A person who is resident in India may be required to report and pay tax on income earned outside India. This can include foreign salary, interest, dividends, rent, pension, business income, capital gains and income from overseas retirement accounts.

The amount taxable in India depends primarily on the taxpayer’s residential status, the nature of the income, the applicable Double Taxation Avoidance Agreement, or DTAA, and whether tax has already been paid outside India.

How residential status affects foreign income

Residential status must be determined separately for every financial year. A taxpayer may be a resident and ordinarily resident, resident but not ordinarily resident, or non-resident.

Common types of foreign income

A resident taxpayer may need to report:

• Salary or employment income earned outside India;
• Interest from foreign bank accounts, deposits or bonds;
• Dividends from shares of foreign companies;
• Capital gains from foreign shares, mutual funds, securities, cryptocurrency or property;
• Rent from an overseas house or other immovable property;
• Foreign pension and retirement-account income;
• Business, professional, royalty or consultancy income; and
• Income received through foreign trusts, entities or custodial accounts.

The foreign income must first be classified under the appropriate head of income, such as Salary, House Property, Capital Gains, Business or Profession, or Other Sources. Merely reporting the amount in Schedule FSI or Schedule FA does not replace reporting it under the relevant income schedule.

Income-tax Act, 1961 and Income-tax Act, 2025 mapping

Relief from double taxation

Foreign income may be taxed both in the country where it arises and in India. A resident taxpayer may claim relief through the applicable DTAA or, where no agreement exists, through unilateral relief.

Section 90: Relief under a DTAA

Section 90 applies where India has entered into a tax treaty with another country. The treaty may allocate taxing rights, provide an exemption or permit credit for tax paid in the foreign country.

Where a DTAA applies, the taxpayer may generally use the provision that is more beneficial, subject to treaty eligibility, documentation, anti-abuse provisions and the relevant treaty article.

Section 90A: Agreements between specified associations

Section 90A covers notified agreements between specified associations in India and specified territories outside India. The applicable notified agreement and its conditions must be examined before claiming relief.

Section 91: Relief where no DTAA exists

Where India does not have a relevant DTAA with the foreign country, a resident taxpayer may claim unilateral relief under section 91 on qualifying doubly taxed income. The relief is generally calculated using the lower of the Indian rate of tax and the foreign-country rate of tax.

How foreign tax credit is calculated

Under Rule 128, foreign tax credit is generally restricted to the lower of:

• Tax paid outside India on the foreign income; or
• Indian tax payable on that foreign income.

Where a DTAA restricts the foreign country’s right to tax the income to a specified rate, tax paid beyond the treaty-permitted amount may not qualify for credit in India.

Foreign tax credit may generally be set off against Indian income tax, surcharge and cess relating to the foreign income. Credit is not ordinarily available against interest, fee or penalty imposed outside India.

Form 67 for AY 2026-27

A resident taxpayer claiming foreign tax credit for FY 2025-26 must furnish Form 67 electronically under Rule 128 of the Income-tax Rules, 1962.

Form 67 should contain:

• Country-wise and source-wise foreign income;
• Foreign tax paid or deducted;
• Indian tax payable on the corresponding income;
• Relief claimed under section 90, 90A or 91;
• Whether any part of the foreign tax is disputed; and
• Details of any foreign-tax refund or carry-back adjustment.

Form 67 must be accompanied by a certificate, statement or other evidence showing the nature of foreign income and the tax deducted or paid outside India.

Form 67 mapping under the 2026 Rules

For a tax year governed by the Income-tax Act, 2025, foreign tax credit is claimed through Form 44 under Rule 76 of the Income-tax Rules, 2026. Form 44 is the corresponding replacement for the earlier foreign tax credit Form 67.

• Form 44 is generally due within 12 months from the end of the relevant tax year where the return has been filed under the permitted original or belated-return provisions.
• For income included in an updated return, Form 44 must be furnished on or before the updated-return filing date.
• Accountant verification is required for a company.
• For other taxpayers, accountant verification is required where foreign tax paid for the tax year is ₹1 lakh or more.
• Form 45 may be used where disputed foreign tax is subsequently settled and the related credit was not claimed earlier.

Foreign-income documents to keep

The taxpayer should preserve documents that establish both the income and the foreign tax paid, including:

• Foreign bank statements and interest certificates
• Salary slips, employment contracts and foreign employer tax certificates
• Broker, custodian and investment-account statements
• Purchase, sale and cost records for foreign securities or property
• Dividend, capital-gain and withholding-tax statements
• Foreign rental agreements and property-income records
• Foreign pension or retirement-account statements
• Foreign tax return, assessment order or tax computation
• Proof of foreign tax deduction or payment
• Details of disputed foreign tax or subsequent refunds
• Applicable DTAA article and relief calculation
• Currency-conversion workings used for the Indian return

Reporting foreign income in the ITR

Schedule FSI

Schedule FSI records income arising outside India, country code, foreign taxpayer identification number, foreign tax paid, Indian tax payable, relief available and the relevant DTAA article.

Schedule TR

Schedule TR provides a country-wise summary of the relief claimed. Its figures should reconcile with Schedule FSI and Form 67.

Schedule FA

Schedule FA is used by a resident and ordinarily resident taxpayer to disclose foreign assets, accounts and financial interests held as a legal owner, beneficial owner or beneficiary.

It may cover:

• Foreign depository and bank accounts;
• Foreign custodial or brokerage accounts;
• Foreign equity and debt interests;
• Foreign cash-value insurance or annuity contracts;
• Financial interest in foreign entities;
• Foreign immovable property;
• Foreign trusts in which the taxpayer is a trustee, beneficiary or settlor;
• Accounts over which the taxpayer has signing authority; and
• Other foreign assets or foreign-source income.

A taxpayer with foreign assets or reportable foreign income should select an ITR form that contains the required schedules. For individuals, this will generally be ITR-2 or ITR-3, depending on whether business or professional income is present.

Consequences of not disclosing foreign assets

Non-disclosure may have consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

The availability of a threshold or exception does not remove the taxpayer’s underlying obligation to correctly examine return-filing and disclosure requirements.

Relief for foreign retirement accounts under section 89A

Some foreign retirement accounts are taxed by the foreign country only when money is withdrawn, while India may otherwise tax the account income as it accrues. This timing difference can create taxation in different years and make foreign tax credit difficult to claim.

Section 89A permits an eligible resident taxpayer to align Indian taxation of income from a specified foreign retirement account with the year in which that income is taxed on withdrawal or redemption in the notified country.

Conditions under the Income-tax Act, 1961

• The taxpayer must be resident in India.
• The retirement account must have been opened while the person was non-resident in India and resident in the relevant foreign country.
• The account must be maintained in a notified country.
• Under Notification No. 25/2022, the notified countries are Canada, the United Kingdom and the United States of America.
• Form 10EE must be filed electronically on or before the applicable due date under section 139(1).
• The option generally applies to all specified accounts in the notified country and continues for subsequent years.

Mapping under the Income-tax Act, 2025

For tax years governed by the new Act, section 89A corresponds to section 158, Rule 21AAA corresponds to Rule 74, and Form 10EE corresponds to Form 40.

The Income Tax Department’s Form 40 guidance currently lists the United States, United Kingdom, Canada and Australia as notified countries under the new-law framework. Form 40 must be filed electronically within the prescribed return-filing due date, together with the required account statements and evidence of taxation in the foreign country.

Practical filing checklist

1. Determine residential status for the relevant financial year.
2. Identify every foreign income source and foreign asset.
3. Convert income, asset values and foreign tax into Indian rupees using the prescribed exchange-rate rules.
4. Report income under the correct income head.
5. Complete Schedule FSI for foreign-source income.
6. Complete Schedule TR for country-wise tax relief.
7. Complete Schedule FA where applicable.
8. Review the relevant DTAA article and foreign withholding rate.
9. Calculate foreign tax credit source-wise and country-wise.
10. File Form 67 for AY 2026-27 with supporting documents.
11. File Form 10EE where section 89A relief is being exercised for AY 2026-27.
12. Reconcile the ITR, Form 67, foreign statements and tax-payment evidence before submission.

Common mistakes to avoid

• Assuming foreign income is exempt because it was not remitted to India;
• Confusing citizenship or FEMA status with income-tax residential status;
• Reporting income only in Schedule FSI but not under the relevant income head;
• Reporting foreign assets using the financial year instead of the prescribed calendar-year period;
• Omitting dormant or low-balance foreign accounts;
• Claiming the entire foreign tax without applying the Indian-tax or treaty limit;
• Claiming credit for foreign interest, penalties or disputed tax;
• Failing to reconcile Schedule FSI, Schedule TR and Form 67;
• Using Form 44 for AY 2026-27 instead of Form 67; and
• Treating section 89A relief as a permanent exemption.

Conclusion

A resident and ordinarily resident taxpayer is generally taxable in India on worldwide income and may also be required to disclose foreign assets. Tax paid outside India does not automatically remove the Indian reporting requirement, but credit may be available under sections 90, 90A or 91 and the applicable DTAA.

Accurate reporting requires the foreign income, supporting documents, Schedule FSI, Schedule TR, Schedule FA and Form 67 to be reconciled. Taxpayers with foreign retirement accounts should separately examine relief under section 89A and the applicable prescribed form.

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