Tax liability on foreign income
This query is : Resolved
22 April 2014
I am currently out of India. My stay has been extended for more than 8 months.
Till now I have been receiving my salary into savings account from my company's Indian current account as reimbursement towards expenses.
I wish to have an expert opinion, whether I can continue to draw my salary in INR as reimbursements into my savings account? whether I will be subjected to IT as I am not getting the income in NRE account??
What is the solution to avail tax benefits of abroad stay in my case??
Thanks!!
Till now I have been receiving my salary into savings account from my company's Indian current account as reimbursement towards expenses.
I wish to have an expert opinion, whether I can continue to draw my salary in INR as reimbursements into my savings account? whether I will be subjected to IT as I am not getting the income in NRE account??
What is the solution to avail tax benefits of abroad stay in my case??
Thanks!!
23 April 2014
Waiting for an expert opinion on my issue.
05 May 2014
still waiting for your comment...
26 July 2025
This is a very relevant question, especially for Indians working abroad but still getting paid in India. Let’s walk through the issue clearly, focusing on **residency status, income source, and taxability** under Indian law.
---
## 🔍 **Your Situation Summarized**
* You are **currently outside India**, and your **stay has exceeded 8 months** (i.e., **240+ days**).
* You are receiving **salary in INR**, into your **regular Indian savings account**, from your **company’s Indian current account**.
* You want to know:
1. Is this **salary taxable in India**?
2. Can you **structure** your income better to **optimize tax** (e.g., via NRE account)?
---
## ✅ Step-by-Step Tax Treatment
### 🔹 1. **Determine Your Residential Status**
As per Section 6 of the Income Tax Act:
> If you are **outside India for 182 days or more** during a financial year, you become a **Non-Resident Indian (NRI)** for that year.
➡️ **You said your stay has exceeded 8 months**, so you are likely an **NRI** for tax purposes.
---
### 🔹 2. **What Income is Taxable in India for an NRI?**
| Type of Income | Taxable in India for NRI? |
| ------------------------------------------------------------- | ----------------------------- |
| Income **earned in India** | ✅ Yes |
| Income **received in India** for **services rendered abroad** | ❌ **Not taxable** (key point) |
| Foreign income remitted to India | ❌ Not taxable |
---
### 🔹 3. **In Your Case**
* You are **working abroad**, so the **services are rendered outside India**.
* But you are being **paid into an Indian savings account**, from an **Indian account**.
💡 **Important Rule**:
> For NRIs, if **services are rendered outside India**, the salary is **not taxable in India**, even if it's **received in India** — as long as the source of income is **foreign**.
BUT — in your case, the salary is:
* **Paid by an Indian company**, and
* **Credited in INR from an Indian account**
🔸 **So this may be treated as Indian-sourced income** — and **taxable in India**, unless structured differently.
---
## 🔁 **Solution to Avail Tax Benefits**
### ✅ **1. Ask the company to pay salary from their foreign entity/account**
* If the company has a **foreign branch**, your salary should be paid **abroad** into a **foreign bank account**, or to your **NRE account**.
* This makes the **source of income foreign**, and hence **not taxable in India** for NRIs.
### ✅ **2. Use an NRE Account**
* Ask your company to **credit salary to your NRE account**.
* Income earned abroad and remitted to NRE account is **fully exempt from Indian tax**, and also **interest on NRE deposits is tax-free**.
### ✅ **3. Maintain documentation**
* Show that the **work was performed outside India**
* Keep **travel records, visa, salary slips, and foreign employment contract**
---
## ⚠️ What NOT to Do
* Do **not** continue receiving salary as **reimbursement** in an Indian **savings account**, if the work is done abroad.
* The **Income Tax Department may treat** it as **Indian income**, and **tax you**.
---
## ✅ Summary
| Topic | Your Case |
| ------------------ | ----------------------------------------------------------- |
| Residential Status | Likely **NRI** |
| Work location | Outside India |
| Salary paid from | Indian company’s Indian account |
| Salary received in | INR in Indian savings account |
| Taxable in India? | ⚠️ **Yes**, unless structured properly |
| Solution | ✅ Use **NRE account** or get paid from a **foreign source** |
---
Let me know if you'd like:
* A **sample declaration** for your employer to pay to NRE account
* Help structuring your salary to **minimize tax**
* Clarification based on **Double Tax Avoidance Agreement (DTAA)** if you're in a treaty country
Happy to assist further!
---
## 🔍 **Your Situation Summarized**
* You are **currently outside India**, and your **stay has exceeded 8 months** (i.e., **240+ days**).
* You are receiving **salary in INR**, into your **regular Indian savings account**, from your **company’s Indian current account**.
* You want to know:
1. Is this **salary taxable in India**?
2. Can you **structure** your income better to **optimize tax** (e.g., via NRE account)?
---
## ✅ Step-by-Step Tax Treatment
### 🔹 1. **Determine Your Residential Status**
As per Section 6 of the Income Tax Act:
> If you are **outside India for 182 days or more** during a financial year, you become a **Non-Resident Indian (NRI)** for that year.
➡️ **You said your stay has exceeded 8 months**, so you are likely an **NRI** for tax purposes.
---
### 🔹 2. **What Income is Taxable in India for an NRI?**
| Type of Income | Taxable in India for NRI? |
| ------------------------------------------------------------- | ----------------------------- |
| Income **earned in India** | ✅ Yes |
| Income **received in India** for **services rendered abroad** | ❌ **Not taxable** (key point) |
| Foreign income remitted to India | ❌ Not taxable |
---
### 🔹 3. **In Your Case**
* You are **working abroad**, so the **services are rendered outside India**.
* But you are being **paid into an Indian savings account**, from an **Indian account**.
💡 **Important Rule**:
> For NRIs, if **services are rendered outside India**, the salary is **not taxable in India**, even if it's **received in India** — as long as the source of income is **foreign**.
BUT — in your case, the salary is:
* **Paid by an Indian company**, and
* **Credited in INR from an Indian account**
🔸 **So this may be treated as Indian-sourced income** — and **taxable in India**, unless structured differently.
---
## 🔁 **Solution to Avail Tax Benefits**
### ✅ **1. Ask the company to pay salary from their foreign entity/account**
* If the company has a **foreign branch**, your salary should be paid **abroad** into a **foreign bank account**, or to your **NRE account**.
* This makes the **source of income foreign**, and hence **not taxable in India** for NRIs.
### ✅ **2. Use an NRE Account**
* Ask your company to **credit salary to your NRE account**.
* Income earned abroad and remitted to NRE account is **fully exempt from Indian tax**, and also **interest on NRE deposits is tax-free**.
### ✅ **3. Maintain documentation**
* Show that the **work was performed outside India**
* Keep **travel records, visa, salary slips, and foreign employment contract**
---
## ⚠️ What NOT to Do
* Do **not** continue receiving salary as **reimbursement** in an Indian **savings account**, if the work is done abroad.
* The **Income Tax Department may treat** it as **Indian income**, and **tax you**.
---
## ✅ Summary
| Topic | Your Case |
| ------------------ | ----------------------------------------------------------- |
| Residential Status | Likely **NRI** |
| Work location | Outside India |
| Salary paid from | Indian company’s Indian account |
| Salary received in | INR in Indian savings account |
| Taxable in India? | ⚠️ **Yes**, unless structured properly |
| Solution | ✅ Use **NRE account** or get paid from a **foreign source** |
---
Let me know if you'd like:
* A **sample declaration** for your employer to pay to NRE account
* Help structuring your salary to **minimize tax**
* Clarification based on **Double Tax Avoidance Agreement (DTAA)** if you're in a treaty country
Happy to assist further!
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