Income tax on salary paid in foreign account

Hi Rishabh,

Great question! Here's how income tax on your salary would work under Indian law, considering your situation:

Key points:

1. Residential status:
   Since you stayed in India for more than 182 days in FY 2020-21, you are considered a resident in India for that financial year under the Income Tax Act.

2. Taxability of global income:
   As a resident, your global income is taxable in India, regardless of whether the salary is credited to your Indian or foreign bank account.

3. Salary credited to foreign account:
   Where your salary is credited (India or abroad) does not affect the taxability. If you are resident in India, the entire salary earned, including salary paid abroad or credited to a foreign account, is taxable in India.

4. Tax exemption by UK:
   You mentioned your organisation is exempt from UK tax and deducts an internal tax for which UK authorities are not responsible. This might mean the salary was not subjected to official UK tax deduction.

5. Double Taxation Avoidance Agreement (DTAA):
   Since you earned the salary from a foreign source (UK organisation), if any foreign tax has been paid or deducted (including ‘internal tax’), you can claim relief under DTAA or credit for foreign tax paid while filing your Indian income tax return.

6. If no foreign tax paid:
   If no actual foreign tax was paid to the UK government, the entire income will be taxable in India.

Summary for FY 2020-21:

• You are an Indian tax resident.

• Your global salary income (including salary credited to foreign account) is taxable in India.

• You must disclose the foreign salary income in your Indian Income Tax Return.

• You can claim credit for any foreign tax actually paid.

• If no foreign tax was paid, full tax liability arises in India.