Tax liability on salary income earned in forign country (us)
This query is : Resolved
16 March 2015
Dear Sir,
My friend who is an IT professional, is visiting US on a Onsite Project for tenure of 2 Years. Please let me know the applicability of Indian Income tax on the salary income received in Foreign currency, which will be credited to his bank account in US.
Thank you.
Nagesh
My friend who is an IT professional, is visiting US on a Onsite Project for tenure of 2 Years. Please let me know the applicability of Indian Income tax on the salary income received in Foreign currency, which will be credited to his bank account in US.
Thank you.
Nagesh
16 March 2015
Salary earned out side India is not taxable in India if he is non resident i.e. stays outside India during the financial year for 182 days or more.
Message likes :
1 times
16 March 2015
mention how many days he was in india?
16 March 2015
he is going to US during this weekend... will stay for more than 1 year...
17 March 2015
any further responses Pls.... Mr.Tushar
26 July 2025
Great question, Nagesh! Let's provide a clear, updated explanation of the **Indian income tax liability** on **salary earned in the U.S.** — especially for someone going on an **onsite assignment** for 2 years.
---
## 🔍 Situation Summary
* Your friend is an **IT professional**, going **onsite to the U.S. for 2 years**.
* Salary will be **credited in USD** to a **U.S. bank account**.
* He is planning to leave India **this weekend**, so by March 31 (end of financial year), his stay **in India may be more than 182 days**.
* You want to know whether this **foreign salary is taxable in India**.
---
## ✅ **Step-by-Step: Check Taxability**
### 🔹 1. **Determine Residential Status under Indian Tax Law**
Under **Section 6 of the Income Tax Act**, a person is **Non-Resident (NRI)** if:
> They are in India for **less than 182 days** in a financial year.
So:
| Period | Status |
| --------------------------------- | ----------------------------------------------------- |
| FY 2014–15 (ending 31 March 2015) | Likely **Resident**, since he leaves only mid-March |
| FY 2015–16 onward | Likely **Non-Resident**, if he stays abroad >182 days |
---
### 🔹 2. **Taxability of Foreign Salary**
| Year | Resident Status | Salary Credited in US | Taxable in India? |
| ----------------- | ---------------- | ----------------------------------- | ----------------- |
| FY 2014–15 | **Resident** | ✅ Yes (Global income taxed) | ✅ **Taxable** |
| FY 2015–16 onward | **Non-Resident** | ✅ Yes (Credited in US, work abroad) | ❌ **Not taxable** |
➡️ In short:
* For the **first partial year**, if he’s a **resident**, salary is **taxable in India**.
* In subsequent years, if he becomes **NRI**, foreign salary is **not taxable in India**, even if credited abroad.
---
## 🛡️ **Double Taxation Relief (DTAA)**
India and the U.S. have a **Double Taxation Avoidance Agreement (DTAA)**:
* If salary is **taxed in the U.S.**, and your friend is a **Resident in India** that year, he can **claim relief under Section 90** to **avoid double taxation**.
* He must **disclose foreign income in Indian ITR** and claim **tax credit** for U.S. tax paid.
---
## 💡 Tip for Immediate Action
If leaving mid-March and staying in India **more than 182 days in FY 2014–15**, your friend is **Resident**, and:
* Must include **foreign salary earned in March** in Indian income for FY 2014–15.
* From FY 2015–16 onward, becomes **NRI**, so foreign salary **won’t be taxable in India**.
---
## ✅ Summary
| Point | Treatment |
| -------------------------------- | -------------------------------------------------- |
| FY 2014–15 (residency >182 days) | ✅ Salary taxable in India |
| FY 2015–16 onwards (NRI status) | ❌ Foreign salary **not taxable** |
| Salary credited in U.S. account | ✅ Irrelevant — **source and work location matter** |
| Double taxation relief | ✅ Available under DTAA with U.S. |
---
Let me know if you'd like:
* Help computing **tax liability for partial year**,
* A **DTAA relief claim format**,
* Or guidance for **NRI tax filing**.
Happy to assist!
---
## 🔍 Situation Summary
* Your friend is an **IT professional**, going **onsite to the U.S. for 2 years**.
* Salary will be **credited in USD** to a **U.S. bank account**.
* He is planning to leave India **this weekend**, so by March 31 (end of financial year), his stay **in India may be more than 182 days**.
* You want to know whether this **foreign salary is taxable in India**.
---
## ✅ **Step-by-Step: Check Taxability**
### 🔹 1. **Determine Residential Status under Indian Tax Law**
Under **Section 6 of the Income Tax Act**, a person is **Non-Resident (NRI)** if:
> They are in India for **less than 182 days** in a financial year.
So:
| Period | Status |
| --------------------------------- | ----------------------------------------------------- |
| FY 2014–15 (ending 31 March 2015) | Likely **Resident**, since he leaves only mid-March |
| FY 2015–16 onward | Likely **Non-Resident**, if he stays abroad >182 days |
---
### 🔹 2. **Taxability of Foreign Salary**
| Year | Resident Status | Salary Credited in US | Taxable in India? |
| ----------------- | ---------------- | ----------------------------------- | ----------------- |
| FY 2014–15 | **Resident** | ✅ Yes (Global income taxed) | ✅ **Taxable** |
| FY 2015–16 onward | **Non-Resident** | ✅ Yes (Credited in US, work abroad) | ❌ **Not taxable** |
➡️ In short:
* For the **first partial year**, if he’s a **resident**, salary is **taxable in India**.
* In subsequent years, if he becomes **NRI**, foreign salary is **not taxable in India**, even if credited abroad.
---
## 🛡️ **Double Taxation Relief (DTAA)**
India and the U.S. have a **Double Taxation Avoidance Agreement (DTAA)**:
* If salary is **taxed in the U.S.**, and your friend is a **Resident in India** that year, he can **claim relief under Section 90** to **avoid double taxation**.
* He must **disclose foreign income in Indian ITR** and claim **tax credit** for U.S. tax paid.
---
## 💡 Tip for Immediate Action
If leaving mid-March and staying in India **more than 182 days in FY 2014–15**, your friend is **Resident**, and:
* Must include **foreign salary earned in March** in Indian income for FY 2014–15.
* From FY 2015–16 onward, becomes **NRI**, so foreign salary **won’t be taxable in India**.
---
## ✅ Summary
| Point | Treatment |
| -------------------------------- | -------------------------------------------------- |
| FY 2014–15 (residency >182 days) | ✅ Salary taxable in India |
| FY 2015–16 onwards (NRI status) | ❌ Foreign salary **not taxable** |
| Salary credited in U.S. account | ✅ Irrelevant — **source and work location matter** |
| Double taxation relief | ✅ Available under DTAA with U.S. |
---
Let me know if you'd like:
* Help computing **tax liability for partial year**,
* A **DTAA relief claim format**,
* Or guidance for **NRI tax filing**.
Happy to assist!
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