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- Salary paid or allowed by an employer / former employer
- Arrears of salary paid or allowed by an employer / former employer
Section 16 – Deductions
- Entertainment allowance (for government employees)
- Professional/ employment Tax
Section 17 – ‘salary’, ‘perquisites’ and ‘profits in lieu of salary’ defined
* While section 15 provides for taxation in employee’s hands when salary is due/ paid, whichever is earlier, section 192 casts the obligation on employer to withhold tax only at the time of payment of salary
Tie breaker rule is applied when an individual has dual residency. It prescribes a set of tests to determine the individual’s residency
Article 4(2) of the OECD model states that “ where by reason of the provisions of paragraph 1 an individual is a resident of both contracting states, then his status shall be determined as follows:
He shall be deemed to be a resident only of the state in which he has a permanent home available to him. If he has a permanent home available to him in both the states, he shall be deemed to be a resident only of the state with which his personal and economic relations are closer;
If the state in which he has his centre of vital interests cannot be determined, or if he does not has a permanent home available to him in either state, he shall be deemed to be a resident only of the state in which he has an habitual abode;
If he has a habitual abode in both states or in neither of them, he shall be deemed to be a resident only of the state of which he is a national;
If he is a national of both states or neither of them, the competent authorities of the contracting states shall settle the question by mutual agreement
Tax reimbursement – tax equalisation vs. tax protection
Tax equalisation Most common approach Employer is responsible for paying expatriate’s actual home and host country taxes Hypothetical tax is calculated on the basis of ‘stay- at- home’ compensation Hypothetical tax is not a real tax but reduction of wages A tax equalisation settlement (“TEQ’) is prepared at the close of the year which compares the
final hypothetical tax deducted to the hypothetical tax that should be deducted among other things.
Tax protection The employee is responsible for paying the actual home and host country taxes At the end of the assignment/ annually ‘stay- at- home’ tax is determined and compared to the
actual worldwide taxes that the expatriate employee paid. The employer reimburses the excess tax to the expatriate employee if the worldwide taxes
exceed the hypothetical tax The employee is not required to reimburse the employer if the worldwide taxes are less than
employee is a foreign citizen employed by foreign enterprise foreign entity not engaged in trade / business in India stay in India ≤ 90 days in a financial year remuneration not liable to be deducted from employer's income chargeable to tax
Under tax treaties
Remuneration derived by not be taxable in the state where services are rendered if: The employee is a resident of a state other than the state where the services are rendered stay in other state ≤ 183 days in relevant taxable year / any twelve month period remuneration is paid by or on behalf of a non resident employer remuneration is not borne/deducted/deductible by a permanent establishment or a fixed base
or a trade or business which the employer has in the other State
Notification issued by the ministry of Labour and Employment (October 2008)
‘International Workers’ introduced as a new class of participants in the existing Employees' Provident Fund Scheme, 1952 (‘EPFS’) Employees’ Pension Scheme, 1995 (‘EPS’)
International Workers required to join the schemes with effect from November 1, 2008
International Workers employed to do any work, in or in relation to any establishment to which the Act applies have to mandatorily participate in the scheme unless falling under the category of “excluded employee”.
Notification issued by the ministry of Labour and Employment (October 2008)
Excluded employee
Covered establishment
International worker
All the establishments to which the provisions of the Act apply.
Non Indian employees, not holding an Indian passport, working for an establishment in India to which the Act applies;
Indian employees having worked or going to work in a foreign country with which India has entered into a social security agreement.
International Workers contributing to the social security of their country of origin, with whom India has entered into a social security agreement (SSA) and enjoying the status of detached worker.
Primary consideration is purpose of stay and not period of stay
Business visa would not be granted to foreign nationals who intend to execute a project or contract in India.
Employment visa
The new guidelines provide for the grant of an employment visa only to foreign nationals who are highly skilled or employed at senior levels.
Limits have been placed on the number of employment visas that can be issued to foreign nationals. The Indian mission abroad can grant such visas only to the extent of 1% of the total workforce engaged on a project subject to a minimum of 5 and maximum of 20. However, in case of power and steel sector projects a relief has been provided and limit has been set at 40.
In case more employment visas are required in comparison with the specified limits then specific permission is to be obtained from the Ministry of Labour and Employment.
Gap of at least two months for foreign nationals who intend to make a return visit to India.
Special permission is required from the Indian mission if the visit to India is within two months of the last departure.
Tourist visa on arrival facility has been introduced for citizens of five countries namely Finland, Japan, Luxembourg, New Zealand and Singapore at four international airports in the country i.e. Delhi, Mumbai, Chennai and Kolkata.
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endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the