How foreign income is taxed
| Income | Indian tax treatment for residents |
|---|---|
| Foreign salary | Salary income at slab rates; credit for foreign tax |
| Foreign rent | House property income — 30% standard deduction, local taxes paid abroad deductible |
| Interest and dividends | Other sources at slab rates |
| Foreign shares and RSUs | Capital gains — 24 months for long-term (unlisted in India), 12.5% LTCG |
| Foreign mutual funds | Typically taxed as non-equity — at slab rates or 12.5% LTCG depending on holding and type |
Schedule FA and the Black Money Act
Schedule FA covers foreign assets held at any time in the calendar year ending during the tax year. Non-disclosure can attract a ₹10 lakh penalty under the Black Money Act; since October 2024 that penalty doesn't apply where the total value of foreign assets other than immovable property is ₹20 lakh or less, but disclosure is still required.
Worked example: returning professional with US RSUs
- 1Resident (ROR) holding US RSUs that vested while working in India: perquisite tax at vesting, then capital gains on sale.
- 2Sold shares held for 30 months for a gain of ₹10 lakh — long-term (more than 24 months for foreign shares).
- 3LTCG at 12.5% = ₹1,25,000 plus cess; claim credit for any US tax on the sale.
≈ ₹1.3 lakh of Indian tax, and the shares must appear in Schedule FA.
