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Salary & Employment

Salary earned abroad but credited to an Indian account

Work done abroad is not Indian income, but where it first lands can change that. The account you choose matters.

You are an NRI working abroad, in the Gulf, on a ship, anywhere, and your salary is credited to a bank account back in India, and you want to know if that makes it taxable here. It is one of the most common NRI questions, and the answer is mostly reassuring, but it hinges on a detail people overlook: which Indian account the money first lands in. Here is when salary earned abroad stays tax-free, and when crediting it to India can put it at risk.
Last reviewed: 26 July 20266 min readReviewed by Preetesh Maloo, CA

The short answer

Salary you earn for work done abroad is not Indian-source income, because the tax follows where the services are rendered, and yours are rendered outside India. The complication is a separate rule that taxes a non-resident on income received in India. The settled position, built on the seafarer cases and a CBDT circular, is that salary for work abroad credited to an NRE account is treated as a mere remittance and is not received in India, so it stays tax-free. The risk is the account. Received here means first received here, so if your foreign employer credits the salary directly into an ordinary resident savings account as its first landing, the tax department can argue it was received in India and try to tax it. Credited to an NRE account, you are on settled ground; credited straight to a resident account, you are on contested ground. So the practical rule is simple: have foreign salary paid to a foreign account or an NRE account, not a resident savings account.

References on this page

  • Salary for services rendered abroad is not Indian-source; the tax follows where the work is done
  • But Section 5(2) taxes a non-resident on income received in India, and 'received' means first receipt
  • Salary for work abroad credited to an NRE account is a mere remittance, not received in India, so it stays tax-free (CBDT and the seafarer cases)
  • Credited directly to a resident savings account, it is contested, so use a foreign or NRE account

Work done abroad is not Indian income

Start with the reassuring part. Indian tax on salary follows where you actually do the work. Salary is Indian-source only for services rendered in India, under the source rule in Section 9, so salary you earn for work performed entirely abroad is not Indian-source and does not accrue in India. That much is settled, and it is why an NRI working in Dubai or sailing on a foreign ship is not taxed in India on that salary as a matter of source.

The complication comes from a different rule. Section 5 taxes a non-resident not only on Indian-source income but also on income received in India. So even though your salary is not Indian-source, a question arises: by having it paid into an Indian bank account, have you received it in India? That single question is what decides whether crediting your foreign salary to India is safe or risky, and the answer turns on which account it goes to.

The account decides it: NRE safe, resident risky

The key idea is that received in India means first received in India. If the salary is first received abroad, or, on the accepted position, credited into an NRE account, it is treated as a mere remittance of money you already earned and received outside India, and it is not received in India for tax. This is the position built up in the seafarer cases, notably CIT v. Avtar Singh Wadhwan, and confirmed by a CBDT circular for non-resident seafarers whose salary for work on a foreign ship is credited directly to an NRE account, treating it as a remittance and not taxable.

The risk is the resident account. If your foreign employer credits the salary as its very first landing directly into an ordinary resident savings account in India, the department can argue that the first receipt happened in India, and try to tax it under the received-in-India rule. That position is contestable and has been litigated, so it is not a place you want to be. The safe course is straightforward: have your foreign salary paid to a foreign account or to an NRE account, from which you can freely move it, and keep it out of a resident savings account as the first destination. The received-in-India doctrine is built on case law and circulars rather than the bare words of the section, so getting the mechanics right matters. A practising CA sets up the salary flow so your foreign earnings stay clearly outside Indian tax.

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What's involved

What the CA actually does

  1. 1

    We confirm it is tax-free

    We confirm your salary is for work done abroad and therefore not Indian-source income.

  2. 2

    We fix the account flow

    We make sure your foreign salary is paid to an NRE or foreign account, not a resident account, so it is not received in India.

  3. 3

    We defend a resident-account case

    If salary already went to a resident account, we build the position that it was earned and received abroad.

  4. 4

    We keep your return clean

    We report your position correctly so a mismatch or query does not follow.

What to have ready

Documents you'll typically need

  • Where your salary is credited and the type of account
  • Your employment contract and where you work
  • Proof the services were rendered abroad
  • Your passport and residency details

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next — how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 31 countries.

Frequently asked questions

Common questions

Foreign salary landing in your Indian account?

Tell us where it is credited and where you work. A practising CA will confirm it stays tax-free and fix the account flow, no obligation.

No card, no obligation. All certification and filing work is handled by ICAI-registered practising Chartered Accountants.