Navigating Stipends and Tax Implications for Foreign Trainees in India: What Are the Rules?

Hi all,

Our parent company (registered in the US) is in the process of recruiting foreign nationals as trainees for a specific period, say 3-6 months. They will be sent to India for training by a company that has a business relationship with them. The foreign company proposes to provide guest house facilities and also a fixed sum every month as a stipend. The stipend in Indian currency is to meet their expenses. The guest house will be maintained for training purposes by the Indian company.

My questions are:
1. Is the Indian company permitted to pay the foreign nationals the stipend and also the guest house maintenance charges to be debited to the foreign company and recovered as a service rendered?
2. What are the tax implications?

Regards,
Paddutr

Dear Paddutr,

Yes, it can. As per the tax implications, the Income Tax Act will be applicable.

Regards,
SC

Hi Paddutr,

Related to your first question, tax will be applicable to stipend provided it is more than Rs. 1 lakh per person. If it is not above 1 lakh, then no tax shall be paid. Since we have to follow the same formula that we use for deducting TDS for all employees in an Indian company.

Secondly, guest house services are services that you are rendering to the foreign company, and it will be regarded as export services since you will be selling services on behalf of the guest house owner. Therefore, there will be no tax, as export services are exempted from tax.

This is as per my understanding. In case of further queries, please feel free to ask.

Regards,
Pooja

Hi!

I have received a two-month contract with the embassy for $2000. I need to add a foreign employee to my payroll. Could you kindly suggest a breakdown of $1000 per month? Also, am I allowed to deduct TDS or PF? The employee does not have a PAN number.

Thanks,
Raj