The Basics of Expatriate Taxation

Comprehensive Solutions for Complex Matters 1

Index
 Meaning of ‘Expatriate Taxation’
 Types of Visa
 Employment Visa
 FRRO Registration
 Article 15 of Double Taxation Avoidance Agreement (DTAA) between India and Japan
 Section 6 - Residential Status
 Section 5 - Scope of Income
 Taxable Components under the head Salary
 Compliances to be followed by an Expatriate and an Employer
 ASC Services under ‘Expatriate Taxation’

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Meaning of ‘Expatriate Taxation’

Meaning of Expatriate ?
An expatriate is a person temporarily residing and employed in another country while still remaining
citizen of his/her home country.
Example: A Foreign national (Japanese person) comes to India for employment purpose for some
period of time is called as Expatriate.

Meaning of Expatriate Taxation ?

The Taxation of income earned by an expatriate is called as Expatriate Taxation.

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Types of Visa

What are the Types of Visa ?

There are various types of visa through which a foreign national can visit India according to their
purposes of visit. Some are explained as under:

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Types of Visa
 Student Visa :
A Student visa is granted to a foreigner whose sole objective is to pursue on-campus, full time
(structured) courses at educational institutions duly recognized by statutory regulatory body and
have acquired statutory authorization to conduct the course(s). The foreigner should produce proof
of admission to a full -time course in a recognized educational institution in India.

 Medical Visa :
A medical visa (MED Visa) is granted to a foreigner whose sole purpose is to seek medical treatment
in established/recognized/specialized hospitals/treatment centres in India.

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Types of Visa
 Research Visa :
A Research Visa is issued to a foreign research scholar for a period of 3 years or for the duration of
the research project, whichever is earlier. The validity of visa can be extended as required by
Institute of Affiliation.

 Business Visa :
A Business visa is granted to a foreigner for the following purposes –
 To establish an industrial / business venture or explore new avenues to set up any business
 To purchase / sell commercial products
 To provide consultation regarding exhibitions, trade fairs, business fairs
 To attend technical meetings, provide business services support etc.

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Types of Visa
 Project Visa :
Project visa is granted to foreign nationals coming to India for execution of projects for limited
period in the power and steel sectors subject to some conditions. Under no circumstance, the person
would be allowed to engage on other projects.

 Tourist Visa:
A Tourist visa is granted to a foreigner whose sole objective of visiting India is recreation,
sightseeing, casual visit to meet friends or relatives, attending a short-term yoga program, short
duration medical treatment including treatment under Indian systems of medicine etc.

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Types of Visa

 Employment Visa:
Employment visa is granted to foreign nationals coming to India for employment purpose.
(Will explain in detail in next slide)

 Other Visa :
Film Visa, Transit Visa, Entry Visa, Conference Visa, Sports Visa, Mountaineering Visa, Journalist
Visa, Missionary Visa, intern visa, X-Visa, etc

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Employment Visa (E-Visa)
A) Eligibility :
An Employment visa is granted to a foreigner who is a highly skilled and/or qualified professional
and comes to India for employment purpose.

Who is eligible for obtaining Employment Visa :

 Consultant on contract for whom the Indian company pays a fixed remuneration (this may not be
in the form of a monthly salary).
 Artist engaged to conduct regular performances for the duration of the employment contract
given by Hotels, clubs etc.
 Coaches of national / state level teams or reputed sports clubs to taken up employment.

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Employment Visa (E-Visa)
 Self-employed people for providing engineering, medical, accounting, legal or such other
highly skilled services in their capacity as independent consultants.
 Language teachers/ interpreters.
 People deputed for providing technical support/services, transfer of know-how/services for
which the Indian company pays fees/royalty to the foreign company.
 Chefs, Circus Artist, Journalist, etc.

(B) To whom Employment Visa shall not be granted ?

 For jobs for which qualified Indians are available;
 For routine, ordinary or secretarial/clerical jobs;
 To a citizen of Pakistan.

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Employment Visa (E-Visa)
(C) Is there any limit on gross salary drawn by foreign nationals ?
Foreign nationals should draw a gross salary of minimum USD 25,000 per annum (equivalent to
approx. INR 16.25 lakhs per annum) in any sector (including BPO/ITES). This limit includes salary,
all allowances and perquisites like rent free accommodation etc. which are included in salary for the
purpose of income tax.

In respect of foreign nationals engaged as teaching faculty at the level of Assistant Professors and
above by the Central Higher Educational Institutions viz. IITs, IIMs, Central Universities (CUs),
National Institutes of Technology (NITs) and Indian Institutes of Science Education and Research
(IISERs), the minimum salary limit will be INR 9.10 lakhs per annum.

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Employment Visa (E-Visa)
(D) Is there any exemptions of above said limit ?
The limit of minimum salary will not apply to:
 Ethnic cooks employed by foreign Missions in India;
 Language translators/teachers (this will not include teachers employed to teach particular subjects
in foreign language);
 Staff working for the concerned Embassy/ High Commission in India;
 Foreigners, eligible for E-visa for honorary work with the NGOs registered in the country without
salary;
 Foreign teaching faculty employed in the South Asian University and the Nalanda University, and
 Circus artists.

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Employment Visa (E-Visa)
(E) Duration of Employment Visa
The duration of foreign national to stay in India ranges between 2-5 years or date of their agreement whichever
is less, depending on their category of employment.

(F) Extension of validity of visa

The Employment visa may be extended by the FRRO / FRO concerned beyond the initial visa validity period, up
to a total period of 5 years from the date of issue of initial E-Visa, on year to year basis.

(G) Change of Employer

 No change in employment is allowed on E-Visa except relation of holding, subsidiary, joint ventures exist.
 Any change of employment would be permitted at a senior level e.g. managerial or a senior executive position.
 Prior permission of the Ministry of Home Affairs is required for change of employment in India.

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FRRO Registration

 Registration of Foreigners :
 All foreigners visiting India on long term Student Visa, Medical Visa, Research Visa, Employment
Visa, Missionary Visa and Project Visa are required to get themselves registered with Foreigners
Regional Registration Officer (FRRO)/ Foreigners Registration Officer (FRO) concerned
having jurisdiction over the place where the foreigner intends to stay.
 It is mandatory for foreign national to get registration from FRRO within their time limit depending
on their stay of days in India.
 There is online portal i.e. https://indianfrro.gov.in/eservices/home.jsp which provides mechanism
for foreigners to register themselves.

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FRRO Registration
Registration with FRRO depending on days of stay In India is depicted below:

Continuous stay 14 days of arrival

> 180 days

Less than 180 Not required
Non-continuous days
stay
Stays in India
More than 180 within 180 days
days arrival
< 180 days Not required

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FRRO Registration
For Pakistani nationals
 They are required to register within 24 hours of arrival (except in case of EPR (Exemption from
Police Reporting) Visa and on Medical Visa)
 In case of medical visa, registration would be done within 7 days of arrival.

 Residential Permit :
 Residential permit is issued at the time of registration valid uptill the period of stay specified in
visa.
 This is a kind of residential address proof of an expatriate in India which is acceptable for opening
bank account, applying PAN etc. It is very important document for an Expatriate.

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FRRO Registration
 An application for extension of the Residential Permit should be made in the prescribed form at
least two months before its expiry to the nearest Registration Officer along with an application for
the extension of visa.
(All such services of FRRO are governed by Bureau of Immigration)

 Stays in Hotels :
All foreigners who stay at hotels, guesthouses or places of such nature should furnish their details in
the hotel register, sign therein, and also furnish the required particulars at the time of departure. Hotel
has to submit such information to FRRO in Form-C.

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Article 15 of DTAA between India and Japan
Article 15 : Dependent Personal Services

Situation – 1
1. Remuneration derived by
- a resident of a Contracting State (Japan)
- in respect of an employment
- shall be taxable only in that Contracting State (Japan)
- unless the employment is exercised in the other Contracting State (India)

2. If the employment is so exercised, such remuneration as is derived there from may be taxed in that
other State (India).

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Article 15 of DTAA between India and Japan
Situation – 2
Notwithstanding the provisions stated in Situation 1, Remuneration derived by a resident of a Contracting State
(Japan) in respect of an employment exercised in the other Contracting State (India) shall be taxable only in the
first-mentioned Contracting State (Japan), if :
(a) the recipient is present in the other State (India) for a period or periods not exceeding in the aggregate 183
days in the relevant taxable year ; and
(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State (India); and
(c) the remuneration is not borne by a permanent establishment or a fixed base or a trade or business which the
employer has in the other State (India).

Thus, if all the aforesaid conditions are fulfilled, then only the income shall be taxable in Japan. However,
if any one condition is not fulfilled, then such income shall be taxable in India.

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Article 15 of DTAA between India and Japan
Conclusion

1. An Expatriate stationed in India for the period less than 183 days in one Financial Year is not liable to pay
income taxes in India. This position is applicable whether the expatriate is working as an employee of Foreign
Company or whether the expatriate is working in an independent capacity. This is however subject to the
condition that the salary is being paid by employer who is not a Resident in India and salary expenses are not
borne by any Permanent Establishment in India.
2. In case an Expatriate is deputed in India by the Foreign Company and such Expatriate is stationed in India for
a period exceeding 183 days in a one Financial Year then such Expatriate is liable to pay income tax due on the
salary income in India for the particular financial year as this salary is being paid in lieu of rendering services
in India and income taxes due on salary income has to be deposited to Indian Government treasury.

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Section 6 - Residential Status
 As per DTAA between India and Japan, if such income is taxable in India, then we have to refer the
provisions of local domestic tax laws of India to calculate tax i.e. Indian Income Tax Act, 1961.

 The income of Expatriates shall be chargeable to tax in India on the basis of two factors:
 Their Residential Status in India; and
 Nature of Income whether accrued and arise in India or outside India.

 Section 6 of Income Tax Act, 1961 deals with Residential Status.

 The residential status of an individual is determined according to the number of days an individual
is present in India in a fiscal year and further divided into three categories which has been
summarized diagrammatically as under:

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Section 6 - Residential Status

Residential Status

Resident Non-Resident (NR)

Not Ordinarily Resident

Ordinarily Resident (ROR) (RNOR)

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Section 6 - Residential Status
Resident
An Expatriate will qualify as a resident of India if he satisfies one of the following 2 basic conditions:
a) Stay in India for a year is 182 days or more; or
b) Stay in India for 60 days or more in the relevant financial year and 365 days in the immediately
preceding 4 financial years.

Non-Resident (NR)
An Expatriate, who doesn't satisfy any of the aforesaid Basic Conditions, will be deemed as Non-
Resident.

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Section 6 - Residential Status
Resident and Ordinarily Resident (ROR)
Once an Expatriate is qualified as Resident, then the next step is to determine that whether he/she is
ROR or RNOR. He/She will be a ROR if he/she meet the following additional conditions:
a) He/She has been resident in India (means fulfilling basic conditions) in at least 2 financial years
out of immediately preceding 10 financial years; and
b) He/She stayed in India for a period of 730 days or more during immediately preceding 7
financial years.

Resident and Not Ordinarily Resident (RNOR)

If an expatriate is unable to fulfil both additional conditions, he would be deemed as RNOR.

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Section 6 - Residential Status

Summary – Rule of Residence

(a) Resident and Not Ordinarily Resident (RNOR) - Must satisfy at least one of the Basic Conditions
and one or none of the Additional Conditions.

(b) Resident and Ordinarily Resident (ROR) - Must satisfy at least one of the Basic Conditions and
both Additional Conditions.

(c) Non-Resident (NR) - Must not satisfy any of the Basic Conditions.

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Section 5 - Scope of Income
Section 5 of Income Tax Act, 1961 - Scope of Income
This section define the scope of income which is taxable in India in accordance to residential status.
S. Particulars Resident Resident Not Non Resident
No. Ordinary Ordinary Resident (NR)
Resident (ROR) (RNOR)
1 Income received in India Taxable Taxable Taxable
2 Income deemed to be receive in India Taxable Taxable Taxable
3 Income accrues or arises in India Taxable Taxable Taxable
4 Income deemed to accrues or arises in India Taxable Taxable Taxable
5 Income accrues or arises outside India Taxable Not Taxable Not Taxable
6 Income accrues or arises outside India from Taxable Taxable Not Taxable
business/profession controlled/set up in India
7 Income which has no relation with India Taxable Not Taxable Not Taxable

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Taxable Components under the head Salary
Type of income taxable under the head “Salary”

All types of monetary or non-monetary remuneration received or receivable by an employee from

the employer for services rendered in India are subject to tax in India like

(a) Monetary remuneration – Salary, Allowances, Bonus, Leave Encashment etc.

(b) Non-monetary remuneration – Benefits/Amenities (also called as ‘Perquisites’)

provided by the employer to the employee, Any obligation of employee paid by the
employer etc.

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Taxable Components under the head Salary
Examples of Non-monetary remuneration provided by the employer to the employee:

1. Rent Free Furnished / Unfurnished Accommodation;

2. Assets provided for personal use of employee like Refrigerator, Furniture & Fixtures etc.;
3. Motor Car along with Chauffeur for partly official and partly personal use;
4. Motor Car along with Chauffeur for fully personal use;
5. Payment of utilities bills (like electricity, water, power back-up, society maintenance charges etc.)
6. for the residential accommodation of employee;
6. Payment of salary of security guard, cook, gardener etc.;
7. Contribution to social security funds paid by the employer on behalf of employee;
8. Any other benefits / amenities provided by the employer to the employee;
9. Any other obligation of the employee discharged by the employer.

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Compliances to be followed by an Expatriate and an Employer
Statutory Compliances under Indian Income Tax Act, 1961

For Employee

To apply and obtain Permanent Account Number (PAN) in Form 49AA

File Annual Income Tax Return in ITR-1 by 31st July following a financial year

Apply and obtain “No Objection Certificate (NOC)” with Income Tax Department at the time of leaving India for
good

Surrender the certificate of registration (Residential permit) with Jurisdictional Registration Officer at the time of
leaving India for good

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Compliances to be followed by an Expatriate and an Employer

For Employer

To apply for Permanent Account Number (PAN) in Form 49AA and Tax Deduction Account Number (TAN) in Form
- 49B

To determine the Residential Status of the Expatriate;

To deposit Withholding Tax in Challan no. 281 on salary on monthly basis within the prescribed time limits

To file Quarterly Withholding Tax Return (Form 27A and 24Q);

To issue Certificate of Withholding Tax (Form 16 and 12BA) to Expatriate Employees.

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ASC services under “Expatriate Taxation”
ASC can provide following services under “Expatriate Taxation”
1. Drafting of Secondment Agreement / Dispatch Agreement between the Transferor (Parent) company located
in Home Country and Transferee (Employer) company in India;
2. Drafting of Employment Agreement of Expatriate with Indian Company (Employer);
3. Registration/amendment/renewal with FRRO / FRO for obtaining Residential Permit;
4. Renewal / extension of E-visa;
5. Obtaining Permanent Account Number of Expatriate;
6. Determination of residential status and calculation of income tax on income earned by Expatriate depending
upon residential status so that Employer can deposit the TDS on monthly basis;
7. Calculation of income tax on other income/global income earned by Expatriate in India & outside India;
8. Compilation of information and disclosure of foreign assets detail of Expatriate (having residential status of
ROR) in India for furnishing in the Income Tax Return;
9. Preparation and filing of Income Tax Return of Expatriate in India;
10. Surrender of ‘Residential Permit’ or obtaining ‘Exit Visa’ from FRRO/FRO before leaving India for good;
11. Obtaining ‘No Objection Certificate (NOC)’ or ‘Income Tax Clearance Certificate (ITCC)’ from Income Tax
Department before leaving India for good.

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Our Team

pes of Visa
Founder and CEO Director Vice President Vice President Asst. Vice President
Alok Kumar Agarwal Deepak Kumar Amit Kumar Rai Mayank Kumar Tania Kakar

Director Director Vice President Asst. Vice President Vice President

Anju Agarwal Shailendra Kumar Mishra Mayank Singal Ankush Goyal Ashok Gupta

Director Vice President Sr. Consultant Operational Head

Antaryami Nayak Deepak Maini Rakesh Mishra Niten Agrawal

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Office Locations
Haryana Karnataka Uttar Pradesh Maharashtra
Delhi Office
Office Office office Office
pes ofPark
73, National Visa 605, Suncity
Business Tower 0420, 2nd
Floor, 20th
605, B-Wing,
Sagartech Plaza,
Lajpat Nagar IV, Andheri Kurla
New Delhi – Golf Course Road, Main, 6th Block, C-100, Sector-2,
Sector-54, Koramangala, Noida- 201301 Road, Sakinaka,
110024
Gurgaon, Haryana Bangalore- Uttar Pradesh Andheri (E),
Phone: - 122002 560095 Phone: Mumbai – 400072
+91-1141729056 / Phone: Phone: 0120-4729400 Tel.no.
57 +91-124-4245110 / 080421-39271 02267413369/70/
111 / 116
71

Chennai Pune Canada Singapore

Office Office Office Office
Office No. 4, 1st
Level 2- 78/132 floor Silver Oak, SN 885, Progress Ave
Toronto, Ontario, #10-09 High Street
Dr. RK Salai Nagar Road,
M1H 3G3, Canada Centre
Mylapore Wadgaon Sheri,
Phone: 1 North Bridge
Chennai- Pune- MH - 411014
(+1) 437-774-4488 Road
Tamilnadu-600004 Landmark: Near
Singapore-179094
Inorbit Mall
+91-8860774980

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Thank You for your patience and support

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