India at a Glance
Working in India
Working in India means participating in one of the fastest-growing and most diverse economies worldwide. With an active population of nearly 500 million, the country boasts the second largest labor force on the globe.
Although the GDP growth slowed down to less than 5% in 2012, experts say that India is still far from having achieved its full economic potential. An inadequate infrastructure is often said to lie at the heart of the problems, holding the country back on its way to becoming the next economic superpower.
Competition for skilled jobs is high among qualified employees working in India. On the other hand, the huge supply of skilled employment candidates increasingly attracts international companies seeking to outsource work.
This trend has been encouraged by the Indian government. Since 1991, it has placed an increasing emphasis on foreign trade and investment by relaxing its hold on the economy. As multinational companies tend to have an international workforce, the number of expats working in India is also on the rise.
Main Economic Sectors
The agricultural sector, while only generating 17% of the national GDP, employs roughly half of all people working in India. This includes employees in modern agricultural industries as well as traditional village farmers. Apart from tea production, Indian farmers mainly grow rice, wheat, sugarcane, fruit, and vegetables.
The industrial sector, with a GDP share of 18%, creates jobs for nearly 20% of people working in India. Employees in the cement industry, for example, are instrumental in making it the second largest cement-producing country in the world. Other industries that employ considerable numbers of people include textiles, transport equipment, mining, pharmaceuticals, chemicals, software, and machinery.
Last but not least, the strong (and fast-growing) service sector is responsible for 65% of the GDP, employing roughly 30% of the active population. Several fields of work, notably information technology, IT-enabled services, telecommunications, as well as financial, social, personal, cultural, and recreational services have grown faster than the rest of the economy. The term “financial services” is used in a comprehensive way to include those working in India’s banks, real estate firms, and insurance companies.
Taxation of Foreigners
With some exceptions, foreigners living and working in India are subject to Indian taxation laws. The tax system for has undergone some liberal reforms in order to boost trade and investment.
Since April 2011, new income tax rates are in force for men working in India: 0% for an annual income not exceeding 180,000 Rs, 10% for everything between that and 500,000 Rs, and 20% for the next income bracket with an upper limit of 800,000 Rs. Finally, everyone working in India and earning more than 800,000 Rs per year has to pay 60,000 Rs to 30% of the total income (minus the 800,000 Rs) in taxes.
Foreign investors and companies or international employees working in India who do not have resident status can benefit from two government strategies for avoiding double taxation. Over 80 DTAAs (Double Taxation Avoidance Agreements) with various countries provide bilateral relief. For a more or less up-to-date list, please check the relevant section of the Income Tax Department website.
Thus, expats who are on assignments not exceeding 183 days in one financial year and whose salary is not paid by an Indian company are taxed in their country of residence rather than in the “source” country. In other cases, where jurisdiction is given to both countries, the “residence” country agrees to give credit for taxes paid in the “source” country.
The Income Tax Act also allows for the possibility of unilateral relief, thus giving the Indian Government the authority to exempt certain individuals from double taxation.