Is salary received from a foreign employer taxable in India?

Yes. If you are a Resident and Ordinarily Resident (ROR) in India, your global income, including salary from a foreign employer, is fully taxable in India.

Can I use ITR-1 if I receive salary from a foreign company?

No. If you have foreign income or hold foreign assets (like foreign bank accounts or RSUs), you cannot use ITR-1. You must file ITR-2 or ITR-3.

How to Report Salary from a Foreign Employer in India

Working remotely for a foreign company? Understand how to declare your foreign salary, claim foreign tax credits (DTAA), and choose the right ITR form.

Remote Work Across Borders

Working remotely from India for a US, UK, or European company has become incredibly common. While earning in dollars or euros is great, the tax reporting requirements are significantly more complex than working for an Indian company.

If you are a tax resident of India (Resident and Ordinarily Resident - ROR), your global income is taxable in India. Here is how to handle your foreign salary.

Scenario 1: You are an Employee (Salary Income)

If you have a formal employment contract with the foreign entity: - The income is classified as "Income from Salary." - Since the foreign employer does not have an Indian TAN, they will not deduct Indian TDS or issue a Form 16. - You must calculate your gross salary in INR (using the SBI TT buying rate on the date of receipt). - You can claim the standard deduction (₹75,000 in the new regime). - Because no TDS was deducted, you must pay Advance Tax in quarterly installments to avoid heavy interest penalties under Section 234B and 234C.

Scenario 2: You are an Independent Contractor (Business/Profession)

Many foreign companies hire Indians as independent contractors rather than formal employees to avoid local labor laws. - The income is classified as "Income from Business or Profession." - You can opt for the Presumptive Taxation Scheme (Section 44ADA) if eligible, declaring 50% of your gross receipts as profit. - You must file ITR-4 (if using 44ADA) or ITR-3. - You may also need to register for GST and file LUT (Letter of Undertaking) for export of services.

Double Taxation and DTAA

What if the foreign country deducted tax before sending the money to India?

India has Double Taxation Avoidance Agreements (DTAA) with most major countries. If tax was deducted abroad, you can claim a Foreign Tax Credit (FTC) in your Indian ITR so you don't pay tax twice on the same income. - You must file Form 67 on the income tax portal before filing your ITR to claim this credit.

A Resident and Ordinarily Resident is taxed on global income, but a Foreign Tax Credit is available only if Form 67 is filed before the ITR. Source: Income Tax Act Section 90 read with Rule 128 (Form 67); DTAA provisions.

Choosing the Right ITR Form

You cannot use ITR-1. - If you are an employee with foreign salary, you must file ITR-2. - If you are a contractor, you must file ITR-3 or ITR-4. - You must also fill out Schedule FA (Foreign Assets) if you have a foreign bank account, foreign RSUs, or any financial interest abroad. Failing to report foreign assets attracts severe penalties under the Black Money Act.

Seek Professional Help

Reporting foreign income, claiming DTAA relief, and filling out Schedule FA are highly complex tasks. While LastMinute ITR is perfect for standard Indian salary filing, we strongly recommend hiring a Chartered Accountant if you earn income from abroad.

What you should do

Convert foreign salary to rupees using the SBI TT buying rate on the date of receipt
Pay advance tax in quarterly instalments since no Indian TDS is deducted
File Form 67 before your ITR to claim any Foreign Tax Credit
Complete Schedule FA for foreign bank accounts and RSUs, and use ITR-2 or ITR-3

Common mistake

Leaving foreign assets out of Schedule FA. Non-disclosure of foreign accounts or RSUs attracts steep penalties under the Black Money Act, even when no tax was due.