Income Tax

Individuals are required to pay tax on remuneration, income from property, professional and business income, capital gains and other sources.

A foreign national in regular employment/service contract in India in a foreign company or in an Indian Company is taxable on his earnings in India, including on income received outside India relating to employment in India. Further, the global income of foreign nationals residing in India for two years or more will become taxable in India from the third year of their stay in India.

Individual Income tax structures (effective 1 April, 2011

Income tax liabilities are calculated on the basis of a slab structure, providing for standard deductions, and special tax saving schemes. Deductions include premium paid for insurance, contributions to public provident funds, etc.

Taxability of Income Items

Note:
a) Compensation paid for services performed in India is taxable in India, regardless of where the compensation is paid. Remuneration includes any salary payable to the employee for a rest or leave period, which is preceded or followed by the performance of services in India and is provided for in the employment contract.
b) Tax paid by the employer us a taxable perquisite in the hands of the employee. However tax paid on non-monetary benefits provided to an employee is not treated as income in the hands of the employee subject to the satisfaction of certain conditions.
c) The taxable value of a perquisite with respect to rent- free housing is calculated using a formula. d) Relocation expenses incurred at the time of transfer are not taxable to the employee, subject to the satisfaction of certain conditions.
e) Medical expenditure or reimbursements are exempt, subject to certain conditions and limit..
f) This item is not taxable for individuals who are considered resident and not ordinarily resident or who are considered non-resident, provided these are not received in or directly remitted in India.

For details of available deductions and exemptions, please refer to Income Tax Act (http://law.incometaxindia.gov.in/Dit/Income-tax-acts.aspx).