A foreign national under the Indian Income Tax Act refers to an individual who is not a citizen of India but may still be liable to pay taxes on income earned or received in India. India follows a residency-based taxation system, which means that taxability is determined not only by citizenship but by the residential status of an individual. A foreign national may be classified as a resident, resident but not ordinarily resident (RNOR), or non-resident (NR) depending on the number of days they have stayed in India during a financial year and preceding years. Foreigners who earn salary, rental income, or capital gains from Indian sources may be taxed accordingly.
As per Section 6 of the Income Tax Act, 1961, an individual’s residential status is determined based on their physical presence in India. If a foreign national stays in India for 182 days or more in a financial year, or 60 days or more in the year and 365 days or more in the preceding four years, they are considered residents. The tax implications vary: residents are taxed on their global income, whereas non-residents are taxed only on income earned or received in India. Additionally, Section 5 defines the scope of total income based on residential status. Even non-residents are liable to pay taxes on income accrued or arising in India, or deemed to accrue or arise in India under Section 9.
To easily remember the rules related to foreign nationals under Indian tax law, use the mnemonic “FIND-RS”:
- F – Foreign national
- I – Income earned or received in India is taxable
- N – Non-residents taxed only on Indian income
- D – Deemed income taxed under Section 9
- R – Residential status is key (Section 6)
- S – Stay duration determines tax rules (182 or 60+365 days)
