NRI Income Tax & Compliance

Taxation of Foreign Source of Income in India for NRIs

By Manish Prajapat |Last Updated: November 7, 2025

Taxation of Foreign Source of Income in India for NRIs

A foreign source of income is earnings derived from an activity or source located outside India. In India, an individual's tax obligations depend on their residential status and source of income.

Generally, Indian residents pay tax on their global income, while NRIs pay tax on income received in India. According to section 5 of the Income Tax Act, 1961, an Indian resident is liable to pay tax on their global income, whether it is earned from local or foreign sources.

Manish Prajapat(Tax Expert)

Mr Manish is a financial professional with over 10 years of experience in strategic financial planning, performance analysis, and compliance across different sectors, including Agriculture, Pharma, Manufacturing, & Oil and Gas. Mr Prajapati has a knack for managing financial accounts, driving business growth by optimizing cost efficiency and regulatory compliance. Additionally, he has expertise in developing financial models, preparing detailed cash flow statements, and closing the balance sheets.

Frequently Asked Questions

For NRIs, foreign source income means any income that is accrued, earned, or arises from sources located outside of India and is received outside India. It includes salary from a foreign employer, interest, capital gains, dividends, or rent from overseas assets.

No, foreign income is not taxable in India for an NRI if it is earned and received overseas while you hold an NRI status. However, if that income is received in India, it becomes taxable here.

By claiming tax benefits under the Double Taxation Avoidance Agreement (DTAA) between India and the foreign country, NRIs can avoid double taxation. They can do so by claiming a foreign tax credit (FTC) on taxes they already paid overseas. Additionally, they need to fill out Form 10F on the income tax e-filing portal to provide information about the paid foreign taxes.

Generally, NRIs do not need to report their foreign assets and income in their ITR if they do not receive or earn them from sources within India. Considering this, the reporting for foreign assets and income in the ITR for NRIs is only mandatory when they are earned or received in India.

If the foreign income or assets of an NRI are taxable in India and if they do not disclose it, under the Black Money Act 2015, they face a penalty of INR 10,00,000. Additionally, it can also lead to prosecution, and they may face imprisonment for a minimum of six months, which can be extended to seven years. So, whenever asked, it is advisable to report your foreign income and assets correctly.

Taxation of Foreign Source of Income in India for NRIs

Frequently Asked Questions

What is Considered a Foreign Source of Income for NRIs?

Is Foreign Income Taxable in India for NRIs?

How Can NRIs Avoid Double Taxation on Foreign Income?

Do NRIs Need to Report Foreign Assets and Income in the ITR?

What Happens if an NRI Doesn't Disclose Foreign Income or Assets?

Taxation of Foreign Source of Income in India for NRIs

Frequently Asked Questions

What is Considered a Foreign Source of Income for NRIs?

Is Foreign Income Taxable in India for NRIs?

How Can NRIs Avoid Double Taxation on Foreign Income?

Do NRIs Need to Report Foreign Assets and Income in the ITR?

What Happens if an NRI Doesn't Disclose Foreign Income or Assets?