Do you have foreign salary, bank accounts, shares, dividends or property? Simply paying tax abroad does not mean that your Indian tax and reporting obligations are over.
Under the Income-tax Act, 2025, always check your residential status, taxability, foreign asset disclosure and foreign tax credit.
1. Resident, RNOR or NRI?
Your residential status is the starting point.
- ROR: Foreign income is generally taxable in India.
- RNOR: Foreign income is generally outside the Indian tax net, subject to the specific conditions of the Act.
- NRI: Generally taxable in India on income received/accruing or deemed to be received/accruing in India.
Relevant provisions: Sections 5 & 6
2. Foreign Bank Account
A foreign bank account may have disclosure requirements, even if it earns little or no interest.
Foreign bank/depository accounts may need to be reported in Schedule FA, where applicable.
Taxability of interest and disclosure of the account are two different questions.
3. Foreign Shares & Investments
Holding US/UK shares, ETFs, foreign mutual funds, RSUs/ESOPs or overseas brokerage accounts may involve:
Capital Gains + Dividend/Other Income + Schedule FA + Foreign Tax Credit
Do not ignore foreign investments merely because the money remains outside India.
4. Foreign Salary
Salary received in a foreign bank account is not automatically tax-free in India.
Taxability depends on:
Residential Status + Place of Services + Accrual + DTAA
For an ROR, foreign-source salary can generally be taxable in India.
5. Foreign Dividend
Foreign dividend may be taxable in India even when tax has already been deducted abroad.
The taxpayer may be able to claim Foreign Tax Credit, subject to applicable provisions and conditions.
6. Schedule FA - Foreign Assets
Schedule FA deals with disclosure of specified foreign assets/accounts, including:
- Foreign bank/depository accounts
- Foreign brokerage/custodian accounts
- Foreign shares/securities
- Foreign immovable property
- Foreign insurance/annuity
- Financial interests in foreign entities
- Certain foreign trusts/interests
Schedule FA = Foreign Asset Disclosure
7. Schedule FSI - Foreign Income
Schedule FSI deals with income from sources outside India and relevant foreign tax information.
Therefore, depending on your facts:
- Schedule FA → Foreign Assets
- Schedule FSI → Foreign Income
8. DTAA - Section 159
Under the Income-tax Act, 2025, Section 159 deals with agreements with foreign countries or specified territories for relief from or avoidance of double taxation. Where an applicable DTAA provides a more beneficial treatment, the provisions of the Act apply to the extent they are more beneficial to the assessee.
Important: For the Income-tax Act, 2025, refer to Section 159, not old Section 90.
9. Foreign Tax Credit
If the same income is taxed in India and abroad, Foreign Tax Credit (FTC) may be available subject to the applicable provisions and prescribed conditions.
The Income-tax Rules, 2026 also provide the framework for claiming foreign tax credit.
Common Mistakes to Avoid
- "I am an NRI, so I don't have to report anything."
- "I paid tax abroad, so I don't need to report the income in India."
- "My foreign bank account earned no interest, so I can ignore it."
- "My foreign shares are small, so disclosure is unnecessary."
- "Foreign salary received outside India is automatically tax-free."
- "Tax was deducted on my foreign dividend, so there is no Indian tax."
Quick Checklist
Before filing your ITR, check:
- Residential Status - ROR / RNOR / NRI
- Foreign Income Taxability
- Foreign Bank & Investment Accounts
- Schedule FA
- Schedule FSI
- DTAA — Section 159
- Foreign Tax Credit
- Correct ITR Form
Bottom Line
Foreign Income Taxation = Residential Status + Taxability + Foreign Asset Disclosure + DTAA + Foreign Tax Credit
If you have foreign salary, bank accounts, shares, dividends or property, review the reporting requirements before filing your ITR.
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