Tax In India

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in India is complying with the country’s tax system. As well as paying tax in India, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.

How do I calculate my taxable income: 

If you’re working in India under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in India for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in India, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in India through PAYE is left with the prospect doing everything themselves.

Do you know much about Indian Tax Law? Does India have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in India can range from 0 to 30 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in India, we can supply it to you free of charge.

Using an Umbrella Company for Income Tax : 

Contractors in India are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. An Indian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Indian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Indian tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in India, many of whom are experts in tax and immigration laws. If you have any questions about tax in India, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Indian work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in India but without the overhead of directly dealing with the Indian tax authorities. Get in touch with us today for some reliable advice on tax in India!

When Do You Need to Lodge Your Tax Return?: 
31 July
Tax Filing Deadline : 
31 July
Can you file it online? : 
Yes, https://incometaxindiaefiling.gov.in/home
Currency: 
Indian Rupee (INR)
Tax-free Threshold in: 
INR250,000*
Grossed Income: 
0 - 250,000*
Tax Rate: 
0%
Grossed Income: 
>250,000 - 500,000
Tax Rate: 
5%
Grossed Income: 
>500,000 - 1,000,000
Tax Rate: 
20%
Grossed Income: 
>1,000,000
Tax Rate: 
30%
How long does it take to set up: 
12 days
How much does it cost: 
INR7,375 – INR9,325 + INR100 (per Director Identification Number)
Is it easy? : 
Starting a Business Rank: 156/190 (Source: World Bank)
How to File Taxes in: 

Tax Year: 1 April – 30 March

Step 1: Register for e-Filing

Register on the Income Tax Department’s e-Filing website here. You will need your PAN. This is 10-digit alphanumeric number, issued in the form of a laminated cared, by the Income Tax Department. If you do not have a PAN, you can apply for one here.

Step 2: Login to e-Filing

Once you have registered for e-Filing, you can sign in here, with your User ID, Password, Date of Birth and Captcha.

Step 3: File Taxes

Go to e-File and click on ‘Prepare and Submit ITR Online’. Select the Income Tax Return Form ITR 1 (for individuals receiving salary, rent and interest income) or ITR 4S (for individuals receiving business, salary, rent and interest income) and the Assessment Year. ITR 1 and ITR 4S are the forms available for filing online.

Fill in the details and click ‘Submit’. Upload Your Digital Signature Certificate (if applicable).

Step 4: Sign and Submit the ITR-V

Upon submitting successfully, the ITR-V is displayed. Click on the link and download the ITR-V. Print, sign and submit the ITR-V to the Central Processing Centre (CPC) in Bangalore within 120 days of the date of filing. Check your email/SMS for reminders on non-receipt. You can check whether it has been received by clicking ‘e-Filing Processing Status’ under the ‘My Account’ tab on your e-Filing account.

If you used a Digital Signature Certificate, there is no need to mail your ITR-V.

Notes: 

*The tax-free threshold varies depending on an individual’s age. For resident individuals over 60 years of age but less than 80 years of age, the threshold is INR300,000. For resident individuals over 80 years of age, the threshold is INR500,000.

Surcharge for High Income Earners: An additional surcharge of 10% is levied on income exceeding INR5 million and less than INR10 million. For income exceeding INR10 million, the surcharge is 15%.

Education Cess: Education Cess at 2% and Secondary and Higher Education at 1% is levied on the amount of tax and surcharge.

Tax Rebate: Residents are eligible for a tax rebate of the lower of the income tax or INR2,500 where their total income is below INR350,000.

Sample Tax Calculation:

Employment Income = INR5,100,000

  1. Tax on income bracket: INR112,500 + (30% x INR4,100,000) = INR1,342,500
  2. Surcharge: 10% x (INR5,100,000 – INR5,000,000) = INR10,000
  3. Education Cess: (1% + 2%) x (INR1,342,500 + INR10,000) = INR40,275

Total Tax = INR1,392,775

Does the 183 day rule apply in: 

Yes

When do you become a tax resident in: 

Residents in India are divided into 2 categories:

  1. Resident and ordinarily resident (ROR)
  2. Resident but not ordinarily resident (RNOR)

You become ROR in India when:

  • You are present in India for a period or periods totalling 182 days or more during the tax year; or
  • You are present in India for 60 days or more during the tax year and 365 days or more during the preceding 4 tax years; or
  • (i) You are a citizen of India, person of Indian origin or citizen of India who leaves India for employment abroad or as a crew member of an Indian ship, (ii) you are present in India for 182 days or more during the tax year and (iii) 365 days or more during the preceding 4 tax years.

If the above 2 conditions are not met, the individual is a non-resident in India for that tax year.

You become RNOR in India when:

  • You have been a non-resident in India in 9 out of 10 tax years preceding the current tax year for which residential status is being determined; or

You have been physically present in India for less than 729 days during the 7 tax years preceding the tax year for which residential status is being determined.

Am I taxed on my global income in: 

RORs are taxed on their worldwide income. NRORs and non-residents are taxed on their India-sourced income only.

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