Double Taxation for Indian Residents With Foreign Income: A Practical Guide

More Indian residents than ever have foreign income: consultants with foreign clients, employees of foreign companies, investors in foreign stocks, and returning NRIs. Without planning, some of that income can be taxed in both countries. This guide sets out how to avoid it.

Step 1: Know Your Residential Status

Only residents who are ordinarily resident are taxed in India on worldwide income. Non-residents and those 'resident but not ordinarily resident' are generally taxed only on Indian income and certain other income. Check your status first.

Step 2: Use Treaty Rates at Source

Where a foreign client or payer withholds tax, give them the documents they need — often a tax residency certificate from India and their own country's forms — so they withhold at the treaty rate, not a higher domestic rate. Excess withholding abroad usually can't be credited in India.

Step 3: Report the Income in India

Report all foreign income in your Indian return, converted into rupees using the prescribed rates.

Step 4: Claim Foreign Tax Credit

Claim credit for foreign tax paid, up to the Indian tax on that income, by filing Form 67 with evidence.

Step 5: Report Foreign Assets

If you're resident and ordinarily resident, report foreign bank accounts, shares, RSUs and other assets in Schedule FA, on a calendar-year basis.

Common Situations

• Freelancers with foreign clients: foreign withholding is often avoidable with treaty documentation.
• Employees working abroad for part of the year: salary for work abroad may be taxed there; claim credit in India if resident.
• Foreign dividends: withholding in the source country, credited in India within limits.
• RSUs: taxed in India as salary when they vest, with foreign tax credit where the other country also taxes them.

Getting Help

Think Filing helps residents with foreign income manage double taxation, claim credit and report foreign assets.