India Offers Tax Relief to Foreign Tech Experts to Boost Electronics Sector

• Chinmay
• February 10, 2025
• India, News
• Electronics Exports, Electronics Manufacturing, Foreign Experts, Global Value Chains, India electronics, India tech growth, Lithium-Ion Batteries, PLI Scheme, semiconductor ecosystem, Smartphone Production, Tariff Cuts, Tax Reforms
• 0 Comments

India is making strides to strengthen its position as a global electronics manufacturing hub, and the recent budget has introduced tax reforms aimed at attracting foreign tech experts and supporting the electronics industry. These measures are expected to drive growth, innovation, and investment in the sector, further solidifying India’s role in the global supply chain.

Presumptive Taxation for Foreign Experts

To address the shortage of highly skilled professionals in electronics manufacturing, India’s finance minister, Nirmala Sitharaman, announced a presumptive taxation regime. Key features of this reform include:

• Only 25% of the remuneration received by foreign experts during short-term stays in India will be taxed.
• Simplified compliance for tech experts staying for more than 90 days.

This change benefits electronics manufacturers who require foreign engineers and support teams to set up factories, maintain operations, and train local employees. Previously, the lack of clarity in tax laws discouraged foreign experts from coming to India due to high taxes and compliance challenges.

Predictable Tax Regime for Global Value Chains

India is also rolling out a predictable safe harbour regime for Global Value Chains (GVCs), which will:

• Allow global component vendors to store sub-assemblies and components in India without fear of unpredictable tax liabilities.
• Provide a stable tax roadmap for the next decade, akin to a long-term advance pricing agreement.

This move aims to make India’s tax regime competitive with manufacturing destinations like China and Vietnam, ensuring the country remains an attractive destination for global electronics manufacturing investments.

Tariff Reductions and Industry Boost

To further incentivize electronics manufacturing, the government announced the removal of tariffs on essential smartphone components and capital goods for lithium-ion battery production.

Key highlights:

• Tariff scrapped for smartphone inputs such as PCBAs, camera modules, connectors, headsets, USB cables, and fingerprint scanners.
• Tax-free imports for capital goods used in lithium-ion battery production, supporting the electric vehicle (EV)

The tariff cuts were carefully planned in consultation with the Ministry of Electronics and IT and industry stakeholders to ensure they do not impact domestic manufacturing or jobs.

Electronics Industry Growth: A Success Story

India’s electronics sector has shown remarkable growth, largely driven by the Production-Linked Incentive (PLI) scheme:

• Revenue in FY24: $118 billion
• Smartphone production: $52 billion
• Electronics exports: $29.1 billion
• Smartphone exports: $15.6 billion

Industry leaders like Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA), praised the reforms, stating:

“This is a welcome move – the first of many needed to build long-term competitiveness, shift supply chains, and enhance opportunities for Indian industry.”

The Road Ahead

With tax reforms, tariff cuts, and a clear focus on self-reliance and global competitiveness, India is paving the way for sustained growth in the electronics manufacturing ecosystem. These measures, combined with government initiatives like the PLI scheme, are expected to:

• Attract global investments.
• Support innovation in electronics and EV manufacturing.
• Create a skilled workforce through foreign expert training programs.

As the electronics sector continues to thrive, these policy changes will ensure that India remains at the forefront of global supply chains, contributing to its vision of becoming a semiconductor and electronics manufacturing powerhouse.