Sunday, August 12, 2012

Expatriates in India - Actual Tax Calculation


To bring in a clear understanding and as a supplement to my blog on expatriate taxation http://ssaravanan-vvu.blogspot.in/2012/07/expatriates-taxation-in-india.html, I have tried to demonstrate here a calculation of expatriate taxation and then finally calculate his / her take home salary in India.

Assumptions

  1. The expatriate is first time in India and hence he is considered a Non Resident for tax purposes
  2. His income is split into two parts
    • Salary paid by overseas parent for services rendered in India- USD 50,000 per annum
    • Income paid by Indian company for services rendered in India - INR 5,000,000 per annum
  3. He has been given the following perquisites in India
    • Furnished housing
    • One Motor Car with Driver
    • Indian company pays school fees for his children
    • Indian company pays for maintenance of the house & domestic help
  4. The country from which the expatriate is based does not have a Social Security Agreement (SSA) with India, and hence Providend Fund (PF)  has to be deducted @12% on both International & Indian salary (effective from 1.10.2008)
  5. No Other Income for this expatriate in India
  6. No Other tax savings in India other than 80C
  7. No Sweat Equity or ESOP
The tax calculation will be as below for the expatriate
Calculation of perquisites

Calculation of Take Home Salary in India is as below



This is a simplified example of expatriate tax and his / her take home salary, but in practice there will be more complicated scenarios which need to be handled according to the relevant laws prevailing at that time