The Hindu Business Line : Key aspects in international assignments

In today’s era of globalisation, deployment of talent is the key to success for every organisation, particularly in the emerging markets. For this, there are various requirements and precautions which an employer and employee need to be aware of in the case of individuals coming to work in India.

Work permit

There is no work permit requirement in India. International assignees coming to work here are required to obtain a valid Indian employment visa from the Indian High Commission/Indian Embassy present in the assignee’s home country. However, Person of Indian Origin (PIO) cardholders and Overseas Citizens of India (OCI) cardholders are exempted from obtaining any visa.

An assignee holding visa for more than 180 days or who intends to stay in India for more than 180 days, is required to register himself (including accompanying family members) with Foreigners Regional Registration Officer (FRRO), within 14 days of his first arrival in India. However, OCI cardholders are not required, whereas PIO cardholders get additional time to register themselves with the FRRO within 14 days after expiry of their 180 days of continuous stay in India.

Tax residency

In India, the tax year runs from April 1 to March 31. Taxability in India is dependent on the tax residency of the individual. An individual who is Resident and Ordinarily Resident is taxable in India on his worldwide income whereas Resident but Not Ordinarily Resident or Non Resident individuals are taxable in India in respect of India sourced income or income received in India.

Salary received for services rendered in India is taxable in India irrespective of the place where it may be received. However, a foreign national can claim exemption under the domestic laws if his stay in India is not more than 90 days and the employer is not engaged in any trade/business in India and remuneration so paid is not a deductible expenditure in the hands of such employer in India.

Further, if an individual is coming from a treaty country then he can claim exemption if his stay in India is not exceeding 183 days and he is paid outside India and the remuneration so paid is not borne by a Permanent Establishment (PE) or fixed base which the employer has in India.

Filing requirement

An individual is required to get himself registered with Indian tax authorities to obtain a permanent account number (PAN), which is mandatorily required to be quoted in his tax return and other specified documentation. An individual is required to file his individual income-tax return on or before July 31 of the year following the relevant tax year.

After completion of the assignment, the assignee is required to obtain no objection certificate from the tax authorities, unless he is a person domiciled in India.

An employer is required to withhold and deposit taxes on a monthly basis on salary paid to its employees. Employer has to issue a tax withholding certificate in respect of taxes withheld to its employees after close of the year and also to file the quarterly tax withholding returns. Additionally, an employer is liable to fringe benefits tax on the fringe benefits provided to its employees and to file the fringe benefits tax return.

Exchange regulation

Under the Exchange Regulations, a foreign national deputed from the parent company to its office/branch/subsidiary/ joint venture in India, can receive up to 75 per cent of his gross salary outside India. Alternatively, an international assignee may be localised on the Indian companies payroll wherein he/she is permitted to remit the entire salary (net of taxes and PF contribution, if any) outside India for the purpose of maintenance of his/her close relatives abroad.

Deputation of its employees by a foreign company to India can also expose the foreign company to the PE risk and service tax implications. Recent rulings — Morgan Stanley & Co., AT&S India Pvt. Ltd., etc., — are an alarm and call for the review and appropriate structuring of the assignments in India by the employers, in order to mitigate corporate tax/PE risk/service tax implications arising from such deputations.

(The authors are with PricewaterhouseCoopers.)