If you have decided to move to India, it is best to inquire on the different types of taxes that apply in the country. Here are some guidelines.
For years, India has been attracting tourists and students, as well as foreign professionals and investors. If you are planning to move there, for either reason, you are advised to inquire on the country's tax system. In fact, you are likely to pay different types of taxes by different means in India, regardless of your status as a foreigners. This is because the country has a quite complex tax system. In general, you will be paying income tax, corporate tax if you are setting up a business, as well as value added tax (VAT), property tax, etc.
The tax year starts as at April 1st to end on March 31st of the following year. As a resident, you are required to submit your tax return at the latest on June 30th of the current year. In the case of employees working with a firm and independent workers, they are required to submit their tax return on August 31st of the same year at the latest. Finally, companies operating across the country have to submit their tax return on the 31st of October at the latest.
On your arrival in India, you are required to apply for a Permanent Account Number (PAN) which will be issued as a card. This card will generally serve as an identity card, especially during administrative formalities such as opening a bank account, etc. Application can be made online. It will then be delivered by the Indian Income Tax Department.
Physical persons in India have to pay income tax at different rates, varying according to their salaries. Hence, foreigners receiving a minimum of INR 200,000 per month are exempt from income tax. Those receiving between INR 200,000 and INR 500,000 will pay tax at a rate of 10%
As regards salaries ranging between INR 500,001 and INR 1 million, income tax rate is capped at 20%, plus additional INR 30,000. Finally, those receiving a monthly salary of more than INR 1 million have to pay tax at a rate of 30% plus additional INR 130,000.
Note that the tax declaration form can be filed online, particularly in the case of those receiving more than INR 500,000 per month. As regards those who receive less than INR 500,000 per month and whose savings account balance is less than INR 10,000, they are required to submit their tax return in person at the nearest tax office to their place of residence.
When calculating the amount of tax to be paid, make sure to take into account different types of deductions allowed by tax laws, including rent, transport fees, health insurance, social contributions, etc.
Good to know:
Income tax is generally deducted at source by employers in the case of physical persons. The latter will take care of paying the corresponding amount to the tax administration at fixed intervals.
All companies operating across India, including foreign companies, have to pay corporate tax. The amount varies according to the company's annual return. Thus, in general, companies pay tax at a rate of 42.02%.
Good to know:
India has signed non-double taxation treaties with several countries, including many European countries. You are hence advised to verify the existence of such a treaty between India and your home country.
Value added tax (VAT) has recently been introduced in India, more specifically in May 2015, so as to prevent tax frauds which are quite common in the country. Over a total of 550 products, it applies to 270 basic products at a rate of 4% and on others at a rate of 12,5%.