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Employment in India

At a Glance:

  • India has one of the world’s strongest economies, dominated by the ever-developing services industry and the manufacturing sector.
  • Tax rates in India are relatively generous and there are many bilateral agreements to make sure expats don’t pay double!
  • Private health insurance is worth considering, as Indian state hospitals are often poorly equipped, especially outside the big cities.
  • While in India, depending on your type of work, you may be eligible to join one of the Indian government’s two social security schemes: EPFO or ESIC.

Working in India means participating in one of the fastest-growing and most diverse economies worldwide. With an economically active population of nearly 512 million, the country boasts the second largest labor force on the globe, behind only China.

Although the annual GDP growth rate slowed down to 5.4% in 2012 — half of what it was in 2010 — experts say that India is still far from having achieved its full economic potential. India has shown significant signs of recovery from their slump in 2012 and, in 2016, boasted a GDP growth rate of 7.1%. An inadequate infrastructure is said to lie at the heart of their 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. Fortunately, the huge supply of candidates for skilled employment 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.

Economic Sectors in India: Strength in Numbers

The agricultural sector, while only generating 17.3% of the national GVA (gross added value) during 2016–2017, is responsible for the main source of livelihood for roughly 58% of Indians — though it is hard to say exactly. Over 51% of India’s population are in some way engaged in the agricultural sector. This includes employees in modern agricultural industries as well as traditional village farmers and their families. Apart from tea and spices, Indian farmers mainly grow rice, wheat, sugarcane, fruit, and vegetables.

The industrial sector, with a GDP share of around 29%, creates jobs for nearly 22% of people working in India. The sheer number of employees in the cement industry (more than one million) is instrumental in making India the second largest cement-producing country in the world. Other sub-sector industries that employ considerable numbers of people include textiles, transport equipment, mining, pharmaceuticals, chemicals, software, and machinery.

Last but not least, the strong (and growing) service sector is responsible for 53% of the national GDP, employing roughly 27% 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 as an umbrella term referring to those working in India’s banks, real estate firms, and insurance companies.

Taxation: Does Your Home Country Have a DTAA?

With some exceptions, foreigners living and working in India are subject to Indian taxation laws. The tax system underwent some liberal reforms in order to boost trade and investment.

Since April 2011, income tax rates are in force for people working in India: 0% for an annual income not exceeding 250,000 INR, 10% for everything between that and 500,000 INR, and 20% for the next income bracket with an upper limit of 1,000,000 INR. Finally, everyone working in India and earning more than 1,000,000 INR per year is taxed 30% of their total income.

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.

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, giving the Indian government the authority to exempt certain individuals from double taxation. To find out which specific tax rules apply to you, visit the website of the Government of India’s Income Tax Department.

The Indian fiscal year runs from April to March, with income tax returns due by the end of July. However, the financial year may be changed to match the calendar year as soon as 2018.

Insurance and Social Security in India

Social Security: Leaving the Informal Sector Untouched

India has a very basic social security system catering to a fairly small percentage of the country’s workforce. Traditionally, Indians relied on their extended families for support in the event of illness or other misfortunes. However, due to migration, urbanization, and higher social mobility, family bonds are less tight and family units much smaller than they used to be. So far, neither the state nor private insurance companies have quite stepped up to fill this gap.

There are two major social security plans in India, the Employees’ Provident Fund Organization (EPFO) and the Employees’ State Insurance Corporation (ESIC). The EPFO runs a provident fund, also known as a pension scheme, and an insurance scheme. All of these are supposed to grant EPFO members and their families benefits for old age, disability, and support in case the primary breadwinner dies.

The ESIC, on the other hand, covers low-earning employees providing them with basic healthcare and social security schemes. Originally aimed at factory workers, the coverage was extended to include greater parts of the population, e.g. employees in hospitals or educational institutions. The ESI scheme has been implemented in all states excluding Manipur and Arunachal Pradesh.

However, government enforcement strategies are not very efficient, and many employers who should be paying contributions for their staff fail to do so. Moreover, the “unorganized” sector, i.e. enterprises — mainly in agriculture — which are not legally covered by any form of social security, is disproportionately large. In 2014, around 92% of India’s labor force worked in the informal sector, which means around 370 million Indians, not to mention their dependents, were excluded from social security schemes.

Expats: India’s Excluded Employees

Anyone working in India for a prolonged period of time will have to pay social security contributions of 12% of their income if they are employed by a company covered by the EPFO. However, India has mutual social security agreements with some European countries, as well as those listed below, which entitles expats of certain nationalities to keep contributing to their social security back home making sure their benefits don’t cease when they leaving for India. Such an agreement gives the expats in question the status “excluded employee”. The conditions for these agreements differ per bilateral agreement, but, in general, it only applies to expats whose assignment in India does not exceed five years.

India has signed social security agreements with Belgium, the Czech Republic, Denmark, France, Germany, Hungary, Luxembourg, the Netherlands, Finland, Sweden, Austria, Canada, Australia, Japan, Portugal, Norway, the Republic of Korea, and Switzerland. Negotiations with additional countries are in progress. However, before you leave for India, please check with your social security administration at home if the agreement has indeed been signed and, most importantly, is officially in force. You can also check the Emigration Services website of the Ministry of Overseas Indian Affairs for up-to-date information on the subject.

Health Insurance: Private Insurances and Hospitals Take the Lead

It is highly recommended to have adequate health insurance coverage before going to India! Most international private insurance companies are now moving into the Indian market. While most expats are likely to work for companies that are part of the EPFO or ESIC, there are bound to be problems with public healthcare provisions.

Public facilities are often poorly maintained and lacking in state-of-the-art medical equipment. In more rural areas, people have been known to travel for days to find a hospital with adequate facilities for their injury.

This is not to say that good medical treatment is not available in India, quite the contrary is true, in fact. However, do keep in mind that many hospitals fall within the private sector, which is not covered by public health insurance — the private sector makes up 74% of hospitals and 40% of hospital beds in India.

India: Where Shortcomings Become Opportunities

The most common route which leads foreign employees to India is the traditional expat assignment. Due to the country’s lasting economic growth and a largely untapped market, multinational companies as well as new investors open branches and businesses in India. One key factor in this development is India’s young and rapidly growing workforce.

However, as mentioned above, the country is still lacking in comprehensive and efficient infrastructural provisions. While, of course, presenting a major problem to foreign companies and their employees, this shortcoming could also be seen as a business opportunity. Not only are there significant tax incentives for businesses willing to engage in the development, maintenance, or operation of infrastructure facilities, but the market for such enterprises is huge.

When it comes to social infrastructure, the private healthcare sector in particular is generally considered to be a goldmine for foreign investors and qualified medical personnel from abroad, as there is currently a lack of sufficient medical professionals. Less conventional employment opportunities for potential expats can be found in teaching or tourism, two other areas where demand still exceeds supply. Some major international job search engines include Monster and NaukriHub, which also cover the Indian market. Shine is also a popular Indian job website.

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