Taxation on Expatriates

• The opening up of the Indian economy and its globalization has resulted in far reaching changes. Due to same, working people from one state have been on the move to other states by taking employment. Income from Employment has also been the most significant component of income derived from personal services in international taxation perspective. The term ‘Expatriate’ is derived from Latin (ex-patria) which means “out of the country”. The Oxford Dictionary defines an expatriate as ‘a person who lives outside their native country’. There is no specific definition of expatriate as per the Income Tax Act 1961. As per general meaning, a person living in a country other than his or her country or citizenship, often temporarily and for work reasons, it is called expatriate.
• In India, for the taxation of expatriates, the residential status has to be determined as per Section 6 of the Income Tax Act as well as the Double Taxation Avoidance Agreement.

(i)  a person is said to be resident if he/she is present in India for:

(a)   182 days or more in relevant financial year or

(b) 60 days in relevant financial year and total 365 days in Four preceding financial years

Further, a person is said to be non-resident if he /she does not satisfy both of the above conditions.

(ii) A resident person is said to be resident and ordinary resident (ROR) if he/she  shall satisfy following both conditions:

(a) he/she is resident in at least two years out of ten preceding financial years

(b) he/she present in India for total 730 days in seven preceding financial years

Further, a resident person is said to be resident but not ordinary resident (RNOR) if he /she does not satisfy any of the both above conditions.

MBG Corporate Services can assist on “Expatriate Taxation” in following ways:

• Help to improve awareness of tax compliance. 
• Identify possible risks and hidden tax exposures.
• Providing recommendations to mitigate the tax risks.

In specific, the scope of services provided by us shall include the following:

• Registration of Expatriate with Foreigner Regional Registration Office (FRRO) on arrival into India.
• Drafting of Employment Agreement between Expatriate and Indian Employer.
• Drafting of Secondment / Dispatch Agreement between Foreign Company and Indian Employer.
• Applying Permanent Account Number (PAN) of expatriate.
• Computation of taxable income and calculation of average monthly income tax amount to be withheld from salary payments for deposit with Government Treasury.
• Co-ordination with Expatriate for compilation of information of global income and foreign assets detail for disclosure in income tax return.
• Preparation of Annual Salary Certificate for salary paid and income tax deposited for issuance to Expatriate.
• Preparation and filing of personal income tax return of Expatriate with Income Tax Authorities.
• Surrender of residential permit and obtaining Exit Visa from the office of FRRO at the time of departure of expatriate from India for good.
• Obtaining No Objection Certificate (NOC) from Income Tax Authorities at the time of departure of expatriate from India for good.