Everything You Need to Know About Your Expat Taxes in India

Living as an American Expat in India

India is home to more US expats than almost any other country—and it isn’t hard to see why. India has plenty to offer with a vibrant culture, delicious food, and ample career opportunities. But what are India’s tax policies like for an American living overseas? Read on for all the answers you need.

Indian Taxes at a Glance

What Are Expat Taxes like for Americans Living in India?

If you live in India, you must pay taxes to the Indian government. Unfortunately, this doesn’t cancel your US tax obligations. The US has a citizenship-based taxation system, meaning citizens must report their income to the IRS regardless of where they live.

As you might expect, this can complicate your expat taxes. To help clear up any confusion, let’s take a closer look at how India may help you pay taxes as an American living overseas. 

Who Has to File Taxes in India?

India has a residence-based taxation system. There are three categories of tax residency under Indian law:

• Resident and ordinarily resident (ROR)
• Resident but not ordinarily resident (RNOR)
• Non-resident (NR)

Expats who qualify as ROR are taxed on their worldwide income. Expats who are RNOR or NR are only taxed on income that comes from an Indian source.

Who Qualifies as a Tax Resident in India?

As an American expat, you will be considered a resident of India if you meet either of the following standards:

• You spend at least 182 days in India in a single year
• You spend at least 60 days in India in a single year, as well as at least 365 days over the previous four years

If you do not meet these standards, you will be considered a non-resident for tax purposes. If you qualify as a resident, you will be either a ROR or an RNOR. (See the above section for more.) You will be considered an RNOR and taxed as a non-resident if either of the following is true:

• You have been a non-resident for at least nine of ten previous tax years.
• You have been in India for less than 730 days in the previous seven years.

Otherwise, you will be considered a ROR and taxed on your worldwide income.

What Types of Taxation Does India Have?

Income Tax

India taxes both residents and non-residents at the same progressive rates, ranging from 0% to 30%. Below, you can see the standard 2022 Indian income tax rates. (All amounts given in INR.)

For taxpayers between the ages of 60 and 80, there is a basic exemption of 300,000 INR. For taxpayers 80 and older, this exemption increases to 500,000 INR.

India also offers a set of alternate tax rates that Indian taxpayers can opt for. These rates are generally lower, but unlike the standard rates, they cannot be reduced further through deductions or exemptions. The current rates for the optional alternate tax are shown below. (All amounts are given in INR.)

Which tax scheme is better for you? That will depend on your unique tax situation and how many deductions or exemptions you can claim. A qualified expat tax professional will advise you on the best choice in your case.

Social Security Tax

Just like the US, India maintains a social security program funded by a payroll tax. This tax is mandatory for any business employing 20 or more workers and optional for all smaller businesses. Employees contribute 12% of their salaries to this fund, and employers contribute a matching 12%.

Capital Gains Tax

India taxes capital gains resulting from selling various assets, including property and securities. Capital gains are taxed at different rates based on residency status and the length of time the seller held the asset.

• Long-term capital gains are generally taxed at 10%
• Short-term capital gains are generally taxed at 15%

Value-Added Tax

India imposes a value-added tax (VAT) on certain goods and services. The rate for this tax ranges from 5% to 28, but it is most commonly set at 18%.

Property Tax

Property is taxed at the local level. The rate for property taxes varies by region.

Corporate Income Tax

As with individual taxation, India’s corporate tax policies are based on residency. Resident companies are taxed on their worldwide income, while non-resident companies are taxed on only their Indian-source income. For domestic companies, the rate ranges from 25% to 30%. For foreign companies, the rate is fixed at 40%.

When Are Taxes Due in India?

The Indian tax year starts on April 1 and ends on March 31 of the following year. Tax returns are due on July 31. In cases where a taxpayer is required to have their books of account audited, the due date is pushed back to October 31.

Does the US Have a Tax Treaty with India?

Yes. The US-India tax treaty defines which country has the right to tax a given income stream, removing the risk of double taxation. In most cases, you will pay your taxes to the country in which you are considered a resident.

Does the US Have a Totalization Agreement with India?

No. The US and India do not currently have a totalization agreement in place. This means that Americans who live and work in India may be required to contribute to both nations’ social security systems.

Get Help with Your Expat Taxes Today

What expat taxes do Americans living in India have to pay? Hopefully, this guide has helped answer that question. If you still have questions, we can answer those, too.