Volume 1, Issue 3


9th December, 2009


Business Alert
Relaxation for Expatriates Under the Indian Exchange Control regulations

Presently, foreign nationals and Indian citizens employed with foreign company on deputation to the office / branch / subsidiary / Joint Venture in India of such foreign company are permitted to receive only up to 75 per cent of their salary by credit to their bank accounts outside India. In other words, the foreign company was under an obligation to remit 25 per cent post tax salary to the expatriate’s bank account in India.

The Reserve Bank of India (RBI) has now permitted (vide notification released in early December but dated 30th September 09) the aforesaid individuals to receive full salary outside India in their overseas bank account provided Indian income tax is paid on the entire salary in India.   The requirement  for  payment  of   Indian
 
The Reserve Bank of India (RBI) has now permitted expatriates to receive full salary outside India in their overseas bank account provided Indian income tax is paid on the entire salary in India.
income tax on entire salary is in line with current Indian income tax laws which provide that an expatriate’s entire salary is taxable in India in as much as it relates to services rendered in India.

The notification also indicates that in case of a foreign national being in employment with an Indian company, the entire salary received by him in India in INR can be remitted to a foreign currency bank account outside India, provided Indian income tax is paid on entire salary in India.

The above liberalization would benefit the expatriates by insulating them from foreign exchange rate fluctuations as also assist expatriates to continue to make social security contributions in their home country. Employers and expatriates should now review their employment arrangement to take benefit of the above change.