- India's budget offers a five-year tax exemption on foreign income for non-resident specialists
- The move targets global talent in electronics, semiconductors, and other fast-growing sectors
- It aims to eliminate double taxation fears that deter long-term foreign professionals in India
India's latest budget on Sunday introduced a special tax exemption aimed at attracting global talent, especially in fast‑growing sectors like electronics and semiconductors. This move responds to a long-standing demand from companies in these fields, who often need foreign specialists for technology transfer and complex project work.
The government has announced a five-year exemption on foreign-sourced income for non-resident individuals coming to work in India for a stay period of 5 years under notified schemes. This is intended to encourage vast pool of global talent to work in India for a longer period of time. The goal is to remove the fear of double taxation, which has often discouraged foreign professionals from taking up long-term roles in India.
Experts and industry watchers say this move boost improve India's ability to attract and retain foreign specialists for longer durations, especially in these sunrise sectors which are dependent on global experts.
"We view it as a big positive because we have been hiring a number of expats,” an executive at an Indian semiconductor firm who did not wish to be named told The Economic Times. “This was something we had been lobbying for and it is encouraging that the government has taken note of it and introduced this measure. It gives confidence that they are listening to industry."
However, industry experts also warn that India currently lacks enough skilled workers in new technology areas, especially semiconductors, electronics manufacturing, and even nuclear power.
"India does not have the requisite talent in newer tech areas, especially when it comes to semiconductors and electronics manufacturing,” Navnit Singh, chairman and regional managing director of Korn Ferry in India told ET adding there will be a lot of demand for echnician level to mid and senior management coming from overseas with the nuclear power being opened up.
Singh also expressed the need for more reforms, particularly on Employees' Provident Fund Organisation (EPFO) as he feels this might be a deterrent in hiring foreign talent. This is becuase a 2023 Delhi High Court ruling requires foreign employees in India to contribute 12% of their salary to EPFO, matched by another 12% from the employer. This added cost has also discouraged firms from hiring expats.
How the New Rule Works
Currently, expatriates become taxable on their global income once they qualify as 'resident and ordinarily resident' (ROR) in India. This includes overseas salary and investments, making long stays financially unattractive. Under the new proposal, if someone has been a non-resident for the past five years, then for the next five years after arriving in India, any income earned outside India will not be taxed here. Only income sourced within India will be taxable marking a major shift from the earlier residential status–based tax model.
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