Income from foreign sources
Updated on July 18, 2023
Income from foreign sources, as per the Income Tax Act, 1961, refers to any income earned or received by a taxpayer that originates from outside India. This includes income generated from various activities conducted outside India, such as business profits, professional fees, salaries, dividends, interest, royalties, capital gains, and other similar sources. The taxation of income from foreign sources is governed by the provisions of the Income Tax Act, relevant double taxation avoidance agreements (DTAA), and any other applicable laws or regulations.
Tax Implications of Income from Foreign Sources
The tax implication of Income from Foreign Sources for residents and non-residents is listed below.
Residents
Residents are generally taxed on their global income, including income from foreign sources.
The tax liability depends on the residential status determined by the number of days spent in India.
Income from foreign sources is subject to tax at applicable slab rates.
Residents may be eligible for foreign tax credits to avoid double taxation.
Reporting all income from foreign sources in tax returns is mandatory.
Non-Residents
Non-residents are taxed on income received, accrued, or deemed to be received or accrued in India.
Residential status is determined based on physical presence in India during the financial year.
Tax rates for income from foreign sources may differ from those applicable to residents.
Non-residents can benefit from Double Taxation Avoidance Agreements (DTAA) for tax relief.
Non-residents must disclose income earned in India from foreign sources in their tax returns.
