The employment of expatriates and foreign nationals involves several complex issues. Whist the Indian economy and market place has generally been less attractive to expatriates and foreign workers, they are still employed to provide training and development to local employees, for technology transfer, compliance of joint ventures and license agreements and so on. With the liberalization of the Indian economy in the early nineties and subsequent entry and establishment of many multinational companies, the need to employ expatriates and foreign nationals became more obvious
Normally, a foreign citizen who visits India and renders services incurs tax liability on the income earned in India. When an expatriate works in India, their entire salary-related income is subject to tax, even if it is paid outside India. Expenses incurred by an employer in moving an expatriate to and from India and home-leave airfares are not considered taxable income in India. Similarly, payments made in an expatriate’s home country as retirements benefits are also not considered as income earned in India. For tax purposes, salary includes base salary, cost-of-living allowances, bonuses, ex-gratia, reimbursement of school fees, utilities, house rent, transportation, tax reimbursements and other payments the company makes on behalf of the employee. Certain in-kind benefits, such as company-lased accommodations, security guards, provision of car with driver, are all taxable on a concessional basis.