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Taxation of Expats

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Taxation of Expats

Meaning of Expatriate or Expat

An expatriate is a person provisionally residing and employed in a different country while a remaining citizen of his native land. The taxation of such expat employees requires a slightly modified computation than the tax computed for a routine employee of an Indian organisation.

Foreign Expat Working in India:

For any foreign expat employed in India, the salary is deemed as earned in India, if they are paid for the services rendered in India as per Section 9(1) (ii) of the Income Tax Act. The said rule is suitable irrespective of the resident status of the expat employee. Besides, the income earned is subjected to tax deducted at source (TDS) regardless of where the salary is credited. It means that even if the salary is credited in the home country of the expat employee, it is still subjected to the Indian TDS.
In such cases, if the salary is paid in foreign currency in the country of expat’s citizenship then, such salary is turned into Indian Rupees (INR) and tax is computed on total Indian currency value. The rate used to calculate tax applicable is telegraphic transfer buying rate used by State Bank of India (SBI). The rate used is the rate on which tax is calculated on that day based on the Deduction of tax (Rule 26), Section 192(6) of the Indian Income Tax Act.

Tax Grossing up:

When the foreign expat receives salary, only net salary after the tax gets credited to his account. Indian company where he has taken up the scheme will pay the tax applicable for his income earned which indicates that an expat’s salary is calculated as the sum of the net salary and tax liability on it. This is known as tax grossing-up.

Computation of Tax on Expat’s Salary:

In India, the higher income tax rate is 30%. Over this 30% tax rate, 4% health and education cess is levied on cumulative total income tax rate to 31.2%. 

Avoidance of Double Taxation:

In the cases of expat, there is always a chance of double taxation in each of the country where the employee is a resident and his / her worldwide income is taxable. 
In some cases, where the income is earned in any country, but it is not on the list of DTAA. The tax has been paid in the said country in accordance with Section 91, he/she will be entitled to a deduction from the income tax in India payable by the expat employee for the sum computed on taxed income at Indian rate of Income-tax or the tax in the country where the income is earned, whichever is lower.
Taxation of expats in India is a crucial matter and our expat professionals are skilled in providing various services associated with repatriation assistance for employees, annual tax equalisation calculations, services tax compliance services, tax return preparation as well as assessment, appeal, opinions and litigation matters.

 We, here at MAG, provide taxation services to expatriates and assist you by providing numerous other services as well like accounting and bookkeeping, auditing & assurance, internal audit, tax audit, management audit, statutory audit, stock audit, income tax, tax planning, direct taxes, indirect taxes, etc. If you are an expatriate India and are looking for an expert in the matters of expat tax, you may reach us at

Frequently Asked Questions

The tax rates applicable for an expat are the prevailing slab rates for non-residents as per the Income Tax Act. You can choose to get taxed either as per the old tax regime or as per the new tax regime of the Income Tax Act.

There are various deductions and exemptions that you can claim and lower your taxable income if you opt for the old tax regime. The tax rates according to the old tax regime are as follows:
Net Income Rate of Income-tax
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 – Rs. 5,00,000 5%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
If you go for the new tax regime, you will have to forego many deductions and exemptions. The tax rates according to the new tax regime are as follows:
New income slabs Tax rates applicable
Up to Rs. 2,50,000 Nil
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 7,50,000 10%
Rs. 7,50,001 to Rs. 10,00,000 15%
Rs. 10,00,001 to Rs. 12,50,000 20%
Rs. 12,50,001 to Rs. 15,00,000 25%
Above Rs. 15,00,000 30%
Yes, the resident individuals in India who are citizens of a foreign state can make remittance up to their net salary earned in India after deducting all taxes, contribution to provident fund and other deductions.
If your income is getting taxed in India as well as a foreign country, you can claim a relief either as per the provisions of the Double Taxation Avoidance Agreement (DTAA) entered into with that country (if any) by the Indian Government or by allowing relief according to section 91​ of the Act in respect of tax paid in the foreign country.
If you wish to claim credit of foreign tax paid in a country outside India, you will be required to submit Form 67 to the Income Tax department at the time of filing your return of income.
An expatriate employee is a person who temporarily resides and works in a country other than their home country.
The taxation of expat employees in India is based on the incomes earned in India and is subject to tax deduction at source, regardless of the resident status of the employee.
Yes, an expat's salary earned in India is subject to tax deduction at source (TDS).
No, the resident status of the expat employee does not matter for taxation in India.
If an expat is paid in a foreign currency in their home country, the salary is taxed in India based on the conversion rate applicable in India.
Tax on an expat's salary in India is computed on a similar basis as per the domestic employees in India. There is not as such difference in calculation of taxes of expats in India.
Tax grossing up is the calculation of an expat's salary including the tax liability paid by the Indian company, affecting the taxable income and tax rate.
Yes, an expat employee can claim a deduction on their Indian income tax for tax paid in another country under the DTAA.
Expat employees in India have a chance of double taxation in both their resident country and in India where their worldwide income is taxable.
Expats in India can avoid double taxation through DTAA and foreign tax credit provisions under Indian tax laws.
There are no specific eligibility criteria for an expat employee in India, but they must obtain the necessary work permits and visas.

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