Taxability on Income Earned in India Vs Income Earned Abroad

Taxability Income earned in India Vs income earned abroad

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Taxability Income earned in India Vs income earned abroad

Taxability of an income depends on where the income was received or where it was earned /accrued, whether in India or abroad. Depending on this, income will be considered to have been earned in India which helps in determining its taxability. The below article helps us to understand the concept of income earned in India.

As per normal understanding, income earned in India is considered as Indian income and income earned outside India is considered as foreign income. However, understanding the classification of income as per Income Tax Act i.e. Indian income or foreign Income is important. For the purpose of taxation, income may be earned from salary, house property, business, capital gain or any other source. Classification of such sources of income into Indian or foreign income will be decided on the basis of place of earning/accrual of income and place of receipt of income. Following table will help us to understand when an income is considered to have been earned in India.

Sr No.Condition 1Condition 2Status of Income
1
Received In India Earn/accrued In IndiaIndian Income
2Received outside IndiaEarn/accrued In IndiaIndian Income
3Earn/accrued in IndiaReceived Outside IndiaIndian Income
4Received outside IndiaEarn/accrued outside IndiaForeign Income

Except for income which is earned/accrued and received outside India all other income will be considered as Indian income. Also, remittance of foreign income in India will not be taxable if it was first received outside India.

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

 Visit hrblock.in for more information or to find your nearest office.

HRBlockIndia
HRBlockIndia
H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

42 Comments

  1. Simran Vora says:

    What about this scenario for an NRI?

    Before I became NRI, I held regular savings a/c in India with SBI. Now I am NRI and have been receiving my income directly in my India savings a/c instead of in UAE.

    So what will be the implications?

    Income is earned outside India but deposited by the UK client directly in my Indian regular Savings a/c (p.s. it’s not NRE a/c but regular savings a/c)?

    Will I be taxed in India for this income?

    Regards.

    • HRBlockIndia says:

      Hello Simran Vora,

      Since your status is that of an NRI and the income source is out of India, the income is not taxable in India. Moreover your tax would have been deducted by the payer according to the taxa rules of the UAE/UK whichever applicable.

    • Ajay Jobanputra says:

      If ur income is directly deposited to ur indian Accounts and u served them outside india do not matter.

      as income is received in india.. it will be taxable.

      pls go through with taxable condition

      it was same in my case.. when i was working at Muscat

  2. Umesh says:

    Hi,

    I have this question about the tax filing that I am planning to do in India for year 2013-14.

    I worked in India for an Indian company for almost 7 months and I also worked 4 months in the US (as a US resident for US employer) in the same financial year. Following are the details of months that I worked in India and US.

    2013 April: 15 days in US and 10 days in India
    2013 May to 2013 September worked in India
    2013 October and November, I didn’t work but I was in India
    2013 December 9th to 2014 March 31, I worked in the US.

    Since I have been more than 182 days in India, I will have to file taxes for all the incomes in India. So, my question is, should I have to consider my US salary also as income ? My US salary was credited to US bank account.

    Thanks,
    Umesh

  3. neha jain says:

    #hrblockindia #Simran hora
    U suggested her that her income would not be taxable…but I wud rather say if any part of her income will be credited directly to her bank account in India then that part of her salary wud be considered as income received in India under section 5 and wud be chargeable to tax even if she is a non resident.
    Therefore she shud receive her salary in her foreign account and then she can remit the required amt to her indian bank account in which case the salary earned by her in UAE wud not be subject to tax in India.

  4. Joe says:

    I am a resident in India. I have a sole proprietorship firm. But I work on commission basis on international trade. Goods sold from Europe to China. The receive the commission in Euros into my current account in India. The goods are sold via bonded warehouse (tax free) because the buyer will pay import tax in china anyway. Wht are the tax complications for me on this income received from abroad? Do I have to pay tax?

  5. Manish says:

    Hi ,

    I have question –
    I was employed in India from March’14 Till Nov’14 while Dec-14 to Mar’15 I was employed in UAE. I used to send my UAE salary (from Dec’14-Mar’15) to my India Saving Account. My Question is do I have to pay Tax on the my earning from Dubai for fiscal year 2014-15.

  6. Rizwan says:

    I am a resident in India. I have a sole proprietorship firm. But I work on commission basis on international trade. Goods sold from USA to INDIA. The receive the commission in USD into my current account in India. The goods are sold via bonded warehouse (tax free) because the buyer will pay import tax in india anyway. Wht are the tax complications for me on this income received from abroad? Do I have to pay tax?

    • Ram Samaria says:

      Dear Rizwan

      as you are resident of India, all income is taxable
      you have to show this income as business activity and claim expense to earn income , net of f income will be taxable

  7. dattatray dhekare says:

    dear sir,
    i have earned income from salary in UAE but as per provision of income tax act,1961 i am resident of india for the PY.
    i have been receiving my income directly in my India savings a/c instead of in UAE.

    So what will be the implications?

    Income is earned outside India but deposited by the employer directly in my Indian regular Savings a/c ?

    Will I be taxed in India for this income?

    Regards.

  8. Ram Samaria says:

    Hi Mr. Dhekare

    as you said you are Resident for the PY then whole income whether received in India or or out of India
    is taxable in India.

    any income which is received in India is taxable even if earned out of India
    so to get this income away from income tax received income in foreign account and transfer in India

  9. Abdulkhadar says:

    Dear Sir/Madam,

    I am resident Indian. I am representing an overseas company in India on commission basis. The commission is applicable on each and every individual jobs booked through my contacts and efforts from anywhere in the world including India. The commission will be transferred to S/B account after sales and as per customer terms of sales payment.

    Since there is no regular or direct income for me from India, I would like to know whether the income tax shall be applicable on the commission income paid to me by the said company from their country.If applicable, please let me know the details.

    Regards,

  10. Smit jain says:

    Hi

    This is Smit and I am an Indian resident, i worked in Singapore for 5 months and before coming to India I paid 15% tax in Singapore of my income earned in a Singapore

    Now i came back to India so again may I need to pay tax for Singapore income or I can get benefit of Double Tax Treaty DTAA between India and Singapore

    Please suggest if I need to pay tax for Singapore income in India as well

    Regards
    Smit Jain

    • HRBlockIndia says:

      Dear Smit,
      Yes, you fall in the category of resident and ordinary resident of India, as your stay in India is more than 6 months. Hence your global income will be taxable in India. Although your Singapore income will be taxable here, you will definitely get the benefit of DTAA between India & Singapore. Only the marginal tax, if liable, will be payable by you being the rate of tax higher in India. H&R Block experts can help you in filing such return.

  11. puneeth says:

    hi,

    thanks hr block for this post. i do have a query though.
    i was paying tax when i was earning in indian firm. now im abroad working solely on foreign income.

    do i need to still keep my tax account of india open ?
    if i have to close it, how to do so ?

  12. Inderpal says:

    Hello,

    i have a question i’m a social media influencer i have social media accounts with lots of followers and i get sponsors from foreign and i’m getting paid through Paypal and my question is do i have to pay tax ? as i’m doing work on internet and companies are paying me for sponsoring them on my social media accounts? please reply as soon as possible

    thanks

  13. Ayan says:

    Hi,

    I am an Indian citizen working in Bangladesh. My consultancy fees post the necessary local TDS, is deposited at a local bank there from where I remit to my Indian savings account.

    I understand that I fall in the fourth caregory and hence no tax is to be paid in India. However, do I need to submit any documents while filing my IT returns.

  14. Khushbu Katyal says:

    Hi,

    I have worked in India till 29 Sept for the financial year FY’15-’16 and then in China from 30 sept till now. So, my residential stay in India is exact 182 days. Please suggest if I have to pay tax for china salary in India.

  15. Pratip Upadhyay says:

    I will be moving out of India to UAE in August 2016 for a job and thus will be staying for less than 182 days in 2016-17. Before this, I have never worked outside India. I have two queries.

    Will foreign income earned & received outside India from August onwards be taxable or not?
    What are the implications if I repatriate that money back to India sometime later this year?

  16. S.V Iyer says:

    Hello,

    I own a house in the USA and have taken a lateral transfer to my India Office (with an option to return back to the USA) . I have been filing my returns in the US. And paying taxes in India as well as I am considered as a resident here in India. I don’t bring the house rent to India as I use it to pay back my balance mortgage (which is 50% of fair market value) and reporting losses and have been getting refunds. This kind of false under category (4), do I need to report my foreign income while filing my returns in India and is it taxable.

    Your help will be appreciated.

  17. Mohanraj Natarajan says:

    sir iam a seaman ..i work for foreign flag ship..my salary credits directly into my NRE account in india.is my income taxable?

  18. sanjay ruhela says:

    hello i lived in belgium from aug 2015 to till date and earned income from belgium and india also during this time so how can i calculate my income for income tax return for ay 16-17

    plz suggest me and tell asap.

    thnkas

  19. K Vasudevan says:

    My son was on deputation to US for about 4 months. His employer in India paid salary in UD dollors and deducted tax as per US laws and deposited there. My son satisfies the definition of Resident Indian and as such income earned in US should be treated as income here. Now please clarify urgently:
    1) What form is to be used for filing return 2) What is the equivalent of Form 16 in respect of tax deducted at US. 3) What kind of proof would be needed to show tax deposited at US. 4) Can the return be filed on line.
    I would appreciate if you could clarify urgently. What would be your charges for filing his return under this scenario.

    • HRBlockIndia says:

      1) What form is to be used for filing return _ ITR 2
      2) What is the equivalent of Form 16 in respect of tax deducted at US. – Form W2
      3) What kind of proof would be needed to show tax deposited at US. – Form W2, US tax return (if any filed there)
      4) Can the return be filed on line. Yes you can definitely file the ITR online. You can use our portal https://www.hrblock.in/ for filing your returns online in the most convenient way and have peace of mind.

  20. S Guha says:

    Hi

    I worked in Singapore for 7 years and came back to India 3 years ago. I still have a savings bank account open there and also have some investment in commodity( loss making).
    If I remit these funds from my SGP bank account to my Indian savings bank account , will I be taxed in India ?
    Please sggest

    thanks
    S Guha

    • Basha says:

      Hi H & R expert team,

      At the outset, thank you for all your help in answering the questions raised by the NRIs. I am an NRI living and working in China for a Chinese company for the past 3 years.
      Now, a US based company would like to recruit me as a consultant in China. If my salary ( around USD 8000 ) is transferred from US to my NRE account in India, will it be subject to tax in India. Kindly advise. The US company does not have an office in China or India.

  21. damandeep says:

    hii,
    my sister is working in abroad and she transfers some amount to me in india monthly? will that be taxable in india? will that be included in my income? and under which section or which head of income tax act? what is the maximum amount she can transfer per annum so it is included in my income., the tax on such income will be as per income tax slab rates???

  22. Subina says:

    Hi,

    I am a resident of India and will continue to work in India till Oct 2016. Post this i plan to move to UAE for a new job.

    I will get a Form 16 from my Indian company and will file my returns basis this form 16. Do i also need to add my UAE earnings for taxation in this financial year ?

  23. Arun says:

    Hi ,i had been in Singapore for the last 11 years working for foreign company and returned in 2014 Jun , And also started working in India from Sep-2014, Can i submit ITR under NOR(not an ordinary resident) for Accessmen year 2015-16) ?, Do i need to pay tax whatever salary earned in Singapore from Jan-2014 to Jun 2014 ) ?.

    And also do i need to pay tax whatever interest earned from NRE FD ? Please clarify

  24. PS says:

    Hello Team,

    i was working in the UK for last couple of years and recently returned to India in Jul 16. My UK employer continues to employ me as i provide my services remotely from India. My employer continues to deposit my salary (post UK taxes) in my UK bank account which i remit to India. I am aware that i have to pay for foreign income and then take tax credits with the help of DTAA. However i have two other specific queries:

    1. Am i allowed to work from India while income being deposited in UK bank accounts? Does this have any legal complications?
    2. What is the exact specific calculation for arriving at the income tax payable and to be refunded (Tax credit from DTAA) subsequently?

    Appreciate your help.

    Thanks,
    PS

  25. Rahul says:

    Hi,

    I am working in Cambodia since Nov 2015. I have paid tax in India on my foreign income for financial year 2015-16 as I have spent more than 183 days in India for fyi 2015-16.

    In 2016, I have spent 70 days in India during my holiday.

    My query: Do I have to pay tax on my foreign income i.e. Cambodian income for fyi 2016-17?

    I am working in Cambodia and employer is also Cambodian and I pay tax (TDS) in Cambodia on my salary.

    Please help me by answering my query.

  26. DINESH BABU says:

    HI
    Im working in qatar for last 3 yrs but i didnt opened NRi/Nro account till now all my remittance so far through normal savings account so far automatically intrest earned tax was debit by bank bcoz i didnt submitted 15g form — my Q . DO i have to pay tax in india

  27. Tushar Shetty says:

    I am a resident Indian and most of my earnings are from abroad. If I transfer the money to India, is it taxable? And suppose if I have a registered company abroad with a bank account and if I transfer the money back to India is it taxable?

  28. Ns, Gayathri P says:

    Hi I am an American Citizen with an OCI, and have been working and paying taxes here in India- fully, for the past nine years. I have been filing USA income tax returns as well,and last year had to pay the IRS. paying income at source and have been a long term resident of India for eight years relief? I believe this is form 2555 or 2555EZ. Kindly advice for next year early. Thanks. Gayathri (61 year old senior citizen status for India). I have 2.5 years left in this job.
    . This is totally unfair, as I am a widow. This is my only income. l

  29. MANIT RAMNANI says:

    The assessee has stayed in Singapore from 01/04/2015 to 31/07/2015 earned salary of Rs. 1044385/-(23208.5 Singapore dollar) and has paid Tax of Rs. 14477/- (322 Singapore Dollar) , after returning from India he has earned salary of Rs. 871863/- wef 01/08/2015 to 31/03/2016. What shall be his Tax liability if the TDS of Rs. 55815 has been deducted on Indian Salary. Please let me understand asap.

  30. Kunal says:

    Hi,
    I am indian resident, worked for 5 months in south korea and recieved salary in korean bank account and have paid income tax to korean government.
    My question is will i be taxed in india for the salary earned in South Korea?

  31. Joshi RS says:

    Hello Sir/Madam,

    I am being transferred to a Japanese company in Japan for 2 months assignment. This Japanese company is a group company of our parent company only but is a totally separate company or entity.

    I am earning my salary from this Japanese company in Japan in my bank account in Japan in Japanese currency.
    So as per the table given by you at the start, my income falls in the category of “Foreign Income” as it is Received outside India and also it is Earned/accrued outside India.

    I will be transferring back to India Payroll after completion of 2 months and will transfer the amount remaining after my living expenses from Japanese bank to my Indian Bank account in India.

    Now, following are my questions –
    1) Am I liable to pay tax on above Foreign income received & earned outside India ?
    If yes,
    2) how much percentage exemption I will get due to double taxation treaty ?
    3) Is there any exemption on the house rent I paid in Japan ?
    (I want to ask this 3rd question specifically because in India we have HRA exemption and mandatory leaving expenses like house rent are huge in abroad so is there any exemption for this ?)

    Thanking you in advance,

  32. Subramanian says:

    Hello Team
    I am taking up consultancy engagement with a company that is based in Netherlands. they will be depositing the consulting fee in Euros into my bank account directly. They are saying that the money they transfer would have not suffered tax.

    I am indian citizen & resident

    my doubts are:
    1. Is this income taxable. If yes, on what basis – normal personal income tax slab basis?
    2. cAn my normal Savings account be used to receive foreign currency? Or is there any special amendment or new account I need to open?
    3. CAn I adjust official expenses on this income while filing returns?

    Thanks in advance

  33. Subhashish says:

    I am located in India. Besides getting regular salary in India, I am also working as a freelance Investment Consultant for the foreign companies and foreign high networth individuals. I will be getting my fees and commission from them for the consultancy / brokerage provided to these foreign companies / foreign individuals. These incomes will be received by me through my current bank account in India.
    Please clarify that whether these incomes will be taxable In India? Is there any legal compliance is necessary prior to receive these incomes in India and after receipt of these Income in India.

    If I will use paymaster services of foreign entity to receive these income on my behalf, in that case incomes will be taxable in my hands in India ?

    Regards,

    Subhashish

  34. Pankaj says:

    Sir I m working for foregn company since June 16. I worked in india. I m getting 2500 USD salary as per contract per month in my saving account. I also received expenses expenses remibursement in my saving account
    Foreign comapny does not provide in form 16 and they also not deducted any TDS from my salary. Please confirm taxabilty on this income. How i can caclulate tax on it & which income to be shown while filing of ITR . Salary income or business income

  35. T.P.Sengupta says:

    My daughter, a resident of India was sent to UK for 1 yr by her employer in April 2016 and she came back in India on 18.09.16. Hence she is treated as resident of India for tax purpose for FY 15 – 16. Now my point is that how to calculate her taxable income for UK period. Whether House rent paid there would be deducted from the income. Is any other income there is liable to be deducted to calculate taxable income.

  36. chandra Shekhar Singh says:

    Dear Sir

    I am working in india for a company and getting salary from there. The said company has been sold and directors has asked me to help me in winding up of business, for which i will get commision. commision has been transfered to my saving account from abrod by sister concern of the winding up of company. please let me know my taxability

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