The employment of expatriates and foreign nationals involves several complex issues. Whist the Indian economy and market place has generally been less attractive to expatriates and foreign workers, they are still employed to provide training and development to local employees, for technology transfer, compliance of joint ventures and license agreements and so on. With the liberalization of the Indian economy in the early nineties and subsequent entry and establishment of many multinational companies, the need to employ expatriates and foreign nationals became more obvious.

Generally in multinational companies, expatriates and foreign nationals are engaged in key and higher level positions. When a foreign company sets up a business operations in India, the management of these companies tends to seek the services of their own employees for management level positions. Typically, these companies tend to bring in the Managing Director, CEOs and Country Heads from their operations and other parts of the world. The trend has been to employ Indian nationals at the next level of operations like General Manager in different functional areas. This level of personnel serves not only as the functional workforce but also in an advisory capacity to the foreign business head. In many cases, the objective is to replace the expatriate with the Indian manager in the course of time, through career progression. In Joint Ventures (JVs) between Indian and foreign partners, the two often agree on who will appoint the key managers in the operation. Depending upon the industry, the products or services, the needs of enterprises, foreign company status and other factors, the foreign partner may insist on appointing the Managing Director or the Country Head or the Finance Head. The local partner often appoints the head of HR. In JV situations, unfortunately, the insistence on appointing certain key managers may stem from mistrust between the two partners rather than from the need of the enterprise.

Legislative restrictions
In the legal context there are no specific legislative restrictions on the type of skills that may be brought in nor the numbers of staff. However, under Government Policy employment visas to foreigners are issued only for jobs requiring high skills and expertise. The principal Indian legislation regarding foreigners is contained in the Registration of Foreigners Act 1939 and the Foreigner Act 1946 which also provides the regulation framework for the registration, movement and departure of foreigners. The Indian government has complete power to regulate and restrict the movement and presence of foreigners in India. The power to grant or refuse foreigners entry into India and subsequent restrictions on the employment are covered in the Foreigners Order 1948 (1948 Order). The legislation and judicial decisions are stringent pertaining to the entry, presence and movement of foreigners in India, including business visitors.

Under Foreigners Order 1948, no foreigner shall, without the written permission from the appropriate authority, accept employment in or in connection with:

Requirements
The Government authorities dealing in issues relating to expatriate employment in India are the Ministry of Home Affairs and RBI In general, employers who are employing expatriates in India must satisfy the following conditions:

Employment Visas
All foreign nationals who enter India must obtain an appropriate visa from an overseas Indian Consular Post in their home country prior to entering India. A Foreigner entering India for the purpose of employment must possess a valid employment visa. An Employment Visa is given only for jobs that require very high level of skills and expertise.

Processing time
Applications are generally processed on the same day. However, applications received from outside the Consular district with jurisdiction over the applicant's usual place of residence may take up to five days to be processed.

Maximum duration
Multiple-entry employment visas are valid for one to five years. In other cases it is given for a specified period depending upon the need of the sponsoring organization, availability of Indian experts in the particular field, the benefit to be gained by the foreign nationals presence and necessity of visiting neghbouring countries.

Extensions
A request for an extension of stay must be filed with the FRRO prior to the end of the employment visa. Consular posts cannot renew Employment Visas.

Family and dependants
Family and dependants should apply for entry permits:

Registration of foreign workers
Under the Registration of Foreigners Act 1939, every foreigner including foreign workers who hold long term visas (more than 180 days) and accompanying dependants are required to register their presence in India with the FRRO within 14 days of their arrival in India. In small cities, this is done through the Office of District Superintendent of Police. They must personally submit all papers for registration with the FRRO. The following categories of foreigners are exempted:

Upon the registration of the report, a foreigner must provide the Registration Officer with documents, which satisfy the accuracy of the particulars in the report

Essential Documents for Registration
A foreigner holding an Employment Visa requires the following documents at the time of registration at FRRO:

Other requirements
For the appointment of Managing Directors, Whole-time Director, Managers or any managerial personnel under the provisions of the Companies Act 1956 to the Board of a Company, approval of registration from the Department of Company Affairs is necessary.
For the appointment of a Partner in  JV the following documents are required:

Residence permit
On registration, the FRRO issues a Registration Certificate/Residential Permit to the foreign national. A valid Residential Permit/Registration Certificate is also considered as a valid work permit. The Residence Permit will have the same validity as the Employment Visa. Residence Permits may be extended upon application. Registration is required only once during the validity of an Employment Visa irrespective of the number of times the foreigner leaves India on multi-entry facility.

Normally, a foreign citizen who visits India and renders services incurs tax liability on the income earned in India. When an expatriate works in India, their entire salary-related income is subject to tax, even if it is paid outside India.

Expenses incurred by an employer in moving an expatriate to and from India and home-leave airfares are not considered taxable income in India. Similarly, payments made in an expatriate’s home country as retirements benefits are also not considered as income earned in India.

For tax purposes, salary includes base salary, cost-of-living allowances, bonuses, ex-gratia, reimbursement of school fees, utilities, house rent, transportation, tax reimbursements and other payments the company makes on behalf of the employee. Certain in-kind benefits, such as company-lased accommodations, security guards, provision of car with driver, are all taxable on a concessional basis.

Special provisions for foreigners
Foreigners are entitled to certain special concessions as follows:

(1) Remuneration received by a foreigner as an employee of a foreign enterprise for services rendered in India is not subject to Indian income tax, provided:

(2) A foreigner ( including a non-resident Indian) who was not resident in India in any of the four financial years immediately preceding the year of arrival in India is entitled to a special tax concession, if provided:

(3) A visiting foreign professor who teaches in any university or educational institution in India is exempt from tax on remuneration received during the first 36 months from the date of arrival in India. However the individual should have not been a resident in India in any of the four financial years immediately preceding the year of arrival in India.

(4) Salary received by a non-resident foreigner in connection with employment on a foreign ship is exempt from tax if the employee’s stay in India during a year does not exceed 90 days.

(5) Special exemptions under specified circumstances are available for the following:

Statutory deductions
Under the provisions of the Income Tax Act 1961 every person responsible for paying salary, shall at the time of payment, deduct income tax on the amount payable at the average rate of tax computed on the basis of the rates in force for that particular financial year.

This statutory deduction will be made even if the foreigner is simultaneously under more than one employer, or has had successive employment under more than one of them.

Other deductions from the income of the foreign national include, deductions:

Expatriate remuneration
Asia has gone from being largely  labour intensive to highly a technologically oriented market. It is a great business opportunity for global companies. But more than that, it calls for meticulous attention to expatriate planning. HR practitioners in India, particularly compensation and benefits specialists, would find it useful to understand remuneration practices followed in the rest of the Asian region.

The remuneration package of the expatriate should normally include base salary, cost-of-living allowances, bonuses, ex-gratia, reimbursement of school fees, health insurance, medical reimbursement, utilities, house rent, transportation, tax reimbursements and other payments the company makes on behalf of the employee. Certain in-kind benefits, such as company-leased accommodations, security guards, provision of car with driver, are generally provided by the employer.