Dealing with tax in India while being overseas can be a tricky process and pose complications that would demand expert guidance. Bradford Jacobs’ international reputation as a front-rank payroll provider is built on more than 20 years of experience. We ensure our clients comply with every aspect of taxation wherever they operate. Our combination of local knowledge and global experience provides solutions to every problem.
This is essential for foreign companies expanding into India – a huge nation of 500 million workers, where taxation laws operate across 28 states with all the complexities that entail. Additionally, India is in the process of consolidating 29 pieces of employment legislation into four codes, including a Wages Code. Bradford Jacobs’ dedicated specialists remove the burdens of worrying about tax complications while you focus on building your business in a new territory. From locating the brightest talent to running your payroll, our Professional Employer Organisation (PEO) and Employer of Record (EOR) specialists will guide you every step of the way.
Personal Income Tax (PIT):
Personal income is more than INR 250,000 (€3,020, US$3,313) with three further bands of 5%, 20% and 30%. The top rate applies to excess over INR one million (€12,114, US$13,280).
New Personal Tax Regime (NPTR):
Since April 1 2020, taxpayers can opt for the new scheme, which after the exempt band has six other bands up to the maximum of 30% against excess over INR 1.5 million (€18,166, US$19,920). Under this regime, taxpayers cannot make deductions against certain expenses.
Social Insurance Taxes:
Employers and employees each contribute 12% of gross salary to the EPF. Out of the employer’s contribution, around 8.3% is diverted to the pension fund. Additionally, there are contributions to the Employee State Insurance (ESI) fund – employers pay 3.25% of the gross salary paid to their employees, with 0.75% from the employee.
Corporate Income Tax (CIT):
Rates vary for domestic and foreign companies, with introductory rates supplemented by ‘effective’ rates, including surcharges for health and education. Domestic companies pay at either 25% or 30% flat rates depending on turnover. The introductory rate for foreign companies is 40%, with effective rates between 41.6% and 43.68%. The tax year runs from April 1 – March 31.
Goods and Services Tax (GST):
Changed from Value Added Tax (VAT) in 2007, the first GST standard rate of 18% applies to restaurants with alcohol licenses, cultural events and TVs. The second standard rate of 12% applies to other restaurants and some foodstuffs. For example, the reduced rate of 5% applies to medicines, sugar, tea, coffee and different categories. The highest rate of 28% includes such air conditioning and vehicles.
For companies supplying goods and services, this is assessed as Central GST by the government, as SGST by states or UTGST by union territories. All three apply where goods and services are traded between states and territories.
Withholding Tax (WHT):
Non-residents pay 20% WHT on India-sourced interest, royalties and fees paid by a resident individual or company, as per regulations laid down by the Finance Act.
Married couples must file returns independently. The financial year is from April 1 until March 31, with returns due by July 31 at the same time as the unpaid taxes. Individuals required to file audited accounts can file by October 31. Salaries, fees, bonuses, commissions, personal expenses and all remuneration are liable for taxes. Individuals are tax residents if they reside in India for more than 182 days in a tax year or 60 days or more during the tax year and a total of 365 days over the previous four years; they are deemed Resident and Ordinarily Resident (ROR). If these qualifications do not apply, the individuals are Non-Resident (NR).
| From | Not Over | Tax % |
|---|---|---|
|
INR 0 |
INR 250,000 (EUR 3,027 - USD 3,320) |
0% |
|
INR 250,001 |
INR 500,000 (EUR 6,057 - USD 6,640) |
5% |
|
INR 500,001 |
INR 1,000,000 (EUR 12,115 - USD 13,280) |
20% |
|
Over INR 1,000,001 |
- |
30% |
New Personal Tax Regime (NPTR)
Taxpayers have been able to opt for
this regime since the 2020-21 tax year, but are then precluded from claiming
certain exemptions against income.
| From | Not Over | Tax % |
|---|---|---|
|
INR 0 |
INR 250,000 (EUR 3,027 - USD 3,320) |
0% |
|
INR 250,001 |
INR 500,000 (EUR 6,057 - USD 6,640) |
5% |
|
INR 500,001 |
INR 750,000 (EUR 9,085 - USD 9,960) |
10% |
|
INR 750,000 |
INR 1,000,000 (EUR 12,115 - USD 13,280) |
15% |
|
INR 1,000,001 |
INR 1,250,000 (EUR 15,143 - USD 16,600) |
20% |
|
INR 1,250,001 |
INR 1,500,000 (EUR 18,166 - USD 19,992) |
25% |
|
Over INR 1,500,000 |
- |
30% |
Employers in India with more than 20 staff contribute the equivalent of 12% of their employees’ salaries to the Employee Provident Fund (EPF) capped at a monthly salary of INR 15,000 (€180, US$200). Approximately 8.3% of the 12% goes to the pension fund. Employers also contribute 3.25% of employees’ salaries to the Employee State Insurance (ESI) fund.
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