Hiring expats to become a challenge for India Inc. after proposed surcharge

The Union Budget has announced a tax on the super-rich, which will affect the hiring of foreign talent, especially in the automobiles, manufacturing and IT sectors.

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India Inc. will soon find it more challenging to hire foreign talent to fill senior positions, due to the latest tax on the super-rich.

The Union Budget 2019-20 proposes a hike in the surcharge from 15 per cent to 25 per cent on taxable annual income exceeding Rs 2 crore and up to Rs 5 crore. The same is to be hiked from 15 per cent to 37 per cent for income beyond Rs 5 crore.

The maximum impact will be experienced by talent from countries where the maximum prevailing tax rate is lower than in India. This will also have a huge impact in cases where the employer shoulders the tax liability.

Many senior salaried professionals have begun renegotiatng the terms of employment and remuneration package so as to incorporate the latest change.

In India, senior foreign talents have come to be indispensible in sectors, such as automobiles, consumer, manufacturing and IT. These foreign nationals are often paid more than Rs 5 crore a year. Now, post Budget, the maximum marginal tax rate on their incomes will go up from 35.88 per cent to 42.74 per cent.

This surcharge on the income of the super-rich will definitely make India less attractive a destination for foreign talent, as the cash in hand means a lot for them. What they receive in hand post tax deduction is what really matters to them.

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