Bangalore at a Glance
Taxes and Social Security in Bangalore
"The Silicone Valley of India", Bangalore offers many business opportunities.
Income Tax
In general, income tax needs to be paid by all working residents of Bangalore. It is calculated at a rate of 0%, 10%, or 20% for incomes up to 180,000, 500,000 or 800,000 Rs respectively. Annual incomes of more than 800,000 Rs are taxed at a rate of 30%. For women, the tax-free income threshold has been raised to 190,000 Rs.
Foreigners who don’t have residence status in Bangalore, i.e. who spend less than 183 days in India during one financial year, may be eligible for double taxation relief on their income from non-Indian sources, provided they continue to pay income tax in their usual country of residence. India has signed Double Taxation Avoidance Agreements (DTAAs) with over 60 countries around the world.
A list of DTAAs can be found on the Income Tax Department website of the Ministry of Finance, but for detailed information expats had best consult the tax authorities of their country of residence. All these DTAAs are more or less standard double taxation treaties and follow OECD guidelines. The Indian government also reserves the right to grant unilateral double taxation relief to individuals who, on grounds of their nationality, are not covered by a DTAA.
Social Security
There are two government schemes providing social security for roughly 10% of the Indian workforce. The Employees Provident Fund Organization (EPFO) is a mandatory pension scheme for companies with more than 20 employees in one of the 180 industries specified on the EPFO website.
The Employees’ State Insurance Company (ESIC) pays medical costs, sick leave, maternity leave, and disability benefits for workers in factories with more than ten employees. In addition, it covers workers in shops, hotels, restaurants, cinemas, and “road motor transport undertakings” with more than 20 employees.
In reality, however, a lot of these companies may fail to pay social security contributions for their employees, and the government lacks the necessary means to carry out comprehensive checks and enforce the rules. Moreover, a vast majority of India’s workforce, the so-called “unorganized sector”, still has no proper claim to any form of pension or benefits whatsoever.
Social Security for Expatriates
Expats working in Bangalore are likely to be employed in the organized sector. They should thus be liable to pay social security contributions, although special arrangements might be in place for expats working in multinational companies.
Expats from Belgium, Germany or Switzerland can profit from the Social Security Agreements between India and their country of origin. They can continue to pay contributions to social security schemes in Germany, Belgium or Switzerland if their work assignment in India does not exceed 60 months. Both agreements are available on the Emigration Services website of the Ministry of Overseas Indian Affairs.
Similar documents have been drawn up for the Czech Republic, Denmark, France, Hungary, Luxembourg, Netherlands, and Norway, and talks have been initiated with Bulgaria, the UK, and the USA. If you are a resident of one of these countries, please consult your local social security office for more information.
As far as your own pension fund is concerned, we recommend that you contribute to a private pension plan during your time as an expat in Bangalore and/or keep paying voluntary contributions to the national social security scheme (if possible).
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