Working Remotely from India for a Foreign Company: How Your Salary Is Taxed (AY 2026-27)

You live in Pune, you log in every morning to a company headquartered in Berlin or Austin or Singapore, and your pay lands in your Indian savings account each month. No Form 16 arrives in June. No TDS shows up in your Form 26AS. For a lot of remote workers, the first year passes with a quiet assumption that if nobody deducted tax, nothing is due.

That assumption is expensive. Salary earned for work you physically perform in India is taxable in India, whoever pays it and wherever it is paid from. The absence of TDS does not reduce the tax; it only moves the entire burden, and the entire compliance calendar, onto you.

This guide covers what a resident salaried by an overseas employer actually owes for AY 2026-27 (FY 2025-26), and how to get the filing right.

First, Settle One Question: Are You an Employee or a Contractor?

Almost every downstream answer depends on this, and the contract usually tells you.

Many "remote employees" are, on paper, consultants on a services agreement. If your agreement calls you a contractor, invoices are raised, and there are no leave or benefit entitlements, you are running a profession, and the guide for freelancers with international clients is the one you want. The rest of this article assumes a genuine employment relationship.

The Employer of Record Exception

If your company engaged you through an Employer of Record or PEO (Deel, Remote, Multiplier, Skuad and similar) and the EOR's Indian entity is your legal employer, your situation is ordinary. That entity deducts TDS under Section 192, issues you a Form 16, and your return may even be a simple ITR-1. Check the payslip: if it shows an Indian PAN or TAN of the payer, you are on Indian payroll and most of the complications below do not apply to you.

Why the Income Is Taxable Here

Two rules do the work.

Under Section 5, a resident is taxed on global income. Under Section 9(1)(ii), salary is deemed to accrue in India if it is earned for services rendered in India.

So the place of payment is irrelevant. Dollars credited to a US account for work done from your flat in Gurgaon are Indian income twice over: once because you are a resident, and once because the services were performed here.

Your residential status for the year is worth confirming before anything else, especially if you moved countries mid-year. A person who was an NRI until August and became a resident in the same financial year has a split picture that the ordinary rules do not describe well.

Converting Foreign Currency Salary

Rule 115 fixes the exchange rate for you, so do not use the rate your bank gave you on remittance.

For salary, use the State Bank of India telegraphic transfer buying rate on the last day of the month immediately preceding the month in which the salary is due or paid.

October salary is therefore converted at the TT buying rate of 30 September. Doing this month by month for twelve months gives you a number that is defensible, and that will differ from the total credited to your bank once conversion charges and remittance spreads are taken out. Keep the monthly workings; you will need them if a mismatch query ever arrives.

Advance Tax Is Your Real Deadline

This is where most remote workers get hurt. With no employer deducting tax, your liability crosses Rs 10,000 in the first month or two of the year, and advance tax becomes compulsory.

Miss these and Section 234B charges 1% a month on the shortfall from April, and Section 234C charges 1% a month on each deferred instalment. On a Rs 10 lakh liability, paying everything in July 2026 instead of through the year costs roughly Rs 60,000 to Rs 70,000 in avoidable interest. The detail is in our guide to advance tax rules and due dates.

Set a standing instruction to move roughly 30% of every payout into a separate account, and pay from there on the four dates.

A Worked Example

Priya is a resident of Bengaluru, employed by a Singapore company with no Indian presence. Her salary converts to Rs 48,00,000 for FY 2025-26 under Rule 115. There is no Indian TDS and no Singapore withholding.

Under the new regime:

Her four instalments are Rs 1,55,610 by 15 June, a cumulative Rs 4,66,830 by 15 September, Rs 7,78,050 by 15 December and the full Rs 10,37,400 by 15 March.

Note what she does not get. No employer NPS contribution under 80CCD(2), which is the one large deduction that survives in the new regime for salaried people. No HRA exemption either, because a foreign employer almost never structures pay into Indian allowance components, and HRA requires an actual house rent allowance in your salary. If Priya pays substantial rent, the old regime plus Section 80GG is worth modelling, though the 80GG cap of Rs 60,000 a year rarely beats the new regime's wider slabs at her income.

When Your Foreign Employer Withholds Tax

Some payroll systems withhold tax in the employer's country by default, particularly US ones. The instinct is to claim foreign tax credit in India. Usually that is the wrong move.

Article 15 of most Indian tax treaties (Dependent Personal Services) gives the taxing right over employment income to the country of residence, unless the employment is actually exercised in the other country. You are exercising your employment in India. So the other country generally has no right to tax that salary at all, and the correct fix is to give the employer a residence certificate, stop the withholding, and reclaim what was already deducted by filing in that country.

Foreign tax credit under Section 90 is for tax the other country was entitled to charge, not for tax withheld in error. If credit genuinely is due, it requires Form 67 filed before your return, and Schedules FSI and TR completed. Our DTAA and foreign income guide walks through that mechanism.

An exception worth knowing: if you travel to the employer's country and work there for part of the year, that country may tax the days worked on its soil, and then a genuine credit claim arises for those days.

Which Return, and What Else Must Be Disclosed

ITR-1 is unavailable to anyone with income from a source outside India, an asset located outside India, or signing authority in a foreign account. A foreign-payroll salary puts you in ITR-2, and you report the salary under Salaries with the employer type marked as "Other".

Then check three disclosures that catch people out:

• Schedule FA. Any foreign bank account, brokerage account, RSU or ESOP holding in the parent company, or foreign retirement account held during the calendar year 2025 must be reported, even if it produced no income and even if you paid tax on it. Non-disclosure carries a Rs 10 lakh penalty per year under the Black Money Act, independent of the amount involved.
• Schedule AL. Applies if your total income exceeds Rs 50 lakh.
• Foreign retirement accounts. Section 89A lets you defer tax on income accruing in a retirement account maintained in a notified country (currently the USA, UK and Canada) until withdrawal, instead of taxing it annually. It requires Form 10-EE, filed before the return due date, and the choice is irrevocable.

49Tax's AI reads your salary credits and capital gains statements and builds the schedules for you, which matters most in exactly this situation, where there is no Form 16 to fall back on.

Five Mistakes That Cost the Most

1. Treating no TDS as no tax. Foreign remittances above Rs 7 lakh into your account are reported to the department through the AIS. The data arrives whether or not you file.
2. Paying all the tax at filing time. Legal, but interest under 234B and 234C makes it one of the most expensive habits in personal tax.
3. Filing ITR-1 because "it is just salary". It makes the return defective and, when foreign assets exist, exposes you to Black Money Act consequences that a correct ITR-2 would have avoided.
4. Skipping Schedule FA for vested RSUs. Vested but unsold shares in the foreign parent are a reportable foreign asset. So is an unused foreign bank account with a small balance.
5. Ignoring FEMA paperwork. Keep the FIRC or inward remittance advice for every credit. Your bank issues these on request, and they are the cleanest evidence of what the money was.

The Takeaway

Open a second bank account this week, move 30% of each payout into it, and calendar the four advance tax dates. Then build a simple monthly sheet with the SBI TT buying rate of the prior month-end against each salary credit. Those two habits convert the hardest part of foreign-payroll filing into an evening's work in July, and they remove the interest charge that otherwise quietly follows this arrangement every single year.