Ever wondered how foreign income is different from Indian income? Let us find out.

Indian Income 

Any of the following three is an Indian income:

i) If income is received (or deemed to be received) in India during the previous year and at the same time it accrues (or arises or is deemed to accrue or arise) in India during the previous year;

ii) If income is received (or deemed to be received) in India during the previous year but it accrues (or arises) outside India during the previous year;

iii) If income is received outside India during the previous year but it accrues (or arises or is deemed to accrue or arise) in India during the previous year;

Foreign income 

If the following conditions are satisfied, then such income is foreign income:

i)   Income is not received (or not deemed to be received) in India; and

ii) Income does not accrue or arise (or does not deemed to accrue or arise) in India.

The provisions of residential status are tabulated as below:

Indian vs Foreign Income — Quick Comparison

Aspect Indian Income Foreign Income
Where received / accrues Received in India and/or accrues/arises in India Not received in India and does not accrue/arise in India
Typical examples Salary for services rendered in India, rent from Indian property, interest credited in India Salary for services rendered outside India, rent from property outside India, dividends from foreign companies
Taxability (Individuals) Taxable in India for all residential statuses ROR: Taxable in India
RNOR/NRI: Taxable in India only if received in India or deemed to accrue/arise in India
Double Taxation Relief Usually not applicable Possible via DTAA/FTC if taxed overseas
Compliance tips Maintain Indian TDS/TCS proofs, Form 16/16A Keep foreign tax paid proofs, Form 67 (FTC), bank FIRC/SOF forms

INCIDENCE OF TAX FOR DIFFERENT TAXPAYERS

Incidence of tax in India for Individuals and Hindu Undivided Family (HUF)

Any other taxpayer (like company, firm, co-operative society, association of persons, body of individuals, etc):

Do you have more queries regarding foreign income and Indian income? Are you looking for Chartered Accountants in Bangalore who deals in such assignments? If yes, then get in touch with us.

Real-Life Examples

1) NRI Salary (Work Outside India)

Scenario: Rahul is an NRI working in the UAE; salary is credited in a UAE bank.
Result: Salary is foreign income and not taxable in India for NRI, unless received in India or for services rendered in India.

2) Foreign Dividend (Credited Abroad)

Scenario: Meera is Resident & Ordinarily Resident (ROR) in India, holds US stocks; dividend is paid to her US brokerage.
Result: As ROR, global income is taxable in India. Dividend is taxable in India; she may claim Foreign Tax Credit (Form 67) if US withholding applied.

3) Rent from Property Outside India

Scenario: Arjun is RNOR and owns an apartment in London; rent is credited in UK.
Result: For RNOR, foreign income is generally not taxable in India unless derived from a business controlled or profession set up in India or received in India.

How Residential Status Affects Taxation — Flow


 

Step 1: Determine Residential Status (FY)
Compute days in India + specific conditions → ROR / RNOR / NRI

If ROR
Global income taxable in India
FTC/DTAA may apply

If RNOR
Foreign income generally not taxable
Except: received in India or derived from business/profession controlled from India

If NRI
Only Indian-sourced/received income taxable in India

Compliance Notes
• Keep proofs of foreign tax paid + file Form 67 for FTC before ITR filing.
• DTAA may reduce double taxation; check relevant country treaty.
• Bank inflows into India can impact “received in India” tests.

FAQs

Is foreign income taxable in India?
For ROR, global income is taxable in India. For RNOR/NRI, foreign income is taxable in India only if received in India or deemed to accrue/arise in India. DTAA/Foreign Tax Credit may reduce double taxation.
What if I am an NRI?
As an NRI, income earned and received outside India is not taxed in India. Income that is received in India or accrues/arises in India (e.g., rent from Indian property, interest credited in India) is taxable in India.
How do I claim relief for tax paid abroad?
If taxed overseas, you can generally claim Foreign Tax Credit in India (submit Form 67 before ITR filing) subject to DTAA and Indian rules. Keep foreign tax deduction certificates and proof of payment.
How is residential status determined?
It depends on days of stay and specific conditions in the relevant Financial Year and preceding years. Status can be Resident & Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), or Non-Resident (NRI).
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