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There are a lot of expats that are currently working in India who are deputed from their home country or have a multiple entry business visa, most have a bank account, PAN card and some are even paying taxes in India.
There was a circular issued by the MHA (Ministry of Home affairs) in 2010 that stated that employment visa is mandatory if you are working / delivering services in India. A lot of expats working on oil rigs on a business visa were made to return to their home country to obtain the employment visa so that they could go back to work.
The risk of being caught out is:
The amount of penalty would be decided by the courts only after it has obtained all the information about the extent of the violation and tax evasion. This could also impact future Business visas for the companies’ employees and their Business in India.
One must understand the law of the land and ensure that compliance is maintained at all times. If you are in such a situation it’s best that you ensure that you change the status of your visa.
The government is becoming very strict on compliance, a lot of people are working on business visa justify that they are paying taxes in USA and with double taxation treaty they don’t need to pay taxes in India. Ignorance of the law is not an acceptable excuse, the reason this is being done is because legitimate taxes are not being paid.
One more thing that I would like to add is that a business visa cannot be converted to an Employment visa in India, you will need to go back to your home country and apply for a fresh employment visa and come back to India and register with the FRRO.
Some Expats also justify working on a business visa by claiming that their company does not have an office in India and they are working on client side, even so, the company that you are supporting will need to sponsor you and you will be sent on a secondment to India and will be issued an Employment visa, so that you can legally work in the country.
Certain compliant companies bring staff on an employment visa even if they work for one day in a year in India, there are companies that bring trainers for a week to impart training and they need to come on an employment visa.