Playbook
Moving to Cyprus from India
Moving to Cyprus from India: short answer
Last reviewed
India levies no exit charge, and residence turns on day count with a transitional resident but not ordinarily resident tier. The constraints that actually bind an Indian founder are exchange control under FEMA and the place of effective management test applied to the Cyprus company.
| Charge on leaving India | None. India does not impose an exit tax |
|---|---|
| How residence is decided | Day count under section 6, with a relaxed threshold for those leaving for employment abroad |
| Transitional status | Resident but not ordinarily resident, under which foreign-source income is outside the charge |
| Deemed residence | Can apply to an Indian citizen with Indian income above the statutory threshold who is not liable to tax elsewhere |
| Company residence risk | Place of effective management in India makes a foreign company Indian resident |
| Treaty with Cyprus | In force, revised by the 2016 protocol |
The tax exit is among the simplest in this set. The difficulty sits in moving capital lawfully and in keeping the Cyprus company out of the Indian residence net.
The tax exit is the easy part
India does not levy a departure charge. There is no deemed disposal, no protective assessment and no claw-back on return of the kind the UK operates. Residence is decided by presence, and it changes when the presence changes.
The ordinary position is that an individual is resident where they are in India for 182 days or more in a financial year, or for 60 days or more in the year combined with 365 days or more across the preceding four years. For an Indian citizen leaving India for employment abroad, the 60-day limb is relaxed, which is the provision that makes a mid-year departure workable.
Between full residence and non-residence sits the resident but not ordinarily resident tier. Foreign-source income is outside the Indian charge for someone in that category, which gives a transitional period during which a founder can hold foreign income without an Indian liability arising on it.
Exchange control is the real constraint
For most Indian founders, FEMA rather than the Income-tax Act is what shapes the move.
Moving capital out of India is governed by the Liberalised Remittance Scheme and by the rules on overseas direct investment, each with its own limits, permissions and reporting. Funding a Cyprus company from India, capitalising it, and later repatriating dividends or sale proceeds are all regulated transactions rather than free ones.
Residential status under FEMA is determined separately from residential status under the Income-tax Act, and the two can differ at any given moment. That divergence is a frequent source of error, because a founder who has become a non-resident for tax purposes may still be treated differently for exchange control, with consequences for what accounts may be held and what remittances are permitted.
This is a question for an Indian adviser at the outset, not at the point of the first transfer.
Checklist for your Indian adviser
Doviandi advises on the Cyprus side of a move and is not licensed to advise on Indian tax law. These are the questions worth putting to an adviser there before anything is committed.
- On my departure date and travel pattern, in which financial year do I become non-resident, and does the relaxed threshold for employment abroad apply to me?
- How long will I qualify as resident but not ordinarily resident, and what does that cover?
- Could the deemed residence provision apply to me at any point, given my Indian-source income?
- Under FEMA, what is my residential status, and how does it differ from my tax status?
- What route may I use to fund a Cyprus company, and what filings does that require?
- What must change so that the Cyprus company's place of effective management is not in India?
- How does the India and Cyprus treaty, as revised by the 2016 protocol, treat dividends and capital gains in my case?
What Cyprus provides on arrival
Tax residence. The 183-day test, or the 60-day rule, which requires 60 days in Cyprus, no more than 183 days in any other single country, a Cyprus business, employment or directorship maintained through the year, and a permanent home in Cyprus owned or rented. The further condition that the individual not be tax resident in any other state was removed with effect from 1 January 2026, which widens the route considerably: being claimed as resident elsewhere no longer excludes you from it.
Non-domiciled status. A Cyprus tax resident who is not domiciled here is outside the Special Defence Contribution on dividends and interest, for 17 years.
The corporate side. Corporate income tax is 15 percent from 1 January 2026. Cyprus applies no withholding tax on dividends to non-residents. Where a company owns qualifying intangibles it funded, the IP Box deducts 80 percent of qualifying profit, which suits an Indian software or services business whose value sits in what it has built rather than in physical assets.
Cyprus is also an EU member state, which gives a company established here freedom of establishment across the single market and access to the EU directives. For an Indian founder selling into Europe, that is frequently as important as the rate.
Where the two systems collide
Place of effective management is the central risk. A foreign company whose place of effective management is in India is Indian resident and taxable in India on its worldwide income. A Cyprus company whose founder continues to take every substantive decision from Bengaluru is exposed to exactly that, regardless of the Cyprus incorporation test that applies from 1 January 2026.
The tax years do not align. India runs a financial year from 1 April. Cyprus runs the calendar year. A departure in the second half of a calendar year sits in different positions in each, and the day counts are answering separate questions over separate periods.
Cyprus was removed from the notified list under the revised treaty. Older Indian material describes a position that changed with the 2016 protocol, and comparisons written before then should not be relied on.
Establishing residence somewhere matters. The deemed residence provision exists precisely to catch people who leave and land nowhere. Completing the Cyprus side promptly is the response to it.
The order this happens in
Settle the FEMA position before moving any money
Establish your residential status for exchange control, the route available for funding a Cyprus company, and the filings each step requires. This governs the mechanics of everything that follows.
Plan the departure date around the financial year
Confirm with an Indian adviser which year you become non-resident and how long resident but not ordinarily resident status will run.
Build the Cyprus side with real management
Incorporate, and appoint directors who will genuinely participate in decisions. Because place of effective management is the exposure, this is not a formality on this route. Take registered premises and open banking.
Establish Cyprus residence promptly
Secure a permanent home held for the whole tax year, register with the tax department and claim non-dom status. Being tax resident somewhere answers the deemed residence provision.
Run the company from Cyprus and record it
Board meetings held in Cyprus, minutes showing matters were considered, decisions taken before they are executed. This is the evidence that answers a place of effective management challenge.
What breaks it
Directing the Cyprus company from India. The single largest risk on this route, and the one that undoes the structure rather than merely complicating it.
Moving capital before settling FEMA. Remittances made outside the permitted routes are a regulatory problem, not a tax one, and they are harder to correct afterwards.
Leaving India without becoming resident anywhere. This is what the deemed residence provision is for.
Relying on pre-2016 material. The treaty position changed and older comparisons describe a regime that no longer applies.
Common questions
Does India charge an exit tax when I move to Cyprus?
No. India does not impose a departure charge. Residence changes on the day counts in section 6, with a relaxed threshold for Indian citizens leaving for employment abroad.
What is resident but not ordinarily resident status?
It is a transitional tier between resident and non-resident, under which foreign-source income falls outside the Indian charge. How long it runs in your case depends on your residence history and is a question for an Indian adviser.
Can my Cyprus company be taxed in India?
Yes, if its place of effective management is in India. That test looks at where key management and commercial decisions are in substance made, so a Cyprus company directed from India is Indian resident on its worldwide income whatever the incorporation position.
Do I need permission to fund a Cyprus company from India?
Moving capital out of India is governed by FEMA, through the Liberalised Remittance Scheme and the overseas direct investment rules, each with limits and reporting. This should be settled with an Indian adviser before the first transfer rather than after.
What happens if I leave India but do not become tax resident anywhere?
A deemed residence provision can treat an Indian citizen whose Indian-source income exceeds the statutory threshold as resident in India where they are not liable to tax elsewhere. Establishing Cyprus tax residence promptly is the response to it.
Technical definition
Residence under section 6 of the Income-tax Act is determined by presence in India, with a relaxed threshold for Indian citizens leaving for employment abroad and a deemed residence provision for certain Indian citizens whose Indian-source income exceeds a statutory threshold and who are not liable to tax elsewhere. A foreign company is Indian resident where its place of effective management is in India.
Practical implications
Because India does not charge on departure, timing carries less weight than it does for a German or Norwegian founder. What carries weight is documenting the move for exchange control purposes and ensuring the Cyprus company is genuinely directed from Cyprus rather than from India.
Common misconceptions
Two recur. That becoming a non-resident is purely a matter of counting days, when the deemed residence provision can apply to an Indian citizen who is not taxed anywhere. And that incorporating in Cyprus puts the company beyond Indian reach, when the place of effective management test looks at where decisions are actually taken.