NRI Receiving Salary In A Foreign Bank Account But Working For An Indian Company — Where Is It Taxable?

NRI Salary from a Company: Where Is It Taxable?

 

Key Takeaways

 

• For an NRI tax depends on where the work takes place and where the salary is received, not on where the employer's located.

 

• Salary for work done outside India and paid outside India is usually not taxable in India.

 

• Salary for days worked in India or credited directly in India is taxable.

 

• Your residential status (NRI, RNOR or Resident) decides how far India’s tax net reaches.

 

• Share proof of NRI status with your employer so that incorrect TDS is not deducted.

 

Introduction

 

Many NRIs earn a salary from a company while living abroad and the pay lands in a foreign bank account. The common worry is whether India can tax that pay just because the employer is Indian. The short answer: an NRI’s salary is taxable in India only if the salary is received in India or earned for services done in India. Where the employer is located or where the money is credited abroad does not decide taxability. This article explains the rule, the residency tests, a worked example with numbers, TDS issues and the steps to stay compliant.

 

Table of Contents

 

1. What Decides the Taxability of NRI Salary?

 

2. When Is NRI Salary Taxable in India?

 

3. How Does Residential Status Change the Answer?

 

4. Worked Example: ₹36 Lakh Salary from an Indian Employer

 

5. TDS, Documents and Filing: What Should You Do?

 

6. Frequently Asked Questions

 

7. Conclusion

 

What Decides the Taxability of NRI Salary?

 

Two tests apply to a non‑resident under Section 5 of the Income‑tax Act. Income is taxable in India if it is (a) received or deemed to be received in India or (b) accrues arises or is deemed to accrue or arise in India.

 

For salary Section 9 adds a rule: salary is treated as earned in India when the services are rendered in India. So the place of work is the test. The employer’s address, the currency of payment and the location of the payroll team do not decide taxability.

 

The law also says that income accruing outside India is not treated as received in India just because it appears in a balance sheet prepared in India. The employer booking NRI salary as an expense in its books therefore does not by itself make NRI salary taxable here.

 

A note on law and years. The Income‑tax Act 2025 applies from 1 April 2026. For Financial Year 2025‑26 (Assessment Year 2026‑27) the 1961 Act still governs. From FY 2026‑27 the period is called Tax Year 2026‑27. The core rules on Sections 5  6 and 9 continue in the Act.

 

When Is NRI Salary Taxable in India?

 

The table below shows situations for an NRI employed by an Indian company.

 

| Situation Taxable in India? | Reason |

 

| Work done abroad salary paid into a foreign bank account | No | Services rendered outside India and money received outside India |

 

Work done abroad employer credits salary directly into an Indian bank account | Yes | Treated as received in India |

 

Work done abroad you later transfer the foreign salary to your NRE or NRO account | No | Income was already received abroad; the transfer is not income |

 

| Visit India and work for some days | Yes for those days | Services rendered in India |

 

| Work remotely from India | Yes Services rendered in India |

 

| Leave or rest period salary earned for service in India | Yes | Deemed to be earned in India |

 

| If the salary is paid by the Government of India to a citizen for services abroad a separate rule applies and it is taxable in India. This does not cover an listed company but check it if your employer is a government body. | | |

 

How Does Residential Status Change the Answer?

 

Your status under Section 6 sets the reach of India’s tax:

 

• Resident and Ordinarily Resident: taxed on income.

 

•. Not Ordinarily Resident (RNOR): taxed on Indian income and on business controlled from India. Foreign salary for work. Received abroad is generally, outside the net.

 

• Non‑Resident: taxed on income received or accruing in India.

 

A resident becomes a resident when a resident stays in India for 182 days or more during a calendar year or when a resident stays for 60 days or more during a calendar year and the resident has stayed for 365 days or more in the four years before that. Two relaxations matter here:

 

- An Indian citizen who leaves India for work overseas must spend 182 days in India to become a resident; the 60‑day rule does not apply.

 

- A citizen or person of origin who visits India can use 120 days instead of 60 if the resident’s Indian income, not counting foreign‑source money is more than ₹15 lakh. Such a person becomes a Resident, Non‑Ordinary Resident (RNOR) not a resident.

 

Also watch the resident rule.

 

An Indian citizen who earns than ₹15 lakh in India and is not taxed in any other country because of domicile or residence is treated as a resident but as RNOR. This can matter for NRIs in countries that have no income tax. Read more in our guide on [LINK: status of NRIs].

 

Worked Example: ₹36 Lakh Salary from an Indian Employer

 

Rohan is a citizen who works in Dubai for a company based in Bengaluru. His yearly salary is ₹36,00,000, which is paid into his Dubai bank account. This year he visited India for 36 days and worked from his home office while there.

 

- Residency: 36 days is below 182 days. The resident’s Indian income is also below ₹15 lakh. The 120‑day rule does not apply. The resident is a Non‑Resident.

 

- Salary for work in Dubai: about ₹32.45 lakh. Not taxable in India.

 

- Salary for 36 days worked in India: ₹36,00,000 × 36 ÷ 365 ≈ ₹3.55 lakh. Taxable in India.

 

Tax on the ₹3.55 lakh is calculated at the slab rates. Depending on the tax regime and any other Indian income the liability may be small or zero. Apportionment on working days or calendar days is practice so keep a record of days worked in India and agree on the method with your CA.

 

If the same ₹36 lakh had been credited directly into Rohan’s account the entire amount would be treated as received in India and would become taxable.

 

TDS, Documents and Filing: What Should You Do?

 

1. Confirm the resident’s status in writing. Give the employer a residency declaration, passport copies showing entry and exit stamps and the resident’s employment details abroad.

 

2. Ask for the TDS treatment. Employers deduct tax on salary under Section 192 of the 1961 Act. The matching provision of the 2025 Act. Many deduct as for a resident by default. A lower or nil deduction certificate from the Assessing Officer can prevent this.

 

3. Keep salary outside India. Ask payroll to pay into the resident’s account. Transfer money to India yourself when needed.

 

4. Track days. Maintain a log of days in India and days worked in India each year.

 

5. File a return when needed. File if the resident has Indian income above the exemption limit or wants a refund of excess TDS. Use the e‑filing portal.

 

6. Check the host country. The country where the resident lives may tax the salary. Look at the tax treaty between India and that country. Claim foreign tax credit where available.

 

For planning see our page on [LINK: NRI tax planning and return filing].

 

Frequently Asked Questions

 

**Is salary credited to a foreign bank account in India for an NRI?**

 

Not by itself. For an NRI salary is taxable in India only if it is received in India or earned for services rendered in India. If the resident works outside India and the employer pays into the resident’s account the salary is generally outside the Indian tax net even though the employer is an Indian company.

 

**What if the resident’s Indian employer deducts TDS on the salary even though the resident is an NRI?**

 

Share proof of NRI status, such as passport stamps and a residency declaration. Ask the employer to stop the deduction. For tax already deducted the resident can claim a refund by filing an income tax return for that year. A lower or nil deduction certificate from the Assessing Officer can also help avoid TDS in advance.

 

**Do I need to file an ITR if the resident’s salary is not taxable in India?**

 

Filing is needed if the resident’s taxable Indian income exceeds the exemption limit or if the resident wants a refund of excess TDS. If the resident’s salary is fully, outside the tax net and no tax was deducted the resident may not be required to file though many NRIs still file to keep a clean record. Check with a CA.

 

Does the 120-day rule apply to NRIs working abroad for companies?

 

Usually not. The 120-day test applies to citizens or persons of Indian origin who visit India. It looks at income earned in India ignoring money earned abroad. If that income is than ₹15 lakh, the test applies. NRI salary from company earned abroad is foreign-source income and is not counted in that limit. So most NRIs stay under the 182-day test.

 

Can I transfer my salary to an NRE account in India?

 

Yes. Once NRI salary from company has been received abroad sending it to your NRE or NRO account is a transfer of money that you already have, not new income. It does not become taxable in India only because you bring it home. The risk arises when the employer credits the NRI salary from Indian company directly in India.

 

For an NRI paid by a company the answer depends on two facts: where you do the work and where the NRI salary from Indian company is received. Work abroad and pay abroad usually means no tax. Days worked in India or NRI salary from company credited directly in India bring that portion into the net. Get your status, day count and TDS treatment right before the year ends because corrections after filing are harder. See how we help with [LINK: NRI taxation services page].

 

[Book a Consultation] to review your salary structure, status and TDS position with CA Dhiraj Ostwal.

 

Official Sources

 

• Income Tax Department, Income-tax Act 2025 (Sections 5 6 and 9): incometaxindia.gov.in

 

• Income Tax e-filing portal for returns and refund claims: incometax.gov.in

 

This post covers Financial Year 2025-26 (Assessment Year 2026-27) and Tax Year 2026-27.

 

Disclaimer

 

This blog is for information and is not tax or legal advice. Tax outcomes depend on facts, residency days and treaty positions. Consult a Chartered Accountant before acting.