Which Indian states do not levy income tax

Taxation of employee secondments to India

07/07/2011 | Cross-border employment

by graduate business lawyer (FH) Caroline Klotzek, graduate in business administration Aleksandra Lechowicz and Anne Vater, Berlin

As one of the BRIC countries, India is one of the growth markets of the future. More and more German companies are sending their employees to India and thus to one of the fastest growing economies. Special regulations regarding the posting process of employees, which arise from both national tax law and treaty law, must be observed.

1. Tax liability in India

Like German tax law, Indian tax law recognizes the distinction between limited and unlimited tax liability. The tax liability of natural persons is decided on the basis of the place of residence or residence status and not on the nationality. The following overview presents the different types of residence in India:

Type of residence in national tax law

condition

Tax liability

ROR

Resident and ordinarily resident

fundamental

1. Stay in India for at least 182 days in the tax year or
2. Stay in India for at least 60 days in the tax year and for a total of at least 365 days during the last 4 tax years; also

Unlimited tax liability with world income

additionally

3. Residency in India for 9 out of 10 previous years OR
4. Stay of at least 730 days in the previous 7 tax years

RNOR

Resident but not ordinarily resident

Condition 1 or 2 of ROR met, but conditions 3 and 4 are not met

Limited tax liability with income from Indian sources, additionally also from foreign sources, insofar as the business is controlled or controlled from India

NO

Non resident

None of the basic conditions mentioned above for ROR are met

Limited tax liability on income from Indian sources

Employees who are posted to India for the first time are usually considered to be RNORs for the first two to three years. For example, if an employee arrives on January 1st, 2001 and leaves the country on November 30th, 2002, the total is less than 730 days and is therefore considered an RNOR. If he stays in India for a short time, for example for one month per year, the employee is also considered an RNOR, since 60 days in the tax year and 365 days in four years are not achieved.

Would you like to read this technical article?

Free PIStB trial subscription

0,00 €*

  • Access to the latest specialist articles and the complete archive
  • Lots of work aids, checklists and special editions as downloads
  • Cancellation after the test at the end of the month

* Thereafter from € 18.75 per month

  • 24 hour access to all content
  • Ends automatically; no termination necessary
  • A wise decision! Please log in.