Working in India as an expatriate brings exciting career opportunities—but it also comes with tax responsibilities that can feel complex at first. Indian taxation for expats depends on several factors such as residential status, income sources, and international tax treaties. Understanding how these elements work together is critical to staying compliant and managing your finances efficiently.
For expatriates earning in India, proper tax planning is just as important as saving wisely. Many expats balance market-linked investments with stable options like fixed deposits to protect their surplus income from volatility..
Terms you need to know
Navigating India’s tax framework becomes easier when you understand these commonly used terms:
Expatriate
An individual living and working in a country other than their country of citizenship, usually for employment or business purposes.
Residential status
Determined each financial year based on the number of days spent in India under Section 6 of the Income Tax Act, 1961. Residential status decides whether Indian income alone or global income is taxable.
Employee Stock Option Plan (ESOP)
A benefit allowing employees to buy company shares at a predetermined price. In India, ESOPs are taxed at the time of exercise and again at sale (capital gains).
Perquisites
Non-cash benefits like accommodation, car facilities, or club memberships. These are taxed as part of salary based on prescribed valuation rules.
Double Taxation Avoidance Agreement (DTAA)
A treaty between India and another country to ensure the same income is not taxed twice, usually by providing tax credits or exemptions.
Taxable income
Income that remains after applicable deductions and exemptions. For expats, this often includes salary, allowances, bonuses, and perquisites earned in India.
Withholding tax
Tax deducted at source by the employer and deposited with the Indian government on behalf of the employee.
Understanding these terms helps expatriates plan taxes and investments more effectively.
Bajaj Finance Fixed Deposits offer a reliable way for expatriates to park surplus income securely, with predictable returns of up to 7.30% p.a. and flexible tenures. Book FD.
