An employee sent abroad on deputation often assumes one of two things: either that Indian tax stops applying the moment they land overseas, or that because their employer is Indian, the whole salary stays taxable in India regardless of where they work. Neither assumption is reliable. Foreign salary tax India rules do not depend on your employer’s nationality or your intention to return — they depend on your residential status for the year and where the service was actually rendered. This post on taxation of foreign salary in India works through how deputation and overseas assignments are actually taxed.
Quick answer
Salary is taxed in India based on your residential status for the financial year and where you physically render the service, not on which country’s company pays you. If you become a non-resident and work entirely outside India, that salary is generally not taxable in India — even if it is paid by an Indian company or credited to an Indian account.
Before acting, check:
- How many days will you spend in India during the financial year? This determines your residential status under Section 6.
- Is the salary for services rendered inside India or outside India? Source of income follows the place of work, not the payer’s location.
- Does India have a DTAA with the country you are deputed to, and does that treaty change who has taxing rights?
Why Deputation Creates Tax Confusion
Deputation sits in an awkward middle ground. You remain on an Indian company’s payroll, sometimes with salary still credited partly in India. You retain an Indian bank account, possibly Indian investments, sometimes an Indian home. But your actual working days shift almost entirely to another country.
The Income Tax Act does not ask where your employer is registered. It asks two separate questions: are you a resident of India for the year, and where was the income earned. Getting these two questions right resolves almost every deputation tax query.
The Question That Decides Everything: Residential Status
Section 6 of the Income Tax Act 1961 determines residential status based on physical presence in India during the financial year, not citizenship, employer location, or intention.
You are a resident if:
- You are in India for 182 days or more during the financial year, OR
- You are in India for 60 days or more during the financial year AND 365 days or more in the preceding four years combined.
Exception for Indian citizens leaving India for employment abroad: the 60-day condition is relaxed to 182 days. This means an employee who leaves India during the year to take up employment abroad is treated as a resident only if they spend 182 days or more in India that year — the shorter 60-day trigger does not apply. This exception exists specifically to accommodate people going on deputation or taking up jobs overseas mid-year.
You become a non-resident if you fail both tests — broadly, if you spend fewer than 182 days in India during the year of departure and your presence does not otherwise trigger residency.
Residential status is determined separately for each financial year. An employee who left India in June on a two-year deputation will likely be non-resident for that year (since they were in India for less than 182 days) and non-resident for the following full year abroad, but their status reverts to being assessed afresh the year they return.
Foreign Salary Tax India: When Is It Taxable Here?
Once residential status is settled, the source rule applies. Section 9(1)(ii) of the Income Tax Act 1961 deems salary to accrue or arise in India if it is earned in India — meaning the services are rendered in India — regardless of where it is paid or by whom.
If you are a non-resident and your services are rendered entirely outside India, that salary is not taxable in India, even if:
- It is paid by an Indian company
- It is credited to your Indian bank account
- Your employment contract is governed by Indian law
If you are a resident (for example, if you did not cross into non-resident territory that year, or you are a Returning Not Ordinarily Resident who has ordinary resident status for foreign income), your global income — including foreign salary — is taxable in India, with credit available for taxes paid abroad through DTAA or FTC provisions.
If part of the year is spent working in India and part abroad, the salary must be apportioned. Only the portion attributable to Indian working days is taxable in India as India-sourced income; the balance follows your residential status for that year.
A common misconception: that salary “for the year you left” is fully taxable in India because the employer is Indian and part of the year was spent in India. In reality, only the days actually worked in India before departure are taxed as Indian-source salary; the remaining period, once you meet non-resident status, is not.
What If You Are Taxed in Both Countries?
Even when the source rule is clear, some overlap can occur — particularly in the transition year of departure or return, or where the host country taxes based on different rules (for example, taxing worldwide income of tax residents regardless of source).
This is where DTAA (Double Taxation Avoidance Agreement) provisions apply. Most tax treaties, including India’s agreements with the UAE, US, UK, Singapore, and others, contain an “employment income” or “dependent personal services” article.
The general rule under this article: employment income is taxable in the country where the work is physically performed, with limited exceptions for short-term assignments (commonly, presence of 183 days or less in the host country combined with payment by a non-resident employer and no permanent establishment bearing the cost).
If salary is taxed in both countries because treaty relief does not eliminate the overlap (or the host country does not have a DTAA with India), you can claim Foreign Tax Credit (FTC) in India for tax paid abroad on the same income, using Form 67.
A note on both tax laws — FTC and Form 67 (mandatory dual-Act cluster). Foreign Tax Credit is governed by Section 90/90A of the Income Tax Act 1961 (where a DTAA applies) or Section 91 (where no DTAA exists), read with Rule 128 of the Income Tax Rules. Form 67 must be filed — generally before the due date of filing the ITR — to claim the credit.
The Income Tax Act 2025 carries forward the FTC mechanism; section references in the 2025 Act should be confirmed against the current bare Act. The requirement to file Form 67 to support an FTC claim continues under both frameworks, and the CPC has consistently disallowed FTC claims where Form 67 was not filed on time — treat this filing with the same urgency as Form 10E for Section 89 relief.
How to Work Out Your Position on Deputation.
Start by counting your actual India presence days for the financial year — not the calendar year. Include partial days as full days per the department’s counting convention. Once your residential status is settled, apply the source rule to your salary: apportion by days worked in India versus abroad if the year is split. If your host country also taxes the same income, check the relevant DTAA article on employment income and claim relief through exemption (if the treaty provides it) or through Form 67 FTC in your Indian ITR.
The RNOR Window: Often Overlooked
Employees returning from deputation frequently qualify for RNOR (Resident but Not Ordinarily Resident) status for one to two years after their return, under the conditions in Section 6(6) of the Income Tax Act. An RNOR is taxed in India only on Indian-source income and on income from a business controlled from India — foreign salary or foreign investment income from the period before return generally remains outside the Indian tax net during this window.
This transition status is frequently missed by returning employees who assume that landing back in India and resuming residency means their global income is immediately taxable. If you have foreign assets, foreign bank interest, or deferred foreign compensation, the RNOR window is worth assessing carefully with a CA before you file your first ITR after return.
When You Should Get This Checked Before You Leave
If your deputation spans a financial year-end (April to March). A deputation starting mid-year, say August, means the departure year has a split residency question. Get the day-count and source apportionment checked before assuming either full taxability or full exemption.
If your employer continues to pay part of your salary in India during the assignment. This does not automatically make it taxable — but the source has to be verified correctly, and TDS deducted by the Indian employer may need correction if you become non-resident partway through the year.
If the host country has no DTAA with India, or a limited one. Without treaty protection, double taxation is a real risk. Confirm whether Section 91 unilateral relief (available where no DTAA exists) will apply, and how it is computed.
If you plan to return within 2-3 years. Understand your likely RNOR eligibility before you return, so you can plan the timing of any income realization (bonus payouts, deferred compensation, stock vesting) to fall within the RNOR window where beneficial.
📋 Documents to Keep Ready
- Deputation letter or assignment agreement specifying start date, host country, and salary structure
- Day-count record of India presence for the financial year — flight tickets, passport stamps, or travel logs
- Salary breakup showing amounts paid in India vs abroad, and the portion attributable to India working days, if applicable
- Tax Residency Certificate (TRC) from the host country, if claiming DTAA relief
- Foreign tax payment challans or host-country tax return, if claiming FTC via Form 67
- Form 16 from the Indian employer for any India-taxable portion of salary
- Previous years’ ITRs, if assessing RNOR eligibility on return
Final Takeaway
Foreign salary tax India rules for deputation come down to two questions answered correctly: what is your residential status for the year, and where was the work actually performed. Employer nationality, payment location, and contract governing law do not decide taxability — days in India and place of service do. Where overlap with the host country’s tax system occurs, DTAA relief or Form 67 FTC closes the gap, provided the filing sequence is followed correctly. Assess your position before the assignment begins rather than after the financial year ends — the residency determination is set by facts during the year, and there is little room to change it retrospectively.
Heading out on deputation or returning from one, and unsure how your foreign salary tax India position works out? eTaxMate can assess your residential status, compute the correct source apportionment, and handle DTAA or Form 67 FTC claims.
This blog post is for general information only and does not constitute professional advice. Tax laws are subject to change and their application depends on individual facts and circumstances. Readers should consult a qualified professional before taking any action based on this content. eTaxMate accepts no liability for any action taken based on the information in this post.
Frequently Asked Questions
1. Is salary taxed in India if I work abroad on deputation for an Indian company?
Not necessarily. If you qualify as a non-resident for the financial year (broadly, fewer than 182 days in India for employees leaving for overseas employment) and your services are rendered entirely outside India, that salary is not taxable in India — even though the employer is Indian and the salary may be paid into an Indian account. Taxability depends on residential status and where the work was performed, not the employer’s location.
2. How many days can I stay in India without becoming a resident during deputation?
For Indian citizens leaving India for employment abroad, you remain a non-resident as long as you are in India for fewer than 182 days in the financial year. This is a relaxed threshold compared to the general 60-day rule, specifically designed to accommodate employees taking up overseas assignments mid-year.
3. What happens if my salary is taxed both in India and the host country?
If both countries tax the same salary, relief is available. Under a DTAA (Double Taxation Avoidance Agreement) between India and the host country, employment income is generally taxable where the work is performed, subject to short-stay exceptions. If double taxation still occurs, you can claim Foreign Tax Credit in India using Form 67, filed before your ITR due date.
4. Do I need to file Form 67 to claim credit for tax paid abroad on my salary?
Yes. Form 67 must be filed on the income tax e-filing portal, generally before the due date for filing your ITR, to support a Foreign Tax Credit claim under Section 90, 90A, or 91 of the Income Tax Act 1961. The Centralised Processing Centre has disallowed FTC claims where Form 67 was not filed in time, similar to how Form 10E is required for Section 89 relief.
5. What is RNOR status and how does it help after returning from deputation?
RNOR (Resident but Not Ordinarily Resident) is a transitional status available under Section 6(6) of the Income Tax Act for individuals returning to India after an extended period abroad. During the RNOR period — typically one to two years — only Indian-source income is taxed in India, while foreign income largely stays outside the Indian tax net. This benefit is often overlooked by returning employees who assume full resident taxation applies immediately.
6. If my deputation starts mid-year, is my entire year’s salary taxed in India or abroad?
Neither, automatically. The salary must generally be apportioned based on where the work was performed during the year — the portion earned for days worked in India is India-source income, and the portion for days worked abroad follows your residential status for that year. If you become non-resident partway through the year, only the pre-departure India-work portion is typically taxable in India.