“Synopsis”
With the rise of remote work, many NRIs and foreign citizens are opting to work from India while staying employed by overseas companies. However, this raises an important question: Is the foreign salary taxable in India if you’re physically present here? The answer depends on your residential status, tax treaty provisions, and duration of stay. This blog explores the tax implications of working remotely from India for a foreign employer, especially for NRIs, returnees, and remote professionals.
1. Residential Status – The Key Tax Trigger
In India, residential status under Section 6 of the Income Tax Act determines whether global income is taxable. The categories are:
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NRI (Non-Resident Indian): Stays in India for less than 182 days in the financial year.
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Resident but Not Ordinarily Resident (RNOR): Recently returned NRI global income may still be exempt.
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Resident and Ordinarily Resident (ROR): Stays in India >182 days and has strong India ties global income is fully taxable.
2. Foreign Salary While Working from India – Is It Taxable?
Scenario A: NRI Status Maintained
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You work remotely for a US/UK company from India for less than 182 days.
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You receive salary abroad (into foreign bank account).
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No tax in India, as income is not received or accrued in India.
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DTAA may still be applicable if income is taxed in the foreign country.
Scenario B: Resident in India
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You’re working from India for over 182 days.
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Your residential status becomes Resident or RNOR.
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Now, income is liable to Indian tax, even if:
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Salary is credited to a foreign account.
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Employer is foreign-based.
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If you are RNOR, foreign salary may still be exempt for 2–3 years.
3. Place of Service Matters – Accrual Principle
Indian tax law states that income is accrued and arises in India if the services are performed in India—even for a foreign entity.
So, if you’re physically in India working for a foreign company:
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Indian tax authorities may deem the salary as earned in India.
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Taxable even for NRIs, unless protected under DTAA.
4. Tax Deduction and Compliance Issues
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Foreign employers may not deduct Indian TDS (they aren’t governed by Indian tax law).
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Hence, you must self-declare income and pay advance tax in India (if taxable).
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If tax is paid abroad (e.g., USA), you can claim Foreign Tax Credit (FTC) via Form 67 when filing ITR in India.
5. DTAA – Your Tax Shield
India has Double Taxation Avoidance Agreements (DTAAs) with over 90 countries. These treaties:
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Prevent double taxation
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Help NRIs claim tax relief in either country
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Decide which country has taxing rights
Example: Under India–USA DTAA, the “tie-breaker rule” decides tax residency based on:
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Permanent home
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Center of vital interests
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Habitual abode
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Nationality
Use this treaty to prove tax residency abroad and avoid paying tax in India.
6. RNOR Status: A Safe Window for Returning NRIs
Returning NRIs may qualify for RNOR status for up to 2–3 years.
Under RNOR, foreign income is not taxable in India, including:
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Foreign salaries
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Pension
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Rental income abroad
Important: You must apply and disclose RNOR in your Indian tax return.
7. Key Considerations for Remote Workers in India
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Keep your foreign tax residency proof ready (TRC + Form 10F)
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Track days of stay in India carefully
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Open a foreign bank account if working for a foreign employer
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Use DTAA to avoid double taxation
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File Form 67 if claiming FTC
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Maintain written contracts specifying your location and work terms
Conclusion
If you’re an NRI or a remote worker temporarily working from India, it’s critical to evaluate your residential status and the source of your income. Even if you’re working for a foreign company, physical presence in India can trigger tax liability. With proper planning like maintaining NRI/RNOR status, utilizing DTAA benefits, and filing the right forms you can minimize tax exposure and stay fully compliant.
Working remotely doesn’t mean working tax-free. Plan early, keep documents in order, and take professional advice to navigate cross-border taxation smartly.
