Tax on Foreign Income in India: A Resident's Guide

There is no separate tax-free slab for foreign income in India. If you are a Resident and Ordinarily Resident (ROR), your global income is taxable, and foreign income simply stacks on top of your Indian income. The only shelter is the standard basic exemption limit that applies to your combined total.

In brief, as of July 2026:

• ROR: worldwide income is taxable in India, foreign income included.
• RNOR or Non-Resident Indian (NRI): only India-sourced income is taxed, foreign income is usually outside the net.
• Basic exemption (combined total, not foreign-only): ₹2,50,000 under the old regime, ₹4,00,000 under the new regime for FY 2025-26 (AY 2026-27).
• Double tax: relieved through a Double Taxation Avoidance Agreement (DTAA) and a Foreign Tax Credit claimed via Form 67.

Where the money lands in your bank and how it appears on your return is a separate question, covered in receipt of foreign remittance in the ITR. This page is not tax advice, so confirm your position with a chartered accountant.

The bigger number most residents miss is the Section 87A rebate. Under the new regime it makes total income up to 12,00,000 effectively tax-free; under the old regime it covers up to 5,00,000. The old-regime basic exemption is also higher with age: 3,00,000 for senior citizens (60 to 80) and 5,00,000 for super senior citizens (80 and above). The table sums up what is actually tax free for a resident this year.

Yes, if you are an ROR. India taxes on the basis of residence, so an ROR pays tax on income earned anywhere in the world: foreign salary, consultancy fees, rent from an overseas flat, interest, dividends and capital gains.

The country where you earned it does not change this. Even if the money never entered India and stayed in a foreign bank account, an ROR must still report and pay tax on it in the Indian financial year it accrued or was received.

What foreign tax you already paid abroad is not lost. It becomes a credit against your Indian liability, which is the point of the DTAA mechanism explained further down.

Your residential status decides how much foreign income is taxable, so the status test is really the answer to “how much is tax free”. Work through it in order.

Two extra rules to check:

• 60-to-182 relaxation: for Indian citizens leaving for employment abroad, or NRIs visiting India, the 60-day trigger is read as 182 days.
• Deemed resident (₹15 lakh test): an Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country is treated as a deemed resident with RNOR status.

Returning to India after years abroad usually makes you RNOR for two to three years, which keeps your foreign salary and savings outside Indian tax during the transition.

No. An NRI is taxed only on income that arises or is received in India, such as rent from an Indian property, Indian bank interest or capital gains on Indian shares. A salary earned and credited abroad is not taxable in India for an NRI.

The confusion arises when an NRI keeps money in an NRO account or earns Indian interest, and the choice of account matters, as our NRE vs NRO vs FCNR comparison sets out. That Indian-source slice is taxable and often has TDS deducted. The foreign-earned portion is not.

Money arriving from abroad is taxed only if it is income you earned. Moving or receiving funds you already own, or a gift from family, is not taxed. What matters is the source of the money, not the fact that it crossed a border. Here is how the common cases are treated:

So before you worry about tax on money from abroad, ask what it is. Income you earned is taxed by your residential status; your own funds, inheritance and gifts from relatives are not. Only foreign income, and gifts from non-relatives above 50,000, enter your tax return, and even then a Foreign Tax Credit can offset tax already paid abroad.

For an ROR, consultancy or freelance income from foreign clients is taxable as business or professional income, added to your total and taxed at slab rates. The source being overseas does not exempt it.

How you compute that business income, the 44ADA presumptive option, advance tax and the GST threshold are mechanics we do not repeat here. The full walk-through sits in our freelancer income tax India guide.

The residency frame is what separates this page: a resident freelancer with only foreign clients still reports that income on the global-income basis, then claims relief for any tax withheld abroad.

There is no special foreign income tax rate. Foreign income is added to your total income and taxed at the ordinary slab rate that applies to that total, under whichever regime you choose.

Capital gains and dividends keep their own special rates. Surcharge and 4% health-and-education cess apply on top. The old regime still runs ₹2.5 lakh, 5%, 20% and 30% bands with its deductions intact.

If you are an ROR, foreign salary credited to a foreign bank account is fully taxable in India. It is added under the head “salaries” and taxed at slab rates, regardless of where the account sits.

Tax deducted by the foreign employer is not a write-off. You gross up the salary, pay Indian tax on it, then reduce your Indian liability by the foreign tax through the credit method below.

You cannot avoid tax twice being calculated, but you can avoid paying it twice. India has DTAAs with most major countries, and relief comes two ways:

• Exemption method: the income is taxed in only one country.
• Credit method: both may tax it, but your home country gives credit for the foreign tax paid. This is the common route for salary and consultancy income.

The Foreign Tax Credit (FTC) is the lower of the foreign tax actually paid and the Indian tax on that same slice of income, under Section 90 (treaty countries) or Section 91 (non-treaty). You claim it by filing Form 67 before or with your return. The step-by-step filing is covered in our Form 67 claim of foreign tax credit guide, so we will not duplicate it here.

Worked example: FTC on foreign consultancy income

Say an ROR earns ₹10,00,000 in consultancy fees from a US client, on which US tax of ₹1,50,000 (15%) was withheld.

• Indian tax on that slice at a 30% marginal slab = ₹3,00,000.
• FTC = lower of foreign tax paid (₹1,50,000) and Indian tax on that income (₹3,00,000) = ₹1,50,000.
• Net Indian tax on the foreign income = ₹3,00,000 minus ₹1,50,000 = ₹1,50,000.

The credit wipes out the US tax, and you top up only the difference. To claim a treaty rate at source you may also need a Tax Residency Certificate (TRC) and Form 10F from the other jurisdiction.

You cannot make foreign income disappear, but four legal levers decide how much tax you actually pay, and the first two carry most of the saving. Use them in this order:

None of this is avoidance; it is using the residency rules and the tax treaties as written. The RNOR window and the Foreign Tax Credit are where most people save the most; the basic exemption, the 87A rebate and the timing of realisation fine-tune the rest. If tax was already deducted abroad, the Foreign Tax Credit alone often removes the double hit entirely, provided Form 67 is filed before the return.

Foreign income is reported in rupees using the SBI telegraphic-transfer (TT) buying rate, under Rule 115 of the Income-tax Rules. For most income you use the rate on the last day of the month immediately before the month the income is due or received.

Worked example: consultancy income received in September is converted at the SBI TT buying rate on 31 August. If that rate is ₹88.40 to the US dollar, then $10,000 is reported as ₹8,84,000.

Keeping a dated exchange-rate record and the remittance advice matters, because your CA needs that evidence to substantiate both the FTC and your Schedule FA figures. A receiving accounts setup that books at the mid-market rate and auto-issues a Foreign Inward Remittance Advice (eFIRA) gives you a clean, timestamped audit trail for exactly this.

No, and this is one of the most common confusions. The 20% TCS on foreign remittance is not a tax on foreign income at all. It is Tax Collected at Source under the Liberalised Remittance Scheme (LRS) when you send money out of India, so it applies to money going out, not to foreign income coming in. The rate depends on why you are remitting:

Two things take the sting out of it. First, the 10,00,000 threshold is cumulative across all your LRS remittances in the year (except education loans, which are always exempt), so most individuals never cross it. Second, TCS is not a cost: it is adjusted against your total tax liability, exactly like TDS, so you claim it back when you file your return, provided it shows in your Form 26AS. To manage the cash flow, stay within 10,00,000 where you can, use the lower-rate categories where they apply, and check your 26AS before filing.

Residents disclose foreign income and assets in dedicated ITR schedules. Getting the right one is where filings go wrong.

Schedule FA is a disclosure of assets, not just income, so foreign bank accounts, unvested RSUs and overseas ESOPs all belong there even if no income arose. Non-disclosure is penalised under the Black Money Act, which can levy a flat ₹10 lakh per year for an undisclosed foreign account or asset, separate from tax on the income.

Undeclared foreign income and assets carry harsh consequences under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015: tax at 30% with no exemptions, a penalty of three times the tax, and the ₹10 lakh per-year penalty for a missed Schedule FA disclosure.

The department now receives foreign account data automatically through global information-exchange agreements, so overseas income and holdings are visible. Voluntary, accurate disclosure is far cheaper than a notice. If you both send and receive money abroad, the outward-payment side has its own withholding rules in TDS on foreign payments.

As of July 2026, the Income-tax Act 2025 (effective 1 April 2026) restructures the compliance forms, and the FTC form currently numbered Form 67 is renumbered Form 44 under Rule 76 of the Income-tax Rules 2026 for tax year 2026-27 onwards. Form 67 still applies to FY 2025-26 (AY 2026-27) and earlier years, even if filed after 1 April 2026.

The lower-of test and the pre-return filing requirement stay the same, though Form 44 adds a foreign Tax Identification Number field and, where foreign tax paid exceeds ₹1 lakh, mandatory verification by a chartered accountant. Confirm the current form number on the income-tax portal or with your CA before you file, since transitional rules are still being notified.