annum will be worked out taking into account the salary and all other allowances paid to the foreign national in cash and also perquisites like rent free accommodation etc. which are included in the salary for the purpose of calculating income tax. Such perquisites should be quantified and indicated in the Employment Contract.

In respect of foreign nationals engaged as teaching faculty at the level of Assistant Professors and above by the Central Higher Educational Institutions viz. Indian Institutes of Technology (IITs), Central Universities (CUs), National Institutes of Technology (NITs), Indian Institutes of Management (IIMs) and Indian Institutes of Science Education and Research (IISERs), the minimum salary limit for grant of Employment visa will be INR910 thousand per annum.

Nationals of Bangladesh, who are married to Indian nationals and who are not eligible for registration as OCI cardholder must draw a minimum salary of INR910,000 per annum for being eligible for grant of Employment Visa.

Generally, a foreign national can apply for an Indian visa from the country/jurisdiction of origin/domicile. However it may be applied from the other country/jurisdiction and the visa may be granted after consulting the Indian Mission concerned in the country/jurisdiction of origin/domicile of the foreigner.

Employment visa with multiple entry facility may be granted for a maximum period of 5 years.

Employment visa can be extended in India up to a total period of 10 years from the date of issue of the initial employment visa.

With the approval of immigration authorities, foreign nationals can change employment in India if it is between holding company, joint ventures and consortiums and its subsidiaries or between subsidiaries of holding company, joint ventures and consortiums.

International Business Travel/Short-Term Assignments

Describe (a) which nationalities may enter India as non-visa national, (b) which activities they may perform and (c) the maximum length of stay.

I. Citizen of Nepal or Bhutan

A) A citizen of Nepal or Bhutan entering India by land or air over the Nepal or the Bhutan border does not require a passport or visa for entry into India. However, they should be in possession of any of the following identity documents –

(i) Nepalese/Bhutanese Passport; or

(ii) Nepalese/Bhutanese Citizenship Certificate; or

(iii) Voter Identification Card issued by the Election Commission of Nepal/Bhutan; or

(iv) Limited validity photo-identity certificate issued by Nepalese Mission/Royal Bhutanese Mission in India when deemed necessary.

(v) For children between age group of 10-18 years, photo ID issued by the Principal of the School, if accompanied by parents having valid travel documents. No such document is required for children below the age group of 10 years.

B) A citizen of Nepal or Bhutan must be in possession of a Passport when entering India from a place other than Nepal/Bhutan.

C) A citizen of Nepal or Bhutan must have a visa for India if they are entering India from China, Macau (SAR), Hong Kong (SAR), Pakistan and Maldives.

D) If a citizen of Nepal or Bhutan visits India on valid Nepalese/Bhutanese passport, they may not be allowed to proceed to any third country/jurisdiction from India, unless they obtain a ‘No objection Certificate’ from the Embassy of Nepal/Royal Bhutanese Mission in India.

II. Citizen of Maldives

A) A citizen of Maldives visiting India for a short period, up to 90 days, is exempt from the requirement of visa, provided they hold a valid passport.

B) The period of 90 days shall include any prior period of stay of such foreigner in India during a period of 6 months immediately preceding the date of their entry into India.

C) The visa free entry will be available only for Tourism and Medical purposes

Describe (a) the regulatory framework for business traveler being visa nationals (especially the applicable visa type), (b) which activities they may perform under this visa type and the (c) maximum length of stay.

Foreign nationals are required to obtain an India Business visa (BV) visa to be able to enter into India for business visitor activities.

In India, business visitors must generally limit their activities to the following:

  • Foreign nationals who wish to visit India to establish an industrial/business venture or to explore possibilities to set up an industrial/business venture, other than Proprietorship Firms and Partnership Firms, in India.
  • Foreign nationals coming to India to purchase/sell industrial products or commercial products or consumer durables.
  • Foreign nationals coming to India for technical meetings/discussions, attending Board meetings or general meetings for providing business services support.
  • Foreign nationals coming to India for recruitment of manpower.
  • Foreign nationals who are partners in the business and/or functioning as Directors of the company.
  • Foreign nationals coming to India for consultations regarding exhibitions or for participation in exhibitions, trade fairs, business fairs etc.
  • Foreign buyers who come to transact business with suppliers/potential suppliers at locations in India, to evaluate or monitor quality, give specifications, place orders, negotiate further supplies etc. relating to goods or services procured from India.
  • Foreign experts/specialists on a visit of short duration in connection with an ongoing project with the objective of monitoring the progress of the work, conducting meetings with Indian customers and/or to provide technical guidance.
  • Foreign nationals coming to India for pre-sales or post-sales activity not amounting to actual execution of any contract or project.
  • Foreign trainees of multinational companies/corporate houses coming for in-house training in the regional hubs of the concerned company located in India.
  • Foreign nationals coming as tour conductors and travel agents and/or conducting business tours of foreigners or business relating to it, etc.
  • Foreign academicians/experts coming under GIAN (Global Initiative for Academic Networks).
  • Crew members of scheduled/non-scheduled flights operated by scheduled airlines, non-scheduled and chartered flights operated by non-scheduled airlines and special flights.
  • Foreign nationals intending to visit India to participate in cultural events/activities with remuneration. [Such foreign nationals intending to visit India to participate in cultural events/activities for short duration without remuneration may be granted Entry (X-Misc.) Visa.]
  • Foreign nationals who are engaged in commercial sports events in India on contract (including coaches) like Indian Premier League, Indian Soccer League, etc. with remuneration. They may be granted ‘B-Sports’ Visa with multiple entry facility for appropriate period. Such a foreign national shall comply with all the statutory obligations like payment of taxes, etc.

The India BV is typically issued for multiple entries. Extension of Business Visa may be granted by the FRRO/FRO concerned on a year-to-year basis. The period of extension shall not be beyond 10 years from the date of issue of the Business visa, subject to submission of documents of proof of doing business/consultancy.

The application for the India business visa must be filed at the Indian embassy/consulate in the respective country/jurisdiction of residence in order to be allowed to enter India.

Outline the process for obtaining the visa type(s) named above and describe (a) the required documents (including any legalization or translation requirements), (b) process steps, (c) processing time and (d) location of application.

1. Document gathering (8-10 days)

2. Book visa appointment at the Indian embassy/consulate at the place of residence (1 day)

3. Prepare Visa application (1 days)

4. File Visa application with the Indian embassy/consulate at the place of residence (5-10 business days after submission of the application)

5. Obtain Visa and travel to India (1 day)

General requirement for Business Visitors

Standard Documents needed to be provided in English:

  • Valid passport or travel document;
  • Online application form;
  • 2 photographs white background 35x45 size white background;
  • Established purpose for the visit (i.e. Letter of Invitation (LOI) from the Indian company including a guarantee to cover certain expenses);
  • Covering letter from the delegate employer;
  • Proof of return or onward travel;
  • Proof of financial and expertise in the field of intended business; and
  • Incorporation of Certificate of Indian company;

Are there any visa waiver programs or specific visa categories for technical support staff on short-term assignments?

NA.

Long-Term Assignments

What are the main work permit categories for long-term assignments to India? In this context outline whether a local employment contract is required for the specific permit type.

Employment visa -

The immigration guidelines are silent on this point and therefore, the Indian embassies/consulates in different countries/jurisdictions (while issuing visa) and the Indian immigration authorities in India (at the time of the registration of foreigner, visa extension, etc.) insist on some sort of a document that establishes the connection between the Indian entity/office and the foreign national.

Therefore, depending on the Indian embassies/consulates in different countries/jurisdictions and jurisdictional/regional Indian immigration authorities, one may have to submit an employment contract or some other document like appointment letter, assignment letter, etc. which particularly has clauses on the below points:

  1. Duration of assignment
  2. Annual salary break-up
  3. Declaration regarding payment of taxes in India

Location of applicant and company in India, etc.

Further, with respect to activities for which employment VISA is granted, kindly refer “Overview of the concept of India’s immigration system for skilled labor” section above.

Project Visa - Project visa is granted to foreign nationals coming to India for execution of projects in the power and steel sectors, subject to the following conditions:

  • The Visa would be project specific. In no circumstances would the person be allowed to be engaged in another project either of the same company or of a different company.
  • The period of visa would be initially for a period of 1 year or for the actual duration of the project/contract, whichever is less, with multiple-entry facility. The visa can be extended for another 1 year by the State Government/UT Administration concerned. Any further extension of visa can be granted only by the Ministry of Home Affairs.
  • The Project Visa would be issued only for skilled/highly skilled persons. However, the Missions/Posts may grant visa for not more than two chefs and two interpreters.
  • A person coming on Project Visa will not be allowed to take up employment in the same Indian company for a period of 2 years from the date of commissioning of the project.
  • The Indian Company engaging the foreign national for executing the project/contract would be responsible for the conduct of the foreign national during their stay in India and also for the departure of such foreign national upon expiry of visa.
  • In case the project/contract site falls in the Protected/Restricted Area, the grant of PAP/RAP should be integrated with the grant of Project Visa. In all such cases, prior clearance of the Ministry of Home Affairs shall be obtained.
  • The foreigner coming on Project Visa will have to register themselves with the FRRO/FRO concerned within 14 days of arrival if the validity of visa is for more than 180 days. If the validity of visa is for a period of 180 days or less, registration would not be required.

Intern Visa

  • Intern visa is granted to a foreigner who intends to pursue internship in Indian companies, educational institutions and NGO’s.
  • Only graduates/postgraduates may be granted the said visa and that too only if the gap between completion of graduation/post-graduation and commencement of internship is 2 year or less.
  • The intern should draw a minimum remuneration of INR0.78 million per annum. This condition shall not be applicable in case of internship with an educational institution and NGOs.
  • Intern visa may be granted for a maximum period of 1 year and is not extendable.

Provide a general process overview to obtain a work and residence permit for long- term assignments (including processing times and maximum validation of the permit).

  • Document gathering (8-10 days)
  • Book visa appointment at the Indian embassy/consulate at the place of residence (1 day)
  • Prepare Visa application (1 days)
  • File Visa application with the Indian embassy/consulate at the place of residence (10-12 business days) in some circumstances the processing times at the embassy/consulate can take several weeks
  • Obtain Visa and travel to India (1 day)
  • Register with the Foreigner Regional Registration office (FRRO) within 14 days of their arrival in India (5 -7 days)
  • Once all the documents are ready, we need to file the online FRRO registration and need to upload all the documents related to FRRO registration in the E-FRRO portal.
  • Once the application is approved by the FRRO office then the delegate will receive the Residential Permit on is register email.

The Employment visa may be extended by the FRRO/FRO concerned beyond the initial visa validity period, up to a total period of 10 years from the date of issue of the initial Employment Visa, on a year to year basis.

Is there a minimum salary requirement to obtain a long-term work and residence permit for assignments? Can allowances be taken into account for the salary?

The salary threshold limit of INR1.625 million per annum will be worked out by taking into account the salary and all other allowances paid to the foreign national in cash and also perquisites like rent free accommodation etc. which are included in the salary for the purpose of calculating income tax. Such perquisites should be quantified and indicated in the Employment Contract.

Is there a fast-track process which could expedite the visa/work permit?

No currently there is no fast track option for India. In the case of urgent request, the Indian Missions/Posts may provide visa for business travel within 48 hours of application.

At what stage is the employee permitted to start working when applying for a long-term work and residence permit (assignees/local hire)?

The employee is permitted to start working, once they obtained a valid Employment Visa after arriving in India.

Can a short-term permit/business visa be transferred to a long-term permit in India?

Technically it would be possible to extend the short-term permit (employment visa)/up to 10 years in India subject to fulfilment of certain conditions. It may be noted that Business Visa cannot be converted into Employment Visa.

Is it possible to renew work and residence permits?

Yes, it is possible to renew the India work visa and Residential Permit in India subject to fulfilment of certain conditions

Is there a quota or system or a labor market test in place?

India does not have a quota system.

General Immigration Related Questions

Would it be possible to bring family members to India?

Dependents are allowed to join the main applicant, According to Indian immigration law, spouses (marriage certificate required) and/or children under 18 years (birth certificates required) are considered as dependents. Any dependent staying for above 14 days other than a child below the age of 12 years needs to get themselves registered with the FRRO.

Is it possible to obtain a permanent residence permit?

No.

What if circumstances change after the Work and Residence application process (e.g. change of employment or personal situation, including job title, job role or salary)?

Change in job title, job role or salary is allowed, and no intimation is required to be made to any authority.

For personal situation, we will have to review case by case basis.

No change of employer shall be permitted during the currency of the Employment Visa, except in cases of change of employment between a registered holding company, Joint Ventures & Consortiums and its subsidiaries and vice-versa or between subsidiaries of a registered holding company, Joint Ventures & Consortiums. Change of employment would be permitted at a senior level e.g. managerial or a senior executive position and/or at a skilled position e.g. a technical expert. Prior permission of the Ministry of Home Affairs is required for change of employment.

How long can a permit holder leave India without their permit becoming invalid?

If at any time a foreigner who is required to register proposes to be absent from their registered address for a continuous period of 8 weeks or more; or is changing the registered address; or is finally departing from India, they shall, before leaving, inform in person, or through an authorized representative, or by registered post to the jurisdictional Registration Officer of their intention to leave, either temporarily or permanently.

Must immigration permissions be cancelled by the end of the assignment/employment?

Delegate needs to surrender their Residential Permit at FRRO or the same can also be done at the Airport immigration checkpoint at the time of their final departure from India.

Are there any penalties for individuals and/or companies in place for non-compliance with immigration law?

Yes, there is penalty but that depends on case to case.

Other Important Items

List any other important items to note, or common obstacles faced, in India when it comes to the immigration processes.

1. Prior reference category countries/jurisdictions may need more time in processing visa application

2. An individual need to carry travel documents such as passport, visa, etc.at the time of travelling abroad

3. Timely compliances are required.

4. Unmarried partner can only come on Tourist visa.

Do the immigration authorities in India provide information to the local taxation authorities regarding when a person enters or leaves India?

There is no formal system under which immigration authorities in India provide information to local taxation authorities. However, recently tax authorities have started requesting such details from the immigration authorities on a regular basis.

Further, since local taxation authorities and immigration authorities are moving towards online process, same may be integrated in due course of time.

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It may be noted that due to COVID-19 pandemic, respective authorities (Taxation / social security / immigration) may provide relaxations and extensions in the statutory requirements from time to time.

Disclaimer

All information contained in this publication is summarized by KPMG (Registered), the Indian member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on:

  • the Income-tax Act, 1961, (‘the Act’) as amended;
  • the Income-tax Rules, 1962 (‘the Rules’) as amended;
  • the Employees Provident Fund and Miscellaneous Provisions Act, 1952 as amended (‘the PF Act’);
  • the Employees’ Provident Funds Scheme, 1952 (“the PF Scheme”) as amended;
  • the Employees’ Pension Scheme, 1995 (“the Pension Scheme”) as amended;
  • the Employees’ Deposit Linked Insurance Scheme, 1976 (“the EDLIS”) as amended;
  • the Employees’ Pension (Third Amendment) Scheme, 2008;
  • the Employees’ Provident Fund (Third Amendment) Scheme, 2008;
  • the rules and regulations there under the above laws and various other laws and regulations

as amended from time to time, including judicial and administrative interpretations thereof, which are subject to change or modification by subsequent legislative, regulatory, administrative or judicial decisions. Any such change, which could also be retroactive, could have an effect on the validity of our comments. Our views are not binding on any authority or court, and so, no assurance is given that a position contrary to that expressed herein will not be asserted by any authority and ultimately sustained by an appellate authority or a court of law.

Copyright

© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

Immigration

Following is an overview of the concept of Greece’s immigration system for skilled labor.

(E.g. which steps are required, authorities involved, in-country/jurisdiction and foreign consular processes, review/draft flow chart illustrating the process)

This summary provides basic information regarding business visits to, and work authorization for, Greece. The information is of a general nature and should not be relied upon as legal advice.

Entry and residence into Greece rules depend on the nationality of the skilled personnel as follows:

a) EU and EEA nationals and

b) third country/jurisdiction nationals.

In accordance with EU rules, EU citizens have the right of freedom of movement, which entails the abolition of any discrimination based on nationality between workers of the Member States and, consequently, their free access to the Greek employment market. In this regard, no visa or residence permit is required for an EU national to enter and work in Greece; In case however their stay/employment in Greece is to exceed 3 months they should be registered with the Greek immigration authorities on the basis of a very simple procedure. Such registration can take place at any time and no penalties are provided for late filing. The same rules apply to EEA nationals.

Regarding third country/jurisdiction nationals, a distinction is made between business visitors and nationals to enter/work in Greece.

Business visitors are distinguished between:

a) Visa Nationals, who must apply for a Business Schengen visa in order to enter Greece for business purposes (such application is filed with the competent Greek Consulate, i.e. the Consulate in the country/jurisdiction of the business visitor’s residence, or in case of more than one Consulates in the same country/jurisdiction, the one being competent for the area where the business visitor resides) and

b) Non-Visa Nationals, who can enter Greece without the need to apply for an entry visa (the list of Non-Visa Nationals includes indicatively nationals from USA, UK, Canada, Australia, Brazil, UAE, Israel, South Korea etc.) on the basis of the Schengen rules.

Third country/jurisdiction nationals to enter/work in Greece must obtain an entry permit (national visa type D) to initially enter Greece and, following their entry, they must apply for a residence permit incorporating the right to work. Greek immigration legislation provides for different types of national visas/residence permits depending on different factors (for instance, type of activities to be carried out locally by the third country/jurisdiction nationals, position of the third country/jurisdiction nationals, shareholding structure/business activities of the employer etc.) with the procedure and processing time depending on the type of residence permit to be issued. Similarly to the Schengen visa, national visas are also issued by the competent Greek Consulate (i.e. the Consulate in the country/jurisdiction of the applicant’s residence, or in case of more than one Consulates in the same country/jurisdiction, the one being competent for the area where the applicant resides), whereas the local authority to issue the residence permit depends on the type of permit to be issued. For all visas/residence permits, third country/jurisdiction nationals must coordinate with their employer to have all documents (corporate and personal) required prepared. Third country/jurisdiction nationals can only start working in Greece as of the filing of the related residence application and the issuance of a related Certificate evidencing such filing (the so-called “Blue Certificate“).

International Business Travel/Short-Term Assignments

Describe (a) which nationalities may enter Greece as non-visa national, (b) which activities they may perform and (c) the maximum length of stay.

Non-visa nationals are allowed to stay in Greece as tourists or business visitors on the basis of their valid passports for up to 90 days within any 180-day period.

In Greece, business visitors are generally prohibited from engaging in productive employment activities which qualify as an extension of professional activities. The list of activities they can be engaged in, include indicatively, attending meetings and negotiations, attending internal business meetings or discussions, attending or holding internal seminars or trainings, attending or participating in trade shows and expositions etc.

The following mode of calculation will apply: A traveler is required to count back 179 days from the current day of stay. The current day of stay counts as the 180th day. Within this time frame the days of stay in all Schengen member states must not exceed 90 days. Days of stay spent in the issuing Schengen member state (in this case: Greece) on the basis of a national visa or national residence permit do not count against the 90 days limitation.

The short-stay calculator on the following website can be used for calculating the period of allowed stay under the Schengen rules:

http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/borders-and-visas/border- crossing/index_en.htm

In addition to Greece, the following countries/jurisdictions are considered as Schengen member states: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.

Finally, Greek immigration legislation does not make a distinction between short term and long-term assignments (for the treatment of assignments for immigration law purposes, please refer to the section below under Long-Term Assignments).

Describe (a) the regulatory framework for business traveler being visa nationals (especially the applicable visa type), (b) which activities they may perform under this visa type and the (c) maximum length of stay.

Business travelers who are visa nationals must obtain a Schengen (C) visa to be able to enter Greece for business visitor purposes. The Schengen Visa is normally issued for multiple entries. Although circumstances may vary, a business visitor may receive authorization to visit Greece for up to 90 days within any 180-day period.

Schengen Visas are generally not eligible for in-country/jurisdiction extension, however in exceptional cases an extension could be possible.

The Schengen Visa application (along with the supporting documents) must be filed with the Greek Consulate in the country/jurisdiction of the applicant’s residence (or in case of more than one Consulates in the same country/jurisdiction, with the Consulate being competent over the area where the applicant resides).

With regards to the permitted activities and permitted duration of stay please see answers to question 2.

Outline the process for obtaining the visa type(s) named above and describe (a) the required documents (including any legalization or translation requirements), (b) process steps, (c) processing time and (d) location of application.

1. Document gathering (1-2 weeks)

2. Book visa appointment at the Greek Consulate (1 day)

3. Prepare Visa application (1-2 days)

4. File visa application with the Greek Consulate (the exact timeframe depends on the Consulate’s workload, but usually ranges from 5-10 business days)

5. Obtain visa and travel to Greece (1 day)

GENERAL REQUIREMENTS FOR BUSINESS VISITORS

Documents needs to be provided either in Greek or in English:

  • Visa application;
  • Valid passport;
  • Two recently taken photos (meeting Schengen visa requirements)
  • Established purpose for the visit (i.e. Letter of Invitation (LOI) from the Greek company);
  • Proof of return or onward travel;
  • Proof of accommodation while in Greece;
  • Proof of financial means;
  • Proof of health insurance coverage while travelling and staying in Greece, valid for all Schengen member states with a minimum coverage of EUR30,000;
  • Proof of paid visa fees.

The above are the standard documents requested by the Greek Consulates but, depending on the facts of each case, additional documents can be requested.

Are there any visa waiver programs or specific visa categories for technical support staff on short-term assignments?

Greek immigration legislation provides for certain professional activities that can be carried out locally in Greece without the need to obtain a residence permit prior to commencing work. The two major exemptions in this regard apply to:

a. Employees of EU/EEA companies moving to Greece to provide certain services (including technical support services) within the context of a contractual obligation between the EU/EEA company and the Greek company. In such a case, the visa’s duration is equal to the time required for the execution of the above obligation undertaken by the EU/EEA company and cannot exceed 1 year.

b. Expert technical personnel of a third country/jurisdiction company which has concluded a supply agreement with a Greek company (including services related exclusively to the installation, testing and maintenance of the supplied goods). In such a case the visa’s duration is equal to the time required for the execution of the above obligation undertaken by the third country/jurisdiction company and cannot exceed 6 months.

Long-Term Assignments

What are the main work permit categories for long-term assignments to Greece? In this context outline whether a local employment contract is required for the specific permit type.

ICT residence permit in accordance with ICT Directive (Directive 2014/66/EU) (local employment contract is not required)

The ICT residence permit (Intra-Corporate Transfer) is a temporary residence permit for executives/managers, experts/specialists or trainees employed by a company registered in a third country/jurisdiction (Home Country/Jurisdiction Employer) transferred to a Greek company (Host Country/Jurisdiction Employer) belonging to the same Group of Companies.

Τhe Intra-Corporate transfer to Greece (including any mobility between EU Member States) may only last up to 3 years for executives/managers and experts/specialists and 1 year for trainees.

Holders of an ICT residence permit in Greece are allowed to temporarily work in other companies of the Group located in other EU member states, if the majority of the total stay is in Greece. Should the majority of the stay be in another EU member state, an ICT residence permit needs to be applied for in that state.

The conditions for the issuance of an ICT residence permit in Greece are summarized as follows:

  • The applicant must be transferred by a company registered in a third country/jurisdiction (Home Country/Jurisdiction Employer) to a Greek company (Host Country/Jurisdiction Employer) belonging to the same Group of Companies to work as a manager/executive, expert/specialist or trainee.
  • The applicant’s term of service with the Home Country/Jurisdiction Employer must be 12 consecutive months before the transfer for managers/executives and experts/specialists and 6 consecutive months for trainees.
  • The intra-corporate transfer to Greece must exceed 90 days.
  • Prior to the entry to Greece, the applicant must have obtained a national entry permit (visa type D) on the same grounds.
  • Certain documents must be filed (i.e. Proof of professional qualifications, valid employment contract (with a minimum level of salary which must be at least equal to the one paid to local employees working at similar position) and, if necessary, an assignment letter).
  • The applicant must be insured locally unless they can be exempted on the basis of a bilateral social security agreement.

Mobility to Greece from another Member State (local employment contract is not required)

Third country/jurisdiction nationals who are already in possession of a residence permit under the ICT Directive issued by another Member State may enter and stay in Greece and work for a Greek company belonging to the same Group of companies without the need to obtain a local residence permit. The above applies irrespective of the duration of the stay in Greece,

i.e. short-term mobility (for up to 90 days within any 180 days period) or long-term mobility (exceeding 90 days).

Requirements and Procedure

  • The Greek company and the company established in the Member State which has issued the ICT residence permit (Host Country/Jurisdiction Employer) belong to the same Group of companies.
  • The Host Country/Jurisdiction Employer notifies the Greek Ministry of Immigration of the intention of the assignee to work in Greece. For this purpose, a related notification (together with copies of the ICT residence permit issued, the applicant’s valid passport, the employment agreement and assignment letter filed with the Host Country/Jurisdiction Employer’s authorities) must be sent to the Greek Ministry of Immigration at the latest 20 days before the applicant moves to Greece. The documents must be filed in Greek and provide for the period of stay in Greece.
  • The Greek Ministry of Immigration reviews the documents filed to assess whether the applicable conditions are met (especially regarding the level of salary, the validity of documents, the duration of stay and public order/safety and health reasons).
  • The Greek Ministry of Immigration informs the Host Country/Jurisdiction Employer and the Host Country/Jurisdiction Employer’s authorities of possible rejection to the mobility within 20 days from the receipt of the Host Country/Jurisdiction Employer’s notification. Failure to reply within the above period qualifies as consent to the mobility.
  • The Greek Ministry of Immigration notifies the competent department of the Ministry of Employment of the consent or rejection to the mobility.

Executives (Managers and General Managers) of Greek companies/branches of foreign interests (local employment agreement is required)

The residence permit is a viable option for assignments if a Greek employment contract can be given to the assignee. Under certain conditions, a third country/jurisdiction national can apply for the above residence permit if they are employed (by virtue of a local agreement) as a Manager or General Manager by a Greek company/branch established by a foreign entity.

The issuance of visa and residence permit under this scenario involves the filing of various documents with both the Greek Consulate (for the visa) and the Greek Ministry of Immigration (for the residence permit), including indicatively a local employment agreement (for a managerial position and with a minimum salary of EUR1,500 gross), corporate documents of the Greek employer, list of the Greek employer’s personnel as filed with the local employment authorities, official proof that the Greek employer is of foreign interests (i.e. established by a foreign entity), proof of insurance in Greece etc.

This residence permit is valid for 2 years subject to renewal.

EU Blue Card for employees of high expertise (a local employment contract is required)

The EU Blue Card can be a viable option for assignments if a Greek employment contract can be given to the assignees. The maximum number of positions to be filled in by third country/jurisdiction nationals is determined by a Ministerial Decision issued during the last quarter of every second year and published in the Official Government Gazette. The number of positions is determined following negotiations between local employers, the District and the Unemployment Office depending on various factors (such as the national economy interest, the availability of Greek personnel to fill in the related positions, unemployment rates etc.).

A third country/jurisdiction national holding a valid passport (with a duration at least equal to the initial duration of the residence permit) can apply for the EU Blue Card if the following conditions are met:

  • They have concluded a valid employment agreement for the provision of highly expert services with a duration of at least 1 year with a gross annual salary of EUR31,016.64 (applying as of 2016, but could change shortly).
  • They prove the high qualifications required (as certified by University degree, or in case permitted by the applicable legislation, by at least 5 years of professional experience of a level equal to the University degree etc.) or in case of regularized profession, they prove that they meet the conditions required.
  • They are insured for all risks covered for Greek nationals.
  • No risks to the public order/safety and health arise.

The EU Blue Card is valid for 2 years subject to renewal. If the duration of the employment contract is less than 2 years, the duration of the EU Blue Card will be equal to the employment agreement’s duration increased by 3 months.

Digital Nomads visa

The “digital nomad” concept was very recently introduced in Greece, defined as the third country national (self employed, freelancer or employee) working remotely with the use of Information and Communication Technologies for employers or clients outside Greece.

Digital nomads working as above in Greece for a period of up to 12 months fall within the category of third country nationals who can work in Greece on the basis of a national visa with a duration exceeding 90 days. Further, digital nomads can be accompanied in Greece by members of their family to whom, following their application, a separate visa is issued to expire simultaneously with the digital nomad’s visa and which does not entitle them to take up employment or any financial activity in Greece. The documents to be filed with the competent Consulate, which must reply within 10 days to the applicant’s request and complete the procedure for the issuance of the visa in “one stop”, include - in addition to the general documents for the issuance of national visas- indicatively, a statutory declaration of the applicant on his intention to reside in Greece on the basis of the national visa for the provision of remote work and on his commitment not to provide services or employment by any means to an employer registered in Greece, employment or project agreement with an employer outside Greece, supporting documents to prove that he has sufficient financial means to live in Greece etc.

As long as the conditions for the issuance of national visa continue to be met and before the latter’s expiry, the digital nomad and the members of his family can be provided with a residence permit of two years duration, subject to further renewal every two years provided that the renewal conditions are met. By exception to the general provisions, third country nationals and the members of their family that meet the conditions set and have entered Greece either on the basis of a visa C or released from any visa obligation can apply for a residence permit during the period of validity of the visa C (or the release from the visa obligation). In this case however and in addition to the remaining documents provided, the applicants must file with the competent authorities a lease or purchase of real estate in Greece agreement.Absences from Greece do not impede the renewal of the residence permit provided that they do not exceed 6 months on an annual basis.

Provide a general process overview to obtain a work and residence permit for long- term assignments (including processing times and maximum validation of the permit).

1. Document gathering (the exact timeframe depends on how quickly the required documentation is prepared by the parties involved)

2. Book visa appointment with the Greek consulate (1 day)

3. Prepare Visa application (1-2 days)

File Visa application with the Greek consulate (the exact timeframe depends on the Consulate’s workload but usually is approximately 10 business days)

4. Obtain Visa and travel to Germany (1 day)

5. Book appointment with Immigration authorities and file application for residence permit (the exact timeframe depends on the workload of the authorities. Booking an appointment is not always possible)

6. Visiting the authorities to file the residence permit application (and supporting documentation) and to provide biometric data.

7. Issuance of a Certificate evidencing filing of the residence permit application and supporting documentation (Blue Certificate).

The above action plan is based on the assumption that any special conditions for the issuance of the residence permit are met (for instance, in case of EU Blue Card, compliance with the maximum number of positions to be filled in requirement).

The exact timeframe for the issuance of the residence permit itself cannot be estimated in advance as it depends on the workload of the authorities. As of the issuance of the Blue Certificate, the third country/jurisdiction nationals can start working in Greece.

The general processing time highly depends on the permit type, the authorities involved in the process and the place of filing the application. In general, the process can take anywhere from 6 months to over 1 year, from the day of filing of the related application with the immigration authorities.

Depending on the residence permit type, the period of validity ranges from 1 – 2 years subject to renewal.

Is there a minimum salary requirement to obtain a long-term work and residence permit for assignments? Can allowances be taken into account for the salary?

In general, the assignee’s salary should be at least equal to a comparable Greek local employee of the Greek company to which the assignee is assigned/transferred. There is no explicit guidance by the Greek authorities as to whether the allowances are taken into account for the salary, but given that in accordance with Greek employment law and jurisprudence, allowances could normally be restricted or reduced at the discretion of the paying employer, it is advisable that the salary per se (i.e. excluding any allowances) meets the above minimum requirements to avoid arguments on the part of the Greek authorities.

Certain residence permits types (for local hires) require a specific minimum salary. The monthly gross salary of executives of Greek companies/branches of foreign interest cannot be less than EUR1,500 (payable 14 times per year in accordance with Greek employment legislation as currently in force), whereas the annual gross salary of EU Blue Card applicants should not be less than EUR31,016.64 (applying as of 2016, but could change shortly).

Is there a fast-track process which could expedite the visa/ work permit?

In general, there is no formal fast –track process, but under certain circumstances and based on the authorities’ discretion, the procedure could be (unofficially) expedited.

At what stage is the employee permitted to start working when applying for a long-term work and residence permit (assignees/ local hire)?

The employee can start working as of the filing of the residence permit application (together with all supporting documents which depend on the type of residence permit to be issued) and the issuance of the Certificate evidencing filing (“Blue Certificate”).

Can a short-term permit/ business visa be transferred to a long-term permit in Greece?

Such option is not available in Greece.

Is it possible to renew work and residence permits?

In Greece, the residence and work permit are incorporated in the same document (residence permit incorporating the right to work). Renewal of residence permits is possible provided that the related renewal conditions are met and takes place locally (i.e. no need for the applicant to leave Greece).

Is there a quota or system or a labor market test in place?

For certain residence permits (dependent employment, EU Blue Card), the maximum number of positions (per District and specialization) to be filled in by third country/jurisdiction workers/employees is determined in a Ministerial Decision issued during the last quarter of every second year and published in the Official Government Gazette. The number of positions is determined following negotiations between local employers, the District and the Unemployment Office depending on various factors (such as the national economy interest, the availability of Greek personnel to fill in the related positions, unemployment rates etc.).

General Immigration Related Questions

Would it be possible to bring family members to Greece?

Third country/jurisdiction nationals legally residing in Greece for a period of 2 years can request the entry and stay in Greece of their family members. In case of certain residence permits (for instance, residence permits of executives of Greek companies/branches of foreign interests, EU Blue Card, ICT residence permits), the family members can file for a related residence permit together with the main applicant (i.e. no need for prior legal stay of the main applicant for a period of 2 years).

Is it possible to obtain a permanent residence permit?

Generally, one would be eligible to apply for a permanent residence permit as long as the following conditions are met:

a) Legal stay (i.e. on the basis of a residence permit) in Greece for an interrupted period of 5 years;

b) Proof of sufficient personal financial means for both the applicant and members of their family, if any (not lower than the annual remuneration of personnel collecting the minimum salary as in force from time to time, increased by 10 percent for all family members);

c) Full insurance coverage;

d) Compliance with the conditions for accession to the Greek society (for instance, sufficient knowledge of Greek language etc.).

What if circumstances change after the Work and Residence application process (e.g. change of employment or personal situation, including job title, job role or salary)?

In accordance with immigration legislation, any circumstances’ change during the period of validity of the residence permit must be notified personally by the residence permit holder. Although not required by law, it is advisable that the employer also notifies the authorities in case of termination of the employment agreement with the residence permit holder/applicant.

How long can a permit holder leave Greece without their permit becoming invalid?

Any extended absences from Greece may affect future Long-Term Residency and Citizenship applications. Regarding the remaining types of residence permits, the applicable legislation does not provide the absence of the residence permit holder as a reason of invalidity of the residence permit issued, but periods of absence exceeding 6 months might affect the renewal procedure

Must immigration permissions be cancelled by the end of the assignment/employment?

The immigration authorities should be informed accordingly in case of end of assignment/employment before the expiry of the residence permit issued.

Are there any penalties for individuals and/or companies in place for non-compliance with immigration law?

Employment of third country/jurisdiction nationals illegally residing in Greece is prohibited. Infringement of the above restrictions entails the following (for the company):

a) Monetary penalty of EUR5,000 per illegally employed employee (which can be increased in case of repeated infringement);

b) Administrative sanctions (such as exclusion of the employer from subsidies or aids for a period up to 5 years, exclusion of the employer from public tenders for a period of up to 5 years, temporary or permanent cessation of business activities);

c) Criminal sanctions, i.e.

  • imprisonment of at least 5 months in case of (a) continuous or systematic intentional employment of third country/jurisdiction nationals illegally residing in Greece, (b) intentional simultaneous employment of a significant number of third country/jurisdiction nationals illegally residing in Greece, (c) intentional employment of third country/jurisdiction nationals illegally residing in Greece under significantly abusive terms.
  • imprisonment of at least 6 months in case of employment of minors illegally residing in Greece.

Employment of third country/jurisdiction nationals who have obtained visas/residence permits which do not grant the right to work is also prohibited. Failure of the employer to comply with the above restriction entails a monetary penalty of EUR1,500 per employee. It should be noted that more severe penalties/sanctions are provided in certain cases (such as human trafficking etc.).

Regarding the individuals, non-compliance with immigration legislation could give rise to monetary penalties (for instance, penalties for non-filing/late filing of notifications in case of change of personal circumstances are imposed on the residence permit holders/applicants themselves range from EUR50 to EUR100 per infringement). An illegal worker will initially be deported. Thereafter, it is highly likely that any future application would be rejected.

Other Important Items

List any other important items to note, or common obstacles faced, in Greece when it comes to the immigration processes.

  • Salary in renewal cases – it is of high importance that the salary indicated in the first application has been paid during the entire period of the assignment.
  • The salary must comply with the minimum Greek salary requirements or special requirements provided directly by the applicable legislation for certain types of residence permits
  • Degree and other professional qualifications verification
  • Apostilles/Legalization/ Verification process
  • Translations – certain documents would require a Greek translation
  • Inconsistencies in documentation – for example if there is a discrepancy in the name of the applicant as shown on their passport, degree or marriage certificates, the authorities may require further supporting documentation.
  • Workload of Greek immigration authorities – such workload in practice delays significantly the issuance of the residence permit (although the applicable legislation provides for a certain timeframe for the issuance of certain types of residence permits, this timeframe is not complied with).
  • Limited possibilities to confirm in advance with the authorities involved the processes to be followed.

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Disclaimer

All information contained in this publication is summarized by KPMG Advisors Single Member S.A., a Greek Societe Anonyme and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International limited, a private English company limited by guarantee, based on the Greek income tax laws 2859/2000, 2961/2001, 3091/2002, the Greek Income Tax Code 4172/2013 and subsequent amendments, the Greek Tax Procedure Code 4174/2013 and subsequent amendments, 4223/2013, 4251/2014, 4254/2014, 4307/2014, 4308/2014, 4312/2014, 4313/2014 and 4316/2014, 4330/2015, 4334/2015, 4337/2015, 4354/2015, 4387/2016, 4389/2016, 4438/2016, 4446/2016, 4447/2016, 4484/2017, 4490/2017, 4579/2018, 4583/2018, 4571/2018, 4549/2018, 4512/2018, 4646/2019, 4714/2020, 4670/2020, 4756/2020, 4799/2021, 4825/2021 the website of the Independent Authority for Public Revenues (IAPR) in Greece.