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9. Working in India

India at a Glance

Working in India

India is one of the fastest-growing and most dynamic economies worldwide.

Working in India means participating in one of the fastest-growing and most diverse economies worldwide. With roughly 487 million people working in India, the country boasts the second largest labor force on the globe.

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 faced by people working in India, 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 working in India increasingly attracts international companies seeking to outsource work.

This trend has been encouraged by the Indian government, which since 1991, 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.

Working in India: Main Economic Sectors

The agricultural sector, while only generating 18% of the national GDP, employs roughly half of all people working in India. This includes those working in India’s modern agricultural industries as well as traditional village farmers. Apart from tea production, farmers working in India mainly grow rice, wheat, sugarcane, fruit, and vegetables.

The industrial sector, with a GDP share of 26%, creates jobs for 14% of people working in India. Employees working in India’s 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 working in India include textiles, transport equipment, mining, pharmaceuticals, chemicals, software, and machinery.

Last but not least, the strong (and fast-growing) service sector is responsible for 56% of the GDP, employing roughly one third of all people working in India. 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 people working in India’s banks, real estate, and insurance.

Working in India: 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, 20% for the next income group with an upper limit of 800,000 Rs, and 30% for everyone working in India and earning more than 800,000 Rs.

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. 60 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.