A German employee working in India owes Indian tax on pay for work done there unless the treaty's short-stay exemption applies: 183 days or fewer in the fiscal year, an employer outside India, and no cost borne by an Indian PE. For social security, the India-Germany agreement, in force since 1 October 2009, lets a posted worker stay in the German scheme for up to 48 months (extendable by 12) and avoid Indian provident fund, but only with a certificate of coverage in hand before the posting begins. A German who keeps a home in Germany usually stays German tax resident as well.
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Key facts
| Treaty rule | Pay for work done in India is taxable in India unless the person is in India for 183 days or fewer in the fiscal year, the employer is not Indian, and the cost is not borne by an Indian PE |
|---|---|
| Social security agreement | Signed 8 October 2008; in force 1 October 2009; implementing bodies DVKA in Germany and the EPFO in India |
| Detachment | Up to 48 months, extendable by 12 months |
| Certificate of coverage | Needed before the posting; the Indian employer gives it to the EPFO to claim exemption from provident fund |
| Without a certificate | The German employee is an international worker and must contribute to the EPF |
| Indian residence test | 182 days in the financial year, or 60 days plus 365 days in the preceding four years (different thresholds for Indian citizens and persons of Indian origin visiting) |
| German tax residence | A home (Wohnsitz) or habitual abode in Germany keeps worldwide taxation in Germany; the treaty tie-breaker decides if both states claim residence |
| Indian visa | Employment visa for staff on the Indian payroll (salary floor generally USD 25,000); e-Business visa for short visits |
| Registration | FRRO registration within 14 days of arrival for stays above 180 days |
Income tax on pay: the 183-day test in practice
India taxes an employee on salary for work done in India. The treaty exempts it only if three conditions are all met: the person is present in India for 183 days or fewer in the fiscal year (1 April to 31 March), the pay is made by an employer that is not an Indian resident, and the cost is not borne by an Indian permanent establishment.
| Condition | What it means | Where German groups fail it |
|---|---|---|
| Days | Present in India for 183 days or fewer in the fiscal year | Long projects that straddle two fiscal years |
| Employer | Pay is made by, or on behalf of, an employer who is not resident in India | The Indian subsidiary pays the salary or is charged for it |
| Cost | Pay is not borne by a PE of the employer in India | Recharge of the person's time to the Indian entity |
If the Indian subsidiary bears the cost, plan to tax the employee in India from day one and run payroll Withholding Tax on salary under Section 392 of the Income-tax Act, 2025. Germany generally gives relief for Indian tax on the same pay; your German payroll adviser should confirm the method.
The German side: residence and payroll
- Worldwide taxation: a person with a home in Germany, or an habitual abode there, is taxed in Germany on worldwide income, even while working in India.
- Tie-breaker: if India also treats the person as resident, the treaty decides by permanent home and centre of vital interests.
- German wage tax: the German employer may need to keep or stop wage tax withholding depending on the relief claimed. Ask the German payroll provider before the first month abroad.
- Records: keep a daily log of days in India and Germany for every assignee.
The social security agreement
The India-Germany Social Security Agreement was signed on 8 October 2008 and applied from 1 October 2009. It covers workers posted temporarily to a branch or subsidiary in the other country for up to 48 months, with an option to extend by 12 months. During the posting the worker is subject to the home country's social security rules only, so a German posted to India stays in the German scheme and does not pay into India's Employees' Provident Fund.
- Who issues the certificate: the implementing bodies are the DVKA in Germany and the EPFO in India. The German employer applies through its social insurer for the certificate of coverage.
- When: before the posting starts. A certificate obtained afterwards invites a claim for back contributions.
- What the Indian employer does: give the certificate to the EPFO and record the exemption in the payroll file.
- What is covered: the agreement is built around pension insurance. Check the text for other branches of social insurance, such as health and unemployment, which may need separate arrangements.
- Beyond the limit: after the detachment period, the worker joins the host scheme unless an exceptional extension is agreed by the authorities.
Without a certificate: the international worker rules
A foreign national who works in a covered Indian establishment and has no certificate of coverage is an international worker and must contribute to the Employees' Provident Fund from the first day, with no wage ceiling. This is the position of a German who is hired directly by the Indian subsidiary on a local contract, or whose posting passes the agreement's limits.
- Review each assignment before the visa application and decide: posting under the agreement, or local hire with EPF.
- Record the decision in the assignment letter, with the party who bears the cost of any double contribution.
- Keep the certificate on file; the EPFO can ask for it during an inspection.
Setting up an assignment: a short checklist
- Fix the legal employer and the payroll country before the person travels.
- Apply for the certificate of coverage through the German social insurer.
- Choose the visa category and apply: employment visa for those on the Indian payroll, e-Business visa for meetings.
- Register with the FRRO within 14 days of arrival if the visa is for longer than 180 days.
- Decide tax equalisation and write it into the assignment letter.
- Track days in India per person with a calendar, not passport stamps.
- Review the PE risk in the tax treaty guide when more than one person works on the same project.
- On return, close out the Indian payroll position and file exit forms.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Federal Central Tax Office (BZSt), Handelsregister and the Deutsche Bundesbank.
Frequently asked questions
Does the India-Germany social security agreement apply to my employee in India?
It applies to workers posted from a German employer to an Indian branch or subsidiary for up to 48 months, extendable by 12, if the certificate of coverage is obtained before the posting begins.
Who issues the German certificate of coverage?
The implementing body in Germany is the DVKA, and the employer applies through the social insurer. In India the EPFO receives the certificate to grant exemption.
What happens if a German employee has no certificate of coverage?
The employee is an international worker and must contribute to the Employees' Provident Fund from the first day, with no wage ceiling.
How many days can a German employee stay in India without Indian tax?
Up to 183 days in the fiscal year, but only if the employer is not Indian and the cost is not borne by an Indian PE. A recharge to the Indian subsidiary can defeat the exemption.
Does a German employee stay German tax resident while working in India?
Usually, if they keep a home in Germany. The treaty tie-breaker decides if both countries claim them as resident.
What is the minimum salary for an Indian employment visa?
Generally USD 25,000 a year, with limited exceptions.
Does India tax the fees of a German managing director of the Indian subsidiary?
Directors' fees are taxable in the state where the paying company is resident, which is India for an Indian subsidiary, even if the director never visits.
Related guides
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Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and German rules change often; confirm current requirements before acting.