If you are an NRI returning to India while still holding a foreign job, bank account, or investments, you may face complex tax filing requirements. A common example is someone who worked in Australia, moved back to India, but continues to receive salary in Australia.
This article explains how Indian tax law applies in such situations, with a focus on the Double Taxation Avoidance Agreement (DTAA) between India and Australia.
Understanding Your Residential Status
Under the Section 6 of Income Tax Act, 1961, your tax obligations in India depend on whether you are classified as:
- Resident and Ordinarily Resident (ROR)
- Resident but Not Ordinarily Resident (RNOR)
- Non-Resident (NR)
If you are in India for 182 days or more in a financial year, you will generally qualify as a resident. Once you are a resident, you need to check if you fall into the ROR category. An ROR is required to declare global income and foreign assets in the Indian income tax return.
Obligation to File a Return in India
If you are an ROR and hold any foreign bank account, investment, property, or other asset, you must file an Indian Income Tax Return (ITR) and disclose these in Schedule FA of the return form — even if you have no Indian income.
Failure to disclose can attract penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which allows for a penalty of ₹10 lakh for non-reporting of foreign assets.
Dealing with Double Taxation
Since your employer in Australia deducts local tax, you may face taxation in both countries. This is where the India–Australia DTAA comes in. Under Section 90 of the Income-tax Act, you can claim Foreign Tax Credit (FTC) in India for tax already paid in Australia.
For FTC claims, you need to:
- Report the foreign income in your Indian ITR.
- Submit Form 67 with proof of tax paid abroad.
Bringing Foreign Salary to India
Once you return to India as a resident, any salary earned abroad should be remitted to India within 180 days as per FEMA (Foreign Exchange Management Act) rules. Later, you may transfer it outside India under the Liberalised Remittance Scheme (LRS), subject to limits.
Recommended Steps for Compliance
- Confirm your residential status for the financial year. If unsure, consult a CA experienced in international taxation.
- File ITR with Schedule FA if you are an ROR.
- Claim FTC for taxes paid in Australia by filing Form 67 before ITR submission.
- Maintain proper employment contracts to avoid GST or contractor classification issues.
- Review FEMA rules for holding and remitting foreign salary.
NRIs DTAA Compliance — Plain-language Checklist
Use this checklist if you are a returning NRI with foreign income, assets, or a foreign salary. This is a practical list of steps; it is not legal advice. Consult a CA experienced in foreign income and DTAA compliance for your specific case.
- Confirm residential status for the relevant financial year (ROR / RNOR / NR).
- If resident and ordinarily resident (ROR): prepare to report global income and foreign assets in ITR.
- List all foreign assets — bank accounts, investments, insurance, pensions, property. Keep account numbers and provider details.
- Fill Schedule FA accurately in the ITR (foreign assets disclosure).
- Report foreign income (salary, interest, dividends, capital gains) in the ITR even if tax was paid abroad.
- Claim Foreign Tax Credit (FTC) in India for tax paid overseas — prepare Form 67 and proof of foreign tax paid.
- Keep supporting documents: employment contract, payslips, Form/Tax statements from foreign employer, bank statements, tax payment receipts.
- Check DTAA provisions (India–Australia DTAA in this case) for reliefs/exemptions and the method of elimination of double taxation.
- FEMA / remittance rules: note requirements for repatriation or bringing salary to India (timelines such as 180 days) and LRS implications.
- File ITR before the due date and attach/upload Form 67 if claiming FTC (or maintain proof as required by the CA/ITR rules).
- Correct classification of engagement: ensure contract/employment terms are clear (employee vs contractor) to avoid GST or other issues.
- Consult a specialist CA with experience in international taxation and DTAA to prepare/verify filings and replies to notices.
How readers can save the checklist: copy the checklist text below and paste into a text file or Word/PDF document. You may upload the file to your site as a downloadable resource.
Final Word
Conflicting advice from local accountants and online sources is common in these cases. The safest approach is to assume that as a tax resident of India, you must declare your global income and assets, and then use the DTAA to avoid double taxation. The penalties for non-disclosure are significant, and Indian tax authorities have been increasing scrutiny of foreign asset reporting.
If you are in this position, work with a tax professional who has specific experience in DTAA and foreign income compliance — not just a general accountant.
Donald G. is the Principal Consultant at NRI Money+. He specialises in creating personalised financial plans for NRIs (Non-Resident Indians) and HNI (High Net-worth Individuals).
