Taxation of Foreign Dividends, Interest and Rental Income for Indian Residents

Residents of India are taxed on worldwide income. With more people investing abroad through the Liberalised Remittance Scheme, holding RSUs, or owning property overseas, foreign income is increasingly common. This guide explains how it's taxed.

Foreign Dividends

Dividends from foreign companies are taxed at slab rates. The foreign country often withholds tax — for example, US dividends paid to Indian residents generally have 25% withheld under the India–US tax treaty. You can claim credit for that tax in India, up to the Indian tax on the same income.

Foreign Interest

Interest on foreign bank accounts, bonds and deposits is taxed at slab rates, with credit for any foreign tax.

Foreign Rental Income

Rent from property abroad is taxed as house property income, with deductions for local property taxes paid and the 30% standard deduction, and credit for foreign income tax paid on it.

Claiming Foreign Tax Credit

1. Collect proof of foreign tax paid or withheld.
2. File Form 67 with details, on time.
3. Claim credit in the return, limited to Indian tax on that income.

Exchange Rates

Foreign income must be converted to rupees using the rates the rules prescribe, generally the SBI telegraphic transfer buying rate on the relevant date.

Reporting

Report foreign income in the relevant schedules, and the underlying assets — accounts, shares, property — in Schedule FA. Schedule FA uses the calendar year for many items, so align the periods carefully.

TCS on Remittances

Tax collected at source on LRS remittances above the threshold can be claimed as credit in the return.

Getting Help

Think Filing prepares returns with foreign income, foreign tax credit and Schedule FA.