Working in Chennai?
Chennai: Social Security, Taxes, Healthcare
Sadly, India’s social security system is not very well developed at all. It only serves a minority of the country’s millions-strong workforce. If you are moving to Chennai as an expat, do not necessarily expect the same state benefits that you might receive at home.
Looking to the Future: Social Security in Chennai
India’s framework for social security in cases of old age and permanent, debilitating disability is composed of various plans open to different sections of the population:
- The Employees’ Provident Fund (EPF) is for people earning up to 15,000 INR a month or employed in a company with more than 20 staff members. Employees with an income of less than 15,000 INR can contribute voluntarily, but their employers are still obliged to pay their share.
- A gratuity scheme originally set up for workers in factories, mines, oil fields, ports, and railways, has now expanded into the Employees’ State Insurance Corporation (ESIC) providing low-income families with basic healthcare and social security.
- There is social assistance for elderly people in need.
All these various schemes are supposed to ensure that older people and retirees have a minimum pension or a lump sum paid upon their retirement to provide them with a subsistence-level income at the very least.
Moreover, the Employees’ State Insurance scheme helps about 15–16 million employees and their dependent family members to get access to medical benefits, maternity pay, cash benefits in case of unemployment, and compensation for work-related accidents and injuries.
Social Security for Expatriates
Before moving to Chennai, you should check the Emigration Services website of the Ministry of Overseas Indian Affairs. This will give you up to date information on the countries with which India has entered into a bilateral social security agreement.
These agreements may exempt short-term expats from having to pay social security contributions in India. These agreements ensure you do not lose the benefits obtained via your contributions in your country of origin once you’ve left for India. If you are from one of the countries with such an agreement and you will be staying in India for less than five years, you will be eligible to keep paying social security contributions back home.
Regardless, when you move to India it is definitely worth looking into private pension plans, which might provide you with greater security in the long term. Get in touch with your social security office, your insurance providers of existing pension schemes, and your bank to talk about retirement provisions and financial planning.
Private Healthcare — The Trick to Getting a Hospital Bed
If your company participates in either of the above-mentioned social security plans, (basic) health insurance will be included. However, around half of all hospital beds, and most good hospitals, are privately owned. Therefore it would be wise to sort out private health insurance coverage before you leave for Chennai.
International private insurance companies have started expanding into India. Check these out while you are still in your home country. It is also a good idea to make sure all of your standard vaccinations (e.g. diphtheria, tetanus, polio, mumps, measles and rubella, influenza, and pneumonia) are up to date. It is also advised to get immunizations for hepatitis A and B, typhoid fever, rabies, meningitis, and Japanese encephalitis.
While you are in Chennai, one of the best hospitals, should you need it, is the Apollo Hospital. It belongs to the biggest Asian healthcare group of the same name. The premises are modern and they provide a decent quality of care. Otherwise, please see this list of all hospital numbers in Chennai.
Taxation: Are You One of Chennai’s Extraordinary Residents?
The taxation of expats living and working in Chennai is primarily linked to their resident status. The easiest definition of fiscal residency in India is based on your physical presence in the country. You count as a fiscal resident if:
- you are physically present for 182 days or more of the tax year (1 April till 31 March of the following calendar year)
- or you are physically present for 60 days or more of the tax year and have been present for at least 365 days in the previous four tax years.
If you do not fall into either of these groups, you are classified as a non-resident (NR) for tax purposes. If you are a fiscal resident, though, you can either be a resident and ordinarily resident or a resident but not ordinarily resident (ROR vs. NOR). If you are considered a NR or NOR, you will only be taxed on your Indian income, while RORs have to pay taxes on their worldwide income.
As a rule of thumb, expats coming to work in Chennai are often deemed NORs for the first two or three years of their stay in India. Then they will be taxed on their worldwide income unless they are eligible for income tax relief through a Double Taxation Avoidance Agreement. Check with your tax office at home if your country of origin has a DTAA with India.
Income Tax and Expat Perks
If you have to tax your income in India, this includes your regular salary, all bonuses and commissions, utilities (including paid domestic staff provided by the employer), children’s school fees, and extra allowances. Medical benefits and housing benefits (like company accommodation) will be taxed, but there may be certain concessions. Travel costs for your move to India, a company car, or relocation expenses may even be exempt from income tax in India.
If you are an ROR in Chennai, then you will have to pay Indian income tax. The Indian government introduced new rules for taxation in April 2011. Every income bracket is taxed as follows:
- 0% for an annual income below 250,000 INR
- 10% for an income between 250,000 INR and 500,000 INR
- 20% for an income between 500,000 INR and 1,000,000 INR
- 30% for an income over 1,000,000 INR
Bear in mind that anyone over the age of 60 is considered a senior citizen, making the lowest tax threshold is higher, namely 300,000 INR.
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