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Indian Currency
Indian Rupee (INR)
The Capital of India
New Delhi
Time Zone in India
GMT+5:30
Important Facts About the Country of India
Introduction to India
India, known historically as the land of the Indus, traces its name back to the ancient Persian term “Hindu,” which finds its roots in the Sanskrit word “Sindhu,” signifying the mighty Indus River. The ancient Greeks, recognizing its inhabitants as “Indoi” (Ἰνδοί), aptly dubbed them “The people of the Indus.”
Officially designated as the Republic of India, this South Asian nation boasts the title of the world’s most populous democracy, with over 1.3 billion people. Spanning vast territories, India ranks as the seventh-largest country by land area.
Geographically, India is flanked by the Indian Ocean to the south, the Arabian Sea to the southwest, and the Bay of Bengal to the southeast. Its borders touch Pakistan to the west and extend to China, Nepal, and Bhutan in the northeast, while Myanmar (Burma) and Bangladesh lie to the east. Nestled adjacent to the Indian Ocean, India shares maritime borders with Sri Lanka and the Maldives.
The Andaman and Nicobar Islands further expand India’s maritime reach, sharing borders with Thailand and Indonesia.
New Delhi serves as the capital, overseeing a diverse administrative landscape consisting of 29 states and 7 union territories, each with its administrative, legislative, and judicial capitals.
What to Know about India’s Geography
Land Area: 2,973,193 square kilometers
Water Area: 314,070 square kilometers
Total Area: 3,287,263 square kilometers
Climate in India
India exhibits a remarkably diverse climate, influenced significantly by its varied topography.
Religions Observed in India
Hindu: 79.8%,
Muslim: 14.2%
Christian: 2.3%
Sikh: 1.7%
Other and unspecified: 2%
Languages Spoken in India
In India, English holds the status of a subsidiary official language and serves as the predominant language for national, political, and commercial communication. Hindi, on the other hand, is the most widely spoken language, serving as the primary tongue for 41% of the population. Alongside Hindi and English, there are 14 other officially recognized languages in India: Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, and Sanskrit. Additionally, Hindustani, a popular variant of Hindi/Urdu, is widely spoken throughout northern India, although it does not hold official language status.
The Culture of India
Indian culture, often characterized as a fusion of diverse cultures, encompasses the vast expanse of the Indian subcontinent and reflects a rich history spanning several millennia. Influenced profoundly by Dharmic religions, Indian culture stands as the birthplace of Hinduism, Buddhism, Jainism, Sikhism, and other religions, collectively referred to as Indian religions.
Tax and Social Security Information for Employers in India
Personal Income Tax in India
Individual taxation in India primarily relies on the individual’s residential status in the applicable tax year. This status is evaluated independently for each tax year and is determined by the individual’s physical presence in India during the relevant tax year, as well as in past years.
The following types of residential status are envisaged for an individual:
Residency in India is further categorized into two groups:
- Resident and Ordinarily Resident (ROR)
- Resident but Not Ordinarily Resident (RNOR)
Non-resident in India (NR)
Under Indian tax laws, the scope of taxation varies based on the residential status of an individual:
- Resident and Ordinarily Resident (RORs) are liable to pay tax in India on their worldwide income, regardless of where it is earned or received.
- Residents but Not Ordinarily Resident (RNORs) are subject to tax in India only on income earned or received in India, income arising from a business controlled in India, or income from a profession set up in India.
- Non-Residents (NRs) are taxed in India only on income earned or received in India.
- RNORs and NRs are not taxed on income earned and received outside of India.
Employees must obtain a personal account number for tax withholding purposes and file an annual Indian tax return.
Personal Income Tax Rates
In India, two tax systems exist: the Old Tax Regime and the New Tax Regime. By default, employees are taxed under the New Tax Regime, but they have the option to switch to the Old Tax Regime once in a financial year through the Employee Self-Service Portal.
The following income tax slab rates are applicable for the Year of Assessment 2023/24.
New Tax Regime:
| Income Slab (INR) | Tax on lower bracket (INR) | Tax Rate on Excess (%) |
|---|---|---|
| Up to 300,000 | – | No tax |
| From 300,001 to 600,000 | – | 5 |
| From 600,001 to 900,000 | 15,000 | 10 |
| From 900,001 to 1,200,000 | 45,000 | 15 |
| From 1,200,001 to 1,500,000 | 90,000 | 20 |
| Above 1,500,000 | 150,000 | 30 |
Old Tax Regime:
| Income Slab (INR) | Tax on lower bracket (INR) | Tax Rate on Excess (%) |
|---|---|---|
| Income up to INR 250,000 | – | No tax |
| Income from INR 250,001 – INR 500,000 | – | 5.0 |
| Income from INR 500,001 – INR 1,000,000 | 12,500 | 20.0 |
| Income more than INR 1,000,000 | 112,500 | 30.0 |
Surcharge
In addition to income tax, a surcharge is to be levied at the following rates:
New Tax Regime:
| Total Income (INR) | Surcharge Rate |
|---|---|
| Up to 5,000,000 | 0 |
| From 5,000,001 to 10,000,000 | 10 |
| From 10,000,001 to 20,000,000 | 15 |
| Above 20,000,000 | 25 |
Health and Education Cess
A health and education cess at the rate of 4% of the income tax and surcharge (if applicable) will be levied to compute the final tax liability of individuals.
Tax Rebate:
A rebate is available to a resident individual if their total income does not exceed INR 5 million. The rebate amount shall be 100% of the income tax or INR 12,500, whichever is less.
Surcharge
A surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:
| Nature of Income | Up to Rs. 50 lakh | More than Rs.50 lakh but up to Rs. 1 crore | More than Rs.1 crore but up to Rs. 2 crore | More than Rs.2 crore but up to Rs. 5 crore | More than Rs. 5 crore but up to Rs. 10 crore | More than Rs. 10 crore |
|---|---|---|---|---|---|---|
| Short-term capital gain covered under Section 111A | Nil | 10% | 15% | 15% | 15% | 15% |
| Long-term capital gain covered under Section 112A | Nil | 10% | 15% | 15% | 15% | 15% |
| Any other income | Nil | 10% | 15% | 25% | 2% | 25% |
Personal Income Tax Deductions
For income computation purposes, the total taxable income under all heads, after deductions under Chapter VI-A and Section 80C, will be considered. Some examples of deductions allowed under Chapter VI-A and Section 80C at the time of filing income tax returns include:
- Public Provident Fund (PPF) Account contributions
- Tax Saving Fixed Deposits
- Tax Saving Mutual Funds investments
- Senior Citizen Savings Scheme deposits
- National Savings Certificate investments
- Contributions to the National Pension Scheme
- Contributions to Pension Funds
- Payments of Medical Insurance Premiums
- Payments for the treatment of specified diseases
- Donations made to eligible charitable organizations
Employer Requirements
- Employers are accountable for deducting tax from employees’ salaries each month, as applicable. Subsequently, they are required to remit the deducted amount to the government by the seventh day of the subsequent month.
- Employers are also obligated to submit quarterly tax statements, which detail employee-wise salary and tax information, at the conclusion of each quarter.
- Based on the information provided in the quarterly tax statements, employers issue Form 16 to employees at the end of the year. Form 16 serves as a yearly salary and tax statement for employees.
- Employees are required to file their individual tax returns based on the information provided in the Form 16 issued by their employer.
- Form 16 is a comprehensive yearly salary tax statement issued by employers to employees. It comprises two parts: Part A and Part B.
- Part A of Form 16 is extracted from the income tax website (TRACES). It serves as a summary of the quarterly tax statements submitted by employers.
- Part B of Form 16 provides detailed information on salary components, taxable perquisites, exemptions, deductions, total tax liability, and taxes deducted by the employer.
- Form 16 is issued to employees by June 15th each year.
Local Income Taxes
Profession taxes are levied by specific states on individuals. Despite their minimal amounts, they are initially included in the total income and subsequently treated as deductible when computing taxable income.
Social Security in India
The Employee Provident Fund (EPF) stands as a cornerstone savings platform in India, particularly for individuals employed in private sector organizations. This provident fund is established with the aim of providing financial security and stability to employees. Typically, contributions to these funds commence upon employment and are made on a monthly basis. The objective is to enable employees to set aside a portion of their salary each month, which can then be utilized in the event of retirement or if the employee becomes temporarily or permanently unable to work.
Provident fund department has provided three contribution options to choose from:
- Restricts employee and employer provident fund contribution to a maximum of 12% of INR 15,000.
- Restricts employer provident fund contribution maximum to INR 15,000 and deducts employee provident at actual.
- No restriction; both the employee and employer contribute 12% of Basic + DA.
Thresholds:
Social security through provident fund applies when the employee count reaches 20 or more. However, if the employee count is less than 20, the company can opt for voluntary provident fund registration if the majority of the employees grant consent for such registration.
Below is a table illustrating the rates of contribution for EPF (Employee Provident Fund), EPS (Employee Pension Scheme), EDLI (Employee Deposit Linked Insurance), and administrative charges in India.
| Scheme Name | Employee Contribution | Employer Contribution |
|---|---|---|
| Employee Provident Fund (EPF) | 12% | 3.67% |
| Employee’s Pension Scheme (EPS) | 0 | 8.33% |
| Employee Deposit Linked Insurance (EDLIS) | 0 | 0.5% (capped at a maximum of INR 15,000) |
| EPF Admin charges | 0 | 0.5% of INR 15,000 or of Basic Salary |
| Worker’s Compensation Insurance | 0 | Rate varies annually |
The table presented above serves as a general indication. However, the actual rates charged by GoGlobal may vary.
Payment of contributions:
A monthly deduction of the employee’s contribution is made from the employee’s salary, and this amount must be remitted to the provident fund authority along with the employer’s contribution and administrative charges by the 15th of the following month. The provident fund authority provides an online payment facility, and payments must be made online according to the guidelines provided by the provident fund authority.
Set-up and enrollment process:
- The employer is obligated to submit an online application along with various documents, including address proof, a list of board of directors, a roster of employees, and salary details, among others.
- Once the application is received and all documents are verified, the provident fund authority will issue a registration certificate, a registration number, and website login details to the employer.
- Upon receiving the aforementioned details, the employer is required to generate an ECR (Electronic Return) and proceed to make an online payment.
Employee State Insurance (ESI)
Registration under the Employee State Insurance (ESI) scheme is mandatory for the manufacturing industry if the employee count reaches 10 or more. For other companies, this requirement applies to employers with headcounts of 20 or more. Employees with a monthly salary of INR 21,000 or less are covered under this benefit. However, companies provide health insurance to employees who are not covered under ESI.
Types of Employee Provident Funds
If the number of employees exceeds 10, employers have three options for contributing to the provident fund of their employees:
- One option for employers with more than 10 employees is to maintain an un-exempt fund, such as the Employee Provident Fund (EPF), under the Employees’ Provident Fund Organization (EPFO). Un-exempted firms are those that manage the PF accounts of their employees with the EPFO. Currently, there are over five crore active subscribers whose accounts are being managed by the EPFO.
- Another option for employers with more than 10 employees is to maintain a company-run exempt fund, such as an EPF Private Trust, recognized by the Employees’ Provident Fund Organization (EPFO) and ensuring it pays at least the same interest rate as the EPF. These EPF trusts perform similar duties and responsibilities as the EPFO. They are formed by firms to manage the money and accounts of their workers themselves. Companies with EPF Private Trusts are exempt from filing provident fund returns. Members of these trusts enjoy income tax and other benefits similar to EPFO subscribers. However, pension benefits are only payable through the EPFO. Companies such as TCS or Accenture have their private provident fund trusts.
- Employers can choose to invest in a company-run excluded fund, which operates independently of EPFO regulation but is established with approval from the resident income tax commissioner. This fund manages all investments and fund management internally, operating under self-regulation by the company.
Benefits to the Employee in India
Expatriates
Severance Payments
Severance payment is a mandatory requirement for employers in India. The procedure for severance payment varies depending on the circumstances, as outlined below:
- Voluntary resignation: When an employee chooses to resign voluntarily, whether due to retirement, resignation, absconding, or failure to report to work without notice for three consecutive days, the resignation must be accepted by the employer. Once accepted, the employee is typically required to serve a notice period as outlined in the employment contract (usually a minimum of 30 days), unless waived by the employer.
An employee is entitled to receive gratuity upon termination of employment, provided they have completed at least five years of continuous service, with certain exceptions for cases of death or disability. Gratuity is calculated as 15 days’ wages for each completed year of service, with any part of a year exceeding six months counted as a full year. The maximum amount of gratuity payable under the Payment of Gratuity Act is INR 1,000,000. Employers have the discretion to pay amounts exceeding this statutory limit.
Employee Tax Planning
Employers may offer various tax-saving elements to employees based on individual tax planning needs.
Some components that are partially tax-exempt include:
Standard deduction: INR 50,000 per year
House Rent Allowance (HRA): the amount of rental allowance will be exempted from income tax at the lower of the following:
- Actual HRA received from the employer.
- Rent paid minus 10% of basic salary.
- 50% or 40% of basic salary, depending on whether the employee resides in a Metro or non-Metro city (50% for Metro cities and 40% for non-Metro cities).Termination initiated by employer: If termination is initiated by the employer due to misconduct by the employee, the specific misconduct should be clearly defined in the employment handbook, policies, or employment contract.
Per diem allowances in India are not taxable if they are deemed reasonable and justifiable, provided there is proper documentation in place. This exemption typically applies to business-related expenses incurred by the employee.
Tax saving allowances, specified under section 10 of Income Tax Act of India. Some of the examples are as below:
- HRA
- Leave Travel Allowance
- Children Education/Hostel Allowance
Some tax free perquisites:
- Car/driver expenses reimbursement
- Telephone expenses reimbursement
- Meal coupons
- Employer contribution to provident fund is tax free up to 12% of Basic salary.
Common benefits for MNCs to give to their expats include telephone reimbursement, leave travel allowance, meal coupons, and children education/hostel allowance.
Employee’s Pension Scheme (EPS)
The Employees’ Pension Scheme (EPS) of 1995 provides various pension benefits, including disability pension, widow pension, and pensions for nominees. This scheme replaced the earlier Family Pension Scheme (FPS).
Under the EPS, funding is sourced by diverting 8.33% of the employer’s monthly contribution from the Employee Provident Fund (EPF). However, this contribution is capped at 8.33% of INR 15,000 annually, which equates to INR 1,250 per month. Additionally, the government contributes 1.17% of the worker’s monthly wages to the EPS fund.
The purpose of the scheme is to provide for:
- Superannuation Pension: Applicable to members who have completed 20 years of eligible service and retire upon reaching the age of 58 years.
- Retiring Pension: Granted to members with 20 years of eligible service who retire or cease employment before reaching 58 years of age.
- Permanent Total Disablement Pension: Provided to members who suffer permanent total disablement.
- Short Service Pension: Available to members with more than 10 years but less than 20 years of eligible service.
Under the Employees’ Pension Scheme (EPS), an employee becomes eligible to receive pension benefits after completing a minimum of 10 years of service and reaching either 58 years of age or 50 years of age. However, no pension payments are made before the age of 50 years. If an employee opts for early pension between the ages of 50 and 58, a discounting factor of 4% per year (effective from 26.09.2008) is applied for each year below the age of 58. This discount adjusts the pension amount for the early commencement of payments.
It’s important to note that these age and service requirements may be waived in cases of death or permanent disablement.
Employee Deposit Linked Insurance Scheme (EDLIS)
Under the Employee Deposit Linked Insurance Scheme (EDLIS), employers provide life insurance coverage to their provident fund members. The cost of this scheme is covered by the employer. However, due to the relatively low amount of life coverage offered by the statutory scheme, many employers choose to opt out of the EDLIS and instead opt for a group insurance scheme. This alternative option provides higher coverage to employees without any additional cost to the employer.
For employers who do not have a group insurance scheme in place, the premium for the EDLI is entirely funded by the employer. The employer contributes 0.5% of the monthly basic pay, with a maximum cap of INR 15,000, towards the premium for life cover.
The claim amount of the EDLI will be determined by the last drawn salary of the employee. The claim amount would be:
- To determine the maximum claim amount under the Employee Deposit Linked Insurance (EDLI) scheme, the calculation involves multiplying 30 times the salary. In this context, the salary comprises the basic pay along with the Dearness Allowance (DA). However, it’s important to note that the upper limit of the wage considered for the EDLI is INR 15,000.
- In addition to the salary, a bonus of INR 150,000 is also provided.
- Therefore, the maximum EDLI claim amount would be INR 600,000, calculated as [(30 x 15,000) + 150,000].
- There is no requirement for continuous employment (of one year under the current employer) to be eligible for the insurance benefit.
Rules Regarding Visas and Foreign Workers in India
General Requirements
A foreign national typically applies for an Indian employment visa through the Indian Embassy or High Commission in their country of residence. Upon receiving the visa, India’s labor laws governing employment relationships also extend to foreign nationals working in India. Indian legislation distinguishes between two categories of employees: workmen and non-workmen. The Industrial Disputes Act covers only workmen, providing them with specific provisions and protections. Generally, entitlement to statutory employment rights varies based on the employee category and other factors such as remuneration, location, and industry.
Type of Visa
India imposes specific requirements for issuing work permits and visas to staff assigned to work within its borders. The primary type is known as the Employment or ‘E’ visa. This visa is typically granted for one year or for the duration of the contract in India, with a maximum validity of up to five years. Importantly, the E Visa application must be submitted from the employee’s home country and cannot be applied for from within India.
The Culture of India
Indian culture, often characterized as a fusion of diverse cultures, encompasses the vast expanse of the Indian subcontinent and reflects a rich history spanning several millennia. Influenced profoundly by Dharmic religions, Indian culture stands as the birthplace of Hinduism, Buddhism, Jainism, Sikhism, and other religions, collectively referred to as Indian religions.
Important Information for Indian EmployeesImportant Information for Indian Employees
Salary Payment
Salaries in India are typically disbursed at the end of the month through bank transfers.
Payslip
Payslips are issued in either hardcopy or soft copy (PDF) format, often delivered via email. Online payslips are commonly accessible through an employee self-service (ESS) platform or a customized portal.
Holiday Allowance
In general, India observes 10 holidays annually, including three national holidays along with other major festival holidays. Public holidays can vary by region, ranging from four to ten days each year.
Workers may be required to work on public holidays, and there is no centralized legislation restricting this practice. Instead, different state-level acts (e.g., the National and Festival Holidays Act) stipulate that employees who work on official holidays are entitled to receive wages at a premium rate of 200% of the normal hourly wage rate. Similarly, employees working on weekly rest days are entitled to premium pay at a rate of 200% of the normal wage rate.
If a worker is required to work on a public holiday, they may be provided with either twice the wages or a substitute holiday with pay. Likewise, a worker required to work on a rest day must be compensated at overtime rates, which is twice the rate of normal wages.
Annual Leave
The commencement of the leave period typically aligns with the start of the calendar year, and employment contracts usually outline the terms of leave entitlements. Under the Factories Act, employers are mandated to grant all factory workers one day of leave with pay for every 20 days worked (e.g., 18 days of paid time off for every 240 working days). This entitlement is prorated for new joiners and those leaving during the year. Additionally, other conditions of leave are covered by the Employees’ State Insurance Act, 1948. In India, annual leave is commonly referred to as earned leave or privilege leave.
Eligibility for annual leave varies by location, and workers may carry over their annual leave; however, the accumulation of earned leave is typically capped at a maximum of 45 days.
If an employment contract expires before a worker can take their annual leave, compensation for the leave is calculated proportionately based on the number of months worked and the number of working hours per week.
Sick Leave
Sick leave refers to the leave an employee can take when unable to work due to illness, ranging from a minimum of a half day to a maximum of seven days, all of which are paid.
There are no provisions for carrying forward or cashing out sick leave. Any unused sick leave at the end of the calendar year automatically lapses.
For absences exceeding two or three days, depending on company policy, a medical certificate is typically required.
Sick leave can be combined with earned leave, and both new joiners and resigned employees are entitled to sick leave on a prorated basis.
Various acts provide different provisions for sick leave:
- The Apprentices Act, 1961, provides for 15 days of sick leave.
- The Working Journalist and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955, outlines 30 days of sick leave for 18 months of service.
- Under the Sales Promotion Employees (Conditions of Service) Act, 1976, sick leave entitlement is calculated as at least 1/18th of the period worked.
Casual Leave
Casual leave is granted for unforeseen circumstances or when an employee needs to attend to personal matters for a day or two, unrelated to vacation time. Typically, companies have a strict policy allowing for a maximum of three days of casual leave per month, requiring prior permission.
Casual leave can be taken for a minimum of a half day and up to three days. If leave extends beyond three days, it should be considered as annual leave, and advance permission is necessary for taking three consecutive days of leave.
According to The Shops and Establishment Act, employees are entitled to eight days of casual leave annually. However, casual leave cannot be carried forward, and any unused days will automatically lapse at the end of the year without the option for encashment.
Casual leave cannot be combined with annual leave or sick leave.
Termination
Generally, if termination is not due to justifiable causes like non-performance or misconduct, mutual agreement is sought for termination, with the terms documented. In such cases, a termination payment, such as redundancy pay, may be made.
Termination of employees is not uncommon in other sectors as well.
Maternity & Parental Leave
Female employees are entitled to 26 weeks of maternity leave, which can begin as early as eight weeks before the expected delivery date. The remaining weeks can be taken after childbirth. For women expecting their third child or more, the paid maternity leave duration is 12 weeks, with six weeks before and six weeks after the expected delivery date. Maternity leave is granted with full pay if the employee has completed at least 80 days of service with the employer in the 12 months before her expected delivery date. Maternity benefits are paid at the average daily wage rate for the duration of the absence from work. Additionally, female employees receive a medical bonus of INR 3,500 if health benefits are not provided by the employer. If a woman’s job allows, she may work from home after utilizing maternity benefits, based on mutual agreement between her and the employer.
The law also provides for adoption leave of 12 weeks for women adopting a child under three months old. A commissioning mother, who provides her egg for embryo implantation in another woman, is entitled to 12 weeks of leave from the date the child is handed over to her. The woman giving birth, known as the host or surrogate mother, is not eligible for this leave.
Employers are required to inform female workers of their rights under the Act at the time of appointment, both in writing and electronically.
While paternity leave is offered to government employees, it is not mandated in the private sector, and its provision is at the discretion of the employer.
Other Leaves
Some types of leave, such as study leave, bereavement leave, and leave for voting, may vary depending on the industry or state of employment. These leaves can be paid, unpaid, or half-paid, and their availability is typically determined by the organization’s policies and practices.
Public Holidays Recognized by India in 2024
| Occasion | Date | |
|---|---|---|
| 1 | New Year’s Eve | January 1 |
| 2 | Republic Day* | January 26 |
| 3 | Holi | March 25 |
| 4 | Labour Day* | May 1 |
| 5 | Independence Day* | August 15 |
| 6 | Mahatma Gandhi Jayanti* | October 2 |
| 7 | Diwali | November 1 |
| 8 | Christmas | December 25 |
| Employees can choose any two from the below list (one holiday from Group 1 and one from Group 2) | ||
| Group 1 | ||
| 1 | Makar Sankranti | January 15 |
| 2 | Good Friday | March 29 |
| 3 | Id-ul-Fitr** | April 10 |
| 4 | Buddha Purnima | May 23 |
| 5 | Eid-al-Adha** | June 17 |
| Group 2 | ||
| 1 | Muharram | July 17 |
| 2 | Raksha Bandhan | August 19 |
| 3 | Janmashtami | August 26 |
| 4 | Guru Nanak Jayanti | November 15 |
* Mandatory Holiday
** Depends on the sighting of the moon
Note: While most employers provide 10 public holidays, the number can vary depending on the state. For example, in Maharashtra state, there are eight public holidays per calendar year, four of which must be the ones marked with an asterisk (*).
If an employee works on a National/Mandatory holiday, they are eligible for double pay and compensatory off from the provided list, subject to mutual agreement with the employer.
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