Engagement of Expats in India

Introduction

“Expats”, as the term suggests, refers to the expatriates who are individuals who temporarily or permanently reside outside of their native place of origin or country and are often professional or skilled individuals who may intend to return to their place of origin or sometimes, permanently reside in the host country.

India, in recent years, has become an increasingly popular destination for expatriates who plan to move into the country for a variety of reasons such as the growing rate of economy, comparatively lower costs of living and culturally rich heritage. Moreover, with the recent trend of a number of multi-national corporations, international organizations and other players which have been investing in India, India has become a favorable destination for domestic as well as international expats investing and spending their lives in India.

India and Expats – A detailed analysis

There are a number of factors that have been in favour of India becoming a preferred destination for expats in India which are as follows:

1. Healthcare Facilities – India ranks 66^th in healthcare facilities across the globe which is fairly reasonable as compared to various other countries.[1] Moreover, the cost associated with healthcare makes it affordable to nearly every segment of society. Public healthcare is nearly free in India for eligible persons (as applicable) with a huge number of doctors and institutions working towards improvement of healthcare.
2. Cost of Living – the cost of living, which refers to the cost associated with spending one’s life including necessary and basic expenditures in the form of healthcare, education etc., is significantly lower as compared to various other countries. General consumer expenses are shown as significantly lower for individuals with a wide number of alternatives available for people to seek employment opportunities or carry out business activities in order to earn their livelihood.[2]
3. Employment opportunities in India – Even though India has become an increasingly globalized and attractive workspace with multiple multi-national companies coming into India and employing English–speaking expats, the economy has been spreading exponentially making expats from England, United States of America and other countries have a homely feeling and providing adequately comfortable lifestyle.

Many firms, consulting offices and other companies have been spreading their offices and taking up consultants from numerous other countries. Additionally, in the post-COVID – 19 world, virtual offices and companies have opened up new avenues for the online or work from home facilities making it easy for them to travel to and from their native countries or places of origin or work.

• Education and allied vocational training – India is also a hub for educational and vocational training. Moreover, public education in India has significantly less cost as compared to private schools and therefore is affordable to a significant population of the society. Therefore, this is one of the most accessible and affordable destinations for expats.

Despite the above benefits, there are numerous other factors which have an immense potential for growth and development in the expats sector in India. For instance, in the taxation sector – the determination of residential status and scope of total income is considered as a factor for determining the resident and non-resident category for imposing taxes in India. In order to be liable to pay income tax, an expat would have to fulfill either one of the following categories:

1. Must have been in India for a total period of 182 days or more; or
2. Must have been in India for at least 365 days in the preceding 4 years and for at least 60 days in that year[3] . Basis the nature of arrangements entered into between the entities that are sending and receiving expats, the consideration payable to expats may also be subject to deductions at source[4] and goods and services tax[5] for import of services of expats. However, there are various other technicalities and other issues which lead to the formulation of the scope of total income in the country and its subsequent taxability.  Additionally, expats may be exempted from tax liability based on the Double Taxation Avoidance Agreement entered by India with the country of their origin.[6] In light of its intricacy, this system needs to be revamped and improved in order to develop a more expat-friendly system.

Secondly, there is a lack of exposure to social security obligations which is present in numerous other countries. Although India does not boast of a comprehensive social security regime for expats, the Employees Provident Fund and Miscellaneous Provisions Act, 1952 along with schemes formulated thereunder covers expats within its ambit under the ‘International Worker’ category.[7]  However, its applicability would depend on existing social security agreements between the countries. The same would not be applicable if the expat is already subject to a social security program in their home country.[8] India would need to build a robust social security system to cater to the needs of the expats in order to make India more attractive to expats.

Conclusion

The system of expats in India would act in a symbiotic relationship for both India and the expats since the expats would get greater exposure to cheap healthcare, education and access to numerous opportunities while the country would also be able to obtain knowledge transfer, availability of western standards, strengthening of the inter community and cross border relations and inflow of foreign exchange.

The cost of sending expats to India and other factors such as red-tapism may however be a cause of delay to the expats but the government in the past years has started to take steps towards eradication of the non-necessary measures and promotion of the easy–travel system in the country.

FAQs

[1] Global Health Security Index Report (2021)- 2021 Report & Data – GHS Index;

[2]Comparative analysis of cost of living of countries (2022)- Cost of Living by Country 2023 (worldpopulationreview.com);

[3] Section 6 (1) of the Income Tax Act, 1961;

[4] Section 195 of the Income Tax Act, 1961;

[5] Section 7(1) (b) of the Central Goods and Services Act, 2017;

[6] Section 90(1) of the Income Tax Act, 1961;

[7] Paragraph 83 (2) of the Employees Provident Funds Scheme, 1952;

[8] Paragraph 83 (1) of the Employees Provident Funds Scheme, 1952.

King Stubb & Kasiva,
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