Tax Reduction Guide for Indians in Germany
Most employees in Germany get a refund when they file, here is exactly what to claim.
Disclaimer: This page is for general informational purposes only and does not constitute financial, legal, or professional advice. We are not licensed financial advisors. All figures shown are approximate and may change. Always consult a qualified financial advisor and verify with official sources such as bafin.de, bundesfinanzministerium.de, or your local Finanzamt before making any financial decisions.
Top deductions ranked by typical annual savings
Work through all four tiers, Indians often miss Tier 3 and 4 entirely.
€300–1,500+/year
€100–500/year
Easy to overlook
Unique to Indian expats
Handwerker Tax Credit (§35a EStG)
You receive a direct tax credit (not just a deduction) of 20% of labour costs for craft services carried out in your home. Materials do not count — only the labour portion of the invoice. Maximum credit is €1,200/year (from a maximum of €6,000 in labour costs).
- • Plumber, electrician, painter
- • Flooring and tiling work
- • Heating repair or installation
- • Chimney sweep (Schornsteinfeger)
- • Private tutors (household teaching)
- • Only labour costs count, not materials
- • New construction does NOT qualify
- • Must pay by bank transfer — cash payments are not eligible
- • Keep the invoice showing labour separately
| Labour Invoice | Tax Credit (20%) |
|---|---|
| €1,000 | €200 |
| €3,000 | €600 |
| €6,000 | €1,200 (max) |
Household Services (Haushaltsnahe Dienstleistungen)
A separate credit of 20% of costs for domestic help and household-related services. Maximum credit is €4,000/year (from a maximum of €20,000 in spending). This is independent of the Handwerker credit, you can claim both in the same year.
- • Cleaner / housekeeper
- • Gardener
- • Childcare in the home (not nursery)
- • Elderly care at home
- • Laundry and ironing services
- • Service must be performed in or at your home
- • Must pay by bank transfer — cash is not eligible
- • Keep receipts and bank statements
- • Can be combined with Handwerker credit (§35a)
India-Specific Tax Situations
If you send money to support parents or other dependents in India who cannot support themselves financially, this is partially tax-deductible under §33a EStG. The 2026 maximum deduction is €11,784/year per person(equivalent to the Grundfreibetrag). The deduction is reduced by the dependent's own income.
You MUST document all of the following:
Germany and India signed a Double Taxation Agreement (DBA) in 1995. It governs which country has the right to tax different types of income.
If you own property in India that generates rental income, you must declare it in your German Steuererklarung under Auslandische Einkünfte. Under the DBA you will not pay German tax on it (India taxes it), but Germany uses it to calculate your German tax rate (Progressionsvorbehalt — progression reservation). Failing to declare is a tax offence in Germany even though India also taxes the income.
Typical documents needed:
Gifts from parents: Germany has gift tax (Schenkungsteuer). Between parents and children the tax-free allowance is €400,000 per parent over a rolling 10-year period. Gifts within this limit are fully tax-free in Germany.
Money for education or living costs from parents is generally not treated as a taxable gift, routine family support is considered maintenance, not a gift.
Routine family transfers below the allowance do not need to be declared as gifts. However, very large one-off transfers may attract questions — keep a paper trail showing the relationship and purpose.
Filing Your Steuererklarung — Step by Step
- • Lohnsteuerbescheinigung, your annual income tax statement from your employer, sent by end of February
- • Bank statements for any interest income from German or Indian accounts
- • Receipts for all deductions you plan to claim (equipment, professional courses, etc.)
- • Documents for any India-related income (rental agreements, ITR, transfer records)
Official government portal. German-only. Complex but completely free. Covers all scenarios including India income.
Guided questions in English and German. Mobile-friendly. Covers most employee cases. Good starting point for simple returns.
Web-based, thorough for more complex employee cases. Better than Taxfix for users with multiple income sources.
Required for complex cases: India income, freelance work, investments, or DBA situations. Extended filing deadline to February.
- • Typically arrives 4–12 weeks after filing
- • Most employees in Germany receive a refund, the average is €1,000–1,100
- • If you disagree with the assessment, you have 1 month to file an Einspruch (objection)
- • Refund is paid directly to your German bank account