Wondering how much foreign income is tax free in India? In India, the taxability of foreign income depends on the residential status of the individual as defined under the Income Tax Act, 1961. Income up to INR 2,50,000 is free from income tax under the IT Act of 1961. Scroll down to learn more.
How much Foreign Income is Tax Free?
It depends on your residential status. The residential status is categorized into three types: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR).
ROR individuals are taxed on their global income, meaning both Indian and foreign income are subject to tax in India.
No specific amount of foreign income is tax-free. However, foreign income might be exempt under double taxation avoidance agreements (DTAAs) or specific exemptions provided under the Income Tax Act.
RNOR individuals are taxed only on income that is received or accrued in India, or deemed to accrue or arise in India, or is derived from a business controlled or a profession set up in India.
Foreign income, unless it is received or deemed to accrue in India or is from a business/profession controlled from India, is not taxable.
NR individuals are taxed only on income that is received or accrued in India, or deemed to accrue or arise in India. Foreign income is generally not taxable unless it is received in India.
India has DTAAs with several countries to avoid double taxation of income. Under DTAAs, certain types of income such as dividends, interest, royalties, and capital gains might be taxed at a reduced rate or exempt in one of the countries.
Tax credits or exemptions are provided for taxes paid in the foreign country to avoid double taxation.
Section 90: Provides relief from double taxation under DTAAs.
Section 91: Provides unilateral relief from double taxation if no DTAA exists with the foreign country.
ExampleIf an ROR individual earns a salary from a job in a foreign country, this income is taxable in India. However, if tax has already been paid on this income in the foreign country, the individual can claim relief under the DTAA or under Section 91, as applicable.
If an RNOR or NR individual earns interest from a foreign bank account, this income is generally not taxable in India. This is all about how much foreign income is tax free in India.
Get Property Tax Assessment and Assistance on Income Tax with NoBroker Legal Services Read more Can a foreigner buy property in India?.
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Authors Of The Question
How Much Foreign Income is Tax Free in India?
saurabh
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1 Answers
7 months
2024-05-31T16:15:27+00:00 2024-06-28T21:12:11+00:00Comment
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