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. Non-residents and not ordinarily residents are taxed only on income received, accrued, or deemed to accrue or be received 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. 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.
Income tax is levied based on progressive tax rates currently not exceeding 30 percent on taxable income in excess of INR 1,000,000 (applicable for tax year 2015-16). Additionally there is a levy of surcharge at the rate of 12 per cent where the total income exceeds INR 10 million and, Education Cess at the rate of 2 percent and Secondary and Higher Education Cess at the rate of 1 percent on the amount of tax and surcharge, if applicable.
As proposed in the Finance Bill 2016, the rate of surcharge is 15 per cent for the tax year 2016-17 onwards.
A marginal relief is available for income up to INR 10,646,946.
The official Indian currency is the Indian National Rupee (INR).
Herein, the host country refers to the country to which the employee is assigned. The home country refers to the country where the assignee lives when he/she is not on assignment.
© 2016 KPMG, an Indian registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.