Expat expectations

rsriniv24

Hi everyone!

It seems as if many expatriate workers get a wide range of benefits from their employers. What should a mid-level manager expect if he/she is moved to India?

At my American company, I get:

* A medical/dental/vision healthcare plan. It's not a big deal for typical expenses such as doctor's visits, but if I were to get cancer, it would save a ton of money. ...

* About six weeks of vacation (counting holidays and "personal" days). Plus 10 sick days (though most workers usually use fewer than 5 sick days a year).

* A 401K retirement plan (you invest money in a tax-free account, and the company also puts some money in each year).

Are these benefits similar to those offered by Indian firms? Also, is it common to get housing/schooling/expense allowances?

Thanks as always for your sagacity.

raju

Depends on the company--as in MNC or India company etc as well as the level you are at.
Healthcare is cheap in India so most cos do offer it for most employees. There is something called provident fund (12% of base pay) that doubles up as 401k i guess. Vacation is typically 4 weeks plus other holidays etc so it amounts to over 5 weeks.
Typically total compensation will be broken up into car allowance, housing allowance etc etc which are i think tax-advantageous to the employee to a certain degree and if you don't spend it on that part, it will come back to you as salary and taxed at whatever is your main tax rate.
Have not heard of schooling fee assistance but you can check fees of say the American school on their web site and add that into your compensation requirements or some such.

Penri

This varies greatly depending on the company and how critical it is for them that it's you that fulfills the role. The more critical, the more favourable the package.

If (like me), you're on a secondment within a MNC then you should be able to ensure at least the same T&C as you have (or would expect) working in the US.
I would also negotiate:

- that the salary reflects the added responsibility,
- that accomodation costs (to the standard that you expect) are covered
- that visas, vaccindtions and 2 flights p/year are included for you and dependents
- that a car, with driver, is provided
- that international schooling is provided for any children
- that relocation exenses are covered (inc repatration)
- that any increased tax liability is covered (inc repatriation)

Hope this helps

manojb

I am not an expat, I am an Indian working in an Indian company, and I get most of these.

We have a healthcare plan which covers me upto 2 lakhs rupees per year, premium paid by the company. Coverage upto 5 lakhs can be purchased by paying premium. Company pays half the premium for dependents.

29 days of vacation + 10 holidays + 30 days sick leave (I need a medical certificate to use this)

A Provident Fund scheme (tax free). Company contributes 12% of basic salary, so do you.

House Rent Allowance is usually pat of the salary, and is tax exempt upto 40% of the basic salary or actual rent paid, whichever is lower. Sometimes you get a vehicle allowance or a converyance allowance. Expats might get a schooling allowance, but we don't.

rsriniv24

Thanks for such detailed responses everyone.

Can someone explain the basics of a provident fund scheme? I.E. How are the funds invested? Does the employee direct how the money is invested (like a 401K), or do you just put the money in and let it go? Are these schemes run by the Indian government or by the corporations?

Also, what are the typical tax deductions you can take taxes other than House Rent Allowance?

manojb

You have no control on how the money is invested. The rate of return is fixed annually by the government, last year it was 9.5%. This year it is 8.5%. The interest is more than fixed deposit rates but less than the rate of return you would get if you invest in stocks, etc. The scheme is run by the government, but some very large employers have their own schemes for which they have to provide the same interest rate as provided by the government. The statutory contribution is 12% of the basic salary (or basic + dearness allowances, if applicable). Your employer will match this contribution. You can choose to contribute additional amounts, but your employer is not required to match this and probably will not. PF interest is nontaxable and contributions to PF can be deducted from income for tax purposes.

If you want control, you need to invest outside of the PF scheme (stocks, mutual funds, bonds, real estate....)

I filed my income tax returns today and the deductions I have taken are:
* Conveyance Allowance (maximum Rs 800 per month, rest is taxable)
* Profession tax (it is a tax)
* Leave Travel Allowance (one month's basic salary or actual vacation travel costs (only for travel within India) whichever is lower)
* Home Mortgage interest (maximum of Rs 1,50,000 per annum)
* Medical insurance premium (max Rs 15,000 pa)
* Charitable contributions (max 10% of your gross taxable income)
* Contributions to PF
* Home Mortgage Principal Repayment
* Life Insurance premium (the last three combined capped at Rs 1,00,000 pa)


The other tax deductions which are available are:

* House Rent Allowance (capped at 50% of basic salary if in a metro, 40% otherwise or actual rent paid whichever is lower)
* Medical allowance (15,000 pa or actual medical expenses, whichever is lower)
* Children's Education Allowance (15,000 pa or actuals, whichever is lower)
* Voluntary Provident Fund and Public Provident Fund contributions
* Investments in certain Government bonds and Infrastructure bonds

If your company gives you perks like accommodation for free or at a reduced rate, vehicle for personal use, etc. the value of the perk will be counted as income and you will be taxed on it. A car as a perk has an exemption of Rs 1,200 pm (less than 1600cc engine capacity) or Rs 1,600 pm (more than that).

Long term capital gains from stock sales are not taxed. Short term capital gains are taxed at 10%. Gains from derivatives (futures, etc.) are taxed at 33%. Long term capital gains from other sources (e.g. sale of house) is taxed at 20% (the gain is calculated after applying an index on the acquisition price). Short term capital gains from other sources are taxed as ordinary income.

rsriniv24

Thanks for the detailed assessment, Manojb. I hope Tax Day in India isn't as aggravating as it is in the States. But from your list of deductions, it sounds like bookkeeping there is the same kind of chore it is here.

Around late January, my stomach starts churning as I gather everything together and start e-mailing my accountant every day as April 15 approacheth.

schematic

My firm pays a local outfit to handle all the taxation aspects for its expats. Then again, many of our people (like me) are assigned here for only six months -- 182 days to be precise -- to avoid getting into that murk.

The very thought of dealing with tax filing in India gives me fits