Mobility & Payroll Tax

Mobility and payroll tax covers the tax and social security position of employees who move across borders, whether Indian staff sent on overseas assignments or foreign nationals working in India, along with the payroll withholding that applies to them. Businesses that second employees abroad, host inbound expatriates, run split-payroll arrangements, or employ remote cross-border workers face overlapping obligations in more than one country. We address residency, withholding, treaty relief, and social security together so the position is consistent for both employer and employee.

Residency is determined under Section 6 [ITA 2025: s. 6]. The general tests are 182 days in India, or 60 days in the year plus 365 days in the preceding four years. For an Indian citizen or person of Indian origin visiting India, the 60-day limb is replaced by 182 days where Indian income does not exceed Rs 15 lakh, and by 120 days where it exceeds Rs 15 lakh; the statutory exceptions for citizens leaving India, deemed residence and RNOR status must also be tested. Residency determines the scope of Indian taxation, so it is the starting point for every assignment.

Section 6 [ITA 2025: s. 6] separates residents into Resident and Ordinarily Resident and Resident but Not Ordinarily Resident (RNOR); the corresponding worldwide-income and limited-foreign-income scope is governed by Section 5 [ITA 2025: s. 5]. A person is generally RNOR if they were non-resident in nine of the preceding ten years, or in India for 729 days or fewer across the preceding seven years. An Indian citizen or person of Indian origin visiting India, whose total income other than foreign-source income exceeds Rs 15 lakh, is also RNOR where they are in India for 120 days or more but less than 182 days and become resident under that visitor rule. An Indian citizen whose such income exceeds Rs 15 lakh, who is not liable to tax in any other country or territory by reason of domicile, residence or similar criteria, and who is not otherwise resident in India, is a deemed resident and is also RNOR. This distinction often reduces Indian tax exposure for inbound and returning employees during transition years.

The employer withholds tax on salary taxable in India under Section 192 [ITA 2025: s. 392]. The amount depends on residence, place of duties and any applicable treaty, so a split-payroll or part-year assignment requires allocation of the India-taxable portion. Tax is deposited monthly and reported quarterly in Form 24Q [ITR 2026: Form 138].

Benefits provided to assignees may be salary perquisites under Section 17 [ITA 2025: s. 17]. Their taxable value is computed under Rule 3 [ITR 2026: r. 15] using the conditions and thresholds applicable to each benefit. Correct valuation matters because perquisites are added to salary before withholding, so an error affects both monthly deduction and the year-end position.

A DTAA is a treaty between India and another country that allocates taxing rights over cross-border income, so the same salary or other income is not fully taxed in both places. Treaty relief under Section 90 [ITA 2025: s. 159] and Section 90A [ITA 2025: s. 159] must be distinguished from unilateral relief under Section 91 [ITA 2025: s. 160], which applies where no agreement exists. Relief works through either the exemption method, where income is taxed in one country only, or the credit method, where the country of residence allows credit for tax paid in the source country. The Ministry of Finance Annual Report 2025–26 confirms that India has entered into DTAAs/conventions with 96 countries; separately, the India–Taipei arrangement under Section 90A [ITA 2025: s. 159] brings the number of counterpart jurisdictions to 97 only when Taipei is counted separately. The applicable article depends on the type of income and the employee's residency.

A non-resident claiming a treaty rate on India income must hold a Tax Residency Certificate (TRC) from the home country's tax authority and furnish Form 10F [ITR 2026: Form 41] under Rule 21AB [ITR 2026: r. 75], subject to the operative electronic-filing requirements. Depending on the income, a no-permanent-establishment declaration and a PAN may also be needed. The TRC must cover the relevant period, so we align the documentation with the assignment dates before a treaty rate is applied to withholding.

An Indian resident taxed here on worldwide income can claim a Foreign Tax Credit for income tax paid in another country, so the same income is not taxed twice. The claim is made by filing Form 67 [ITR 2026: Form 44] under Rule 128 [ITR 2026: r. 76], with proof of the foreign tax paid. Under the 2026 Rules, Form 67 [ITR 2026: Form 44] and the proof are generally furnished within twelve months from the end of the tax year, and Form 67 [ITR 2026: Form 44] must be verified by an accountant for a company or, for any other assessee, where the foreign tax paid outside India for the tax year is ₹1 lakh or more. The admissible credit is generally the lower of the Indian tax and the foreign tax on that income.

A Social Security Agreement (SSA) is a treaty under which India and a partner country coordinate social security so that an employee on a temporary posting contributes in only one country rather than both. India has SSAs in force with around twenty countries. For an employee on assignment, the agreement prevents duplicate provident-fund-type contributions and protects the benefit rights built up at home. The relief is claimed through a Certificate of Coverage, and the agreement also allows accumulated contributions to be exported or totalised when the posting ends.

A Certificate of Coverage (COC), sometimes called a detachment certificate, is the document that activates Social Security Agreement relief. It confirms that a posted employee remains covered by their home country's social security during the assignment and is therefore exempt from the host country's scheme. For an Indian employee posted to an SSA country, the EPFO issues the COC. For a foreign national from an SSA country working in India, the home-country authority issues it, and the employee is then exempt from Indian provident fund on the strength of that certificate.

A foreign national working in India for an establishment covered by the provident fund is treated as an International Worker and is generally required to contribute, unless exempt under a Social Security Agreement through a Certificate of Coverage. International Workers contribute on full salary, without the Rs 15,000 wage ceiling that limits contributions for domestic employees, so the amounts are higher. The scope of these special provisions has been the subject of recent litigation, so we confirm the current position for the employee's nationality and assignment before payroll is set up.

For an International Worker without Social Security Agreement cover, provident fund can generally be withdrawn only on retirement after reaching 58 years of age, or on permanent incapacity. Where a Social Security Agreement applies, the accumulated balance can usually be withdrawn or transferred when employment in India ends, in line with that agreement. The difference matters for assignment planning, because an employee from a non-agreement country may have funds held in India until 58 even after leaving the country.

A foreign national on a short visit may qualify for the domestic salary exemption under Section 10(6)(vi) [ITA 2025: Sch. IV, item 3] if every statutory condition is met, including the foreign-employer and non-deduction conditions and the applicable stay limit. A treaty may separately exempt a short assignment under its employment article, often using a 183-day test plus employer and permanent-establishment cost conditions. We test the domestic provision and the exact treaty article separately, since the more favourable applicable provision can govern.

Tax deducted from salary is generally deposited monthly under Rule 30 [ITR 2026: r. 218], subject to its government-office and prescribed special timing, and reported quarterly under Rule 31A [ITR 2026: r. 219] in Form 24Q [ITR 2026: Form 138]. The return carries the deductee details and, in the final quarter, the annual salary annexure used to generate each employee's salary TDS certificate. The quarterly due dates are 31 July, 31 October, 31 January and 31 May. For mobile employees, the return must reflect the correct India-taxable portion and any treaty rate applied, so the withholding and the reported figures stay consistent.