Tax for Remote Workers in India

Start here: employee or contractor?

This single distinction decides almost everything below: whether GST can ever apply, and how your income is reported. Many 'remote jobs' for foreign companies are legally contractor arrangements even when they feel like a salaried job, so check what your contract actually says.

• Employee (foreign payroll, EOR, or employment contract)
  Your pay is salary. GST never applies: an employee's services to their employer are outside GST (Schedule III of the CGST Act). You report it as salary income.
• Contractor / freelancer / consultant (you invoice, no employment relationship)
  Your pay is professional or business income. The GST and Section 44ADA rules below can apply to you.

The GST and 44ADA sections apply to contractors, not to salaried employees.

Do you owe Indian tax at all?

If you live and work from India, you're almost certainly a 'resident', and residents are taxed on worldwide income, including money from a foreign employer or client, wherever it's paid.

• The residency test
  You're a resident if you're in India for 182+ days in the year, or 60+ days this year plus 365+ days across the previous four years.
• Resident and ordinarily resident → global income taxable
  Income earned anywhere is taxable in India, even if it's paid into a foreign account.
• No foreign TDS ≠ tax-free
  A foreign company not deducting Indian tax doesn't make the income exempt. You self-pay through advance tax.
• Spent most of the year abroad?
  NRI / RNOR status has different rules and may exclude foreign income. If your days in India are borderline, confirm your status with a CA.

Income tax: regimes, slabs, and foreign income

The new regime is the default for FY 2025-26. Where your income lands and what you can deduct depends on whether it's salary or professional income.

• New-regime slabs (FY 2025-26)
  Nil up to ₹4 L, then 5% (4-8 L), 10% (8-12 L), 15% (12-16 L), 20% (16-20 L), 25% (20-24 L), 30% above ₹24 L. The Section 87A rebate makes taxable income up to ₹12 lakh tax-free.
• Salary vs professional income
  Salary from abroad is 'Income from Salary' and gets the ₹75,000 standard deduction (so ~₹12.75 L is tax-free). Freelance/consulting is professional income (no standard deduction), but you can use Section 44ADA or actual expenses.
• Advance tax
  If your tax after any TDS exceeds ₹10,000, pay it in instalments: 15%, 45%, 75%, then 100% cumulatively by 15 Jun / 15 Sep / 15 Dec / 15 Mar. Missing a date costs 1% interest per month.
• Already taxed abroad? Claim it back
  If a foreign country withheld tax on the same income, claim a Foreign Tax Credit by filing Form 67 (under the DTAA, Sections 90/91) before you file your return (by 31 July for non-audit cases), so you're not taxed twice.
• File ITR-3, not ITR-4
  The simple presumptive form (ITR-4 Sugam) can't be used once you have foreign income or foreign assets, which describes almost everyone reading this. You file ITR-3 instead, and can still declare your income under 44ADA within it.

Section 44ADA: the freelancer's shortcut

If you're an eligible professional, 44ADA lets you declare a flat 50% of receipts as income and skip detailed bookkeeping. For most remote consultants with low real costs, it's the simplest and often the cheapest route.

• Who qualifies (read this carefully)
  A resident individual or firm (not an LLP) in a specified profession (legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, or a notified field), and you must actually hold the qualification for it. Tribunals have held that consultancy without the professional qualification is a business (taxed under Section 44AD, a different scheme), not a profession. Pure software development is a contested grey area, so if your field isn't clearly specified, get a CA's view before opting in.
• Receipts limit
  Up to ₹75 lakh in gross receipts if at least 95% arrives through banking channels (true of foreign remittances), otherwise ₹50 lakh.
• How it works
  50% of your gross receipts is treated as taxable income (declare more if real profit is higher); the rest is a deemed allowance for expenses. You then pay slab-rate tax on that 50%.
• The sweet spot
  Because only 50% of receipts is taxable, up to about ₹24 lakh in receipts leaves ₹12 lakh of income, which the new regime's 87A rebate makes tax-free. At that level you'd still need GST registration and an LUT, but your income tax itself can be nil (assuming no other income).
• Advance tax in one shot
  Presumptive filers pay 100% of advance tax by 15 March, with no quarterly instalments.
• The catch
  Declare less than 50% and cross the basic exemption, and you must keep books (44AA) and get a tax audit (44AB). Unlike Section 44AD for businesses, there's no five-year lock-in, so you can choose each year.

GST: when it applies, and why exports are zero-rated

GST only concerns contractors and freelancers; employees are outside it entirely. The good news: services you sell to clients abroad are zero-rated.

• The threshold
  Register only once your aggregate turnover crosses ₹20 lakh, ₹10 lakh only in Manipur, Mizoram, Nagaland, and Tripura (the wider 'special-category' list you'll see quoted is for goods, not services). Below the limit, invoice foreign clients with no GST and no registration.
• Exports are inter-state, but the threshold still holds
  Export of services is an inter-state supply, which normally forces registration regardless of turnover. A CBIC notification (10/2017-IGST) specifically preserves the ₹20 lakh threshold for service providers, so below it you are genuinely exempt, despite what some guides claim.
• Exports still count toward the limit
  Aggregate turnover includes your export income, so it counts toward the ₹20 lakh line even though exports are zero-rated.
• Export of services = zero-rated
  Under the IGST Act, a service qualifies as an export when you're in India, the recipient is abroad, the place of supply is outside India, and you're paid in convertible foreign exchange. You charge 0% GST on it.
• File an LUT once registered
  A Letter of Undertaking (Form RFD-11) is filed free on the GST portal, valid for one financial year (renew each April), with no bank guarantee. It lets you export without paying IGST upfront; without it you'd pay and later claim a refund.
• Indian clients are different
  Services billed to clients within India carry normal 18% GST and count toward the threshold too, and Indian clients deduct 10% TDS (Section 194J) that you reclaim when you file.

Foreign currency & FEMA: getting paid legally

Receiving foreign currency for your work is perfectly legal under FEMA. The requirement is to route it through proper channels and document each receipt.

• Use banking channels
  Money should arrive via your bank or an authorised dealer, directly, or through platforms like Wise, Payoneer, or Skydo that settle through them.
• Keep your FIRC / FIRA
  The Foreign Inward Remittance Certificate (now usually an e-FIRC / FIRA) is your bank's proof that foreign currency came in. It's your evidence of export earnings for GST and audits. Use the correct RBI purpose code (e.g. P0802 for software services).
• Booked in rupees
  Foreign-currency income is converted to INR at the applicable reference (TT buying) rate when received.
• Declare foreign assets (Schedule FA)
  If you hold money or shares/ESOPs abroad (a foreign brokerage, or a balance held overseas), a resident must disclose them in the ITR's Schedule FA. Non-disclosure carries heavy penalties.