Working in Bangalore?
Taxes and Social Security in Bangalore
In general, income tax needs to be paid by all working residents of Bangalore. As of the 2018–2019 financial year, it is calculated at a rate of 0%, 5%, or 20% for incomes up to 250,000, 500,000, or 1,000,000 INR, respectively. Annual incomes of more than 1,000,000 INR are taxed at a rate of 30%. The rate of income tax in India is the same for male and female professionals.
Foreigners who don’t have fiscal residence status in Bangalore, i.e. who spend less than 180 days in India during one financial year, may be eligible for double taxation relief on their income from non-Indian sources. However, they have to keep paying income tax in their official country of residence. India has signed Double Taxation Avoidance Agreements (DTAAs) with 88 countries around the world, though only 85 are in force, so make sure to check your country’s status.
A list of DTAAs can be found on the Income Tax Department of the Government of India website. For detailed information, though, expats are advised to consult the tax authorities of their country of residence. All these DTAAs are more or less standard double taxation treaties and follow the guidelines of the Organization for Economic Cooperation and Development. 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: Not So Secure in Practice
There are two government schemes providing social security for the Indian workforce. Unfortunately, there is a large proportion of employees of all kinds in India who are not covered under the following schemes. India’s major social security organizations are called the Employees' Provident Fund Organization (EPFO) and the Employees’ State Insurance Company (ESIC). Although ESIC coverage in particular is being extended to ever more low-earning workers and employees, there are still hundreds of millions of people without any access to social security schemes or benefits.
In reality, a lot of employers are unwilling 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, over 90% of India’s workforce, the so-called “unorganized sector”, still has no proper claim to any form of pension or financial aid whatsoever.
Social Security for Expatriates
Expats working in Bangalore are likely to be employed in the organized sector. Therefore, you will be liable to pay social security contributions, although special private social security arrangements might be in place for expats working for multinational companies.
Expats from selected countries (e.g. Belgium) 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 their home country if their work assignment in India does not exceed 60 months. These security agreements are available to view on the Emigration Services website of the Ministry of Overseas Indian Affairs.
Similar documents have been drawn up for a variety of other countries, and talks have been initiated with even more national governments. Before moving to Bangalore, you should visit the Ministry of Overseas Indian Affairs website to see if your country has an agreement. Alternatively, your nearest Indian embassy or consulate will have more information on social security developments.
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). Quite often the company you will be working for will advise you as to what your best options are.
We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete.