Tax savings for Expats in India

General Discussions
1

Hi team,

Just want to know if anyone can suggest how can an expat save income tax in India.

The expat is from Austria.

Thank you for those who will reply

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3

Hi @Ludy,

An expat from Austria working in India can save income tax through various exemptions, deductions, and treaty benefits. Here are some key ways:

1. Check Residential Status for Taxation

  • If the expat stays in India for less than 182 days in a financial year, they may qualify as a Non-Resident (NR) and will be taxed only on income earned in India.
  • If staying for 182+ days, they become Resident and Ordinarily Resident (ROR) and are taxed on global income.

2. Utilize DTAA (Double Taxation Avoidance Agreement)

  • India and Austria have a DTAA, meaning the expat can claim tax relief to avoid being taxed on the same income in both countries.
  • Methods under DTAA:
    • Exemption Method: Income taxed in one country is exempt in the other.
    • Tax Credit Method: If taxed in India, Austria may allow credit for taxes paid in India.

3. Tax-Free Allowances & Perks

  • Expat employees can structure their salary to include tax-free components like:
    • House Rent Allowance (HRA) – If living in a rented house.
    • Leave Travel Allowance (LTA) – For travel within India.
    • Meal Coupons, Transport Allowance – Exempt to certain limits.
    • Children’s Education Allowance – Partial exemption.

4. Deductions Under Indian Income Tax Act

  • Section 80C: Can invest up to ₹1.5 lakh in schemes like PPF, ELSS, LIC premiums, etc.
  • Section 80D: Health insurance premium deductions.
  • Section 80G: Donations to eligible charities.
  • Section 10(14): Special allowances (if applicable to expats).

5. Foreign Tax Credit (FTC)

  • If tax is deducted in both India & Austria, the expat can claim Foreign Tax Credit in Austria while filing tax returns.

6. NRI Tax-Free Investments (if classified as Non-Resident)

  • Income from NRE (Non-Resident External) accounts is tax-free.
  • FCNR (Foreign Currency Non-Resident) deposits – Interest is tax-exempt for NRIs.

7. Exit Planning Before Residency Threshold

  • If nearing the 182-day limit, planning an exit before crossing the threshold can maintain non-resident status and avoid global taxation in India.

I would also suggest you to consult a tax expert in both India and Austria to optimize tax liability under DTAA provisions and ensure compliance.

Sameer

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4

thank you @Sameer1 - great information :slight_smile:

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