Foreign Remittance Income in Indian ITR: Complete Guide

Introduction
Foreign remittances are a common lifeline for millions of Indian households. Whether it is a son working abroad sending money home, or a resident receiving salary from a foreign company, knowing how to treat such remittances in the Indian Income Tax Return (ITR) is crucial. The remittance itself is not taxable, but the nature of the money and the receiver’s residency status determine tax liability.

Remittance vs. Income
A foreign remittance is simply the transfer of money from abroad into India. The transfer itself is not taxable. What matters is the source:
– Gift from relatives → Exempt from tax
– Gift from non-relatives above ₹50,000 → Taxable under “Income from Other Sources”
– Salary, business, or investment income abroad → May be taxable depending on residency
– Past savings or transfer of own money → Not taxable

Residency and Taxation
Tax treatment depends on residency status:
– Resident and Ordinarily Resident (ROR): Taxable on global income, must declare foreign assets in ITR.
– Resident but Not Ordinarily Resident (RNOR): Taxable on Indian income + income from business/profession controlled in India.
– Non-Resident (NRI): Taxable only on Indian income; foreign salary/income not taxed in India.

Reporting in ITR
– If exempt (like gifts from relatives) → Show under “Exempt Income Schedule”.
– If taxable foreign income → File ITR-2 or ITR-3 depending on source.
– If owning foreign assets as a resident → Disclose in Schedule FA.
– Keep Foreign Inward Remittance Certificates (FIRCs) and proof of relationship for gifts.

Double Taxation Relief
Residents receiving foreign income may face double taxation. Relief is available via:
– Double Taxation Avoidance Agreement (DTAA)
– Sections 90/91 of Income Tax Act
– Form 67 to claim Foreign Tax Credit (FTC)

Examples
– NRI son sends ₹1 lakh/month to parents in India → Not taxable; shown as exempt.
– Resident earns Dubai salary in Dubai bank account → Taxable in India if ROR.
– NRI sells property in India and remits abroad → Taxable in India (capital gains).

Penalties for Non-Disclosure
Non-disclosure of foreign assets/income may attract the Black Money Act. Penalties can be up to 300% of tax plus prosecution. Full disclosure ensures compliance.

FAQs
Q1. Is money from my NRI brother taxable? 
A: No, gifts from relatives are exempt. Report under exempt income.

Q2. Do I need to show exempt remittances? 
A: Yes, disclosure ensures transparency and avoids notices.

Q3. Which ITR form for foreign income? 
A: ITR-2 for salaried/residents with foreign income; ITR-3 for business/professional.

Q4. As an NRI, do I show foreign bank accounts? 
A: No, only ROR residents must disclose in Schedule FA.

Q5. What if tax is already paid abroad? 
A: Claim relief under DTAA using Form 67.

Q6. What proof for exempt gifts? 
A: FIRC, bank records, and proof of relationship.

Conclusion
Foreign remittances are not automatically income. Taxation depends on the source and your residency. Always report remittances clearly in ITR. If exempt, show it under the right schedule. If taxable, claim relief where available. Compliance protects you from penalties and strengthens financial credibility.