Expat Tax in India: Complete Guide to Expatriate Taxation for FY 2026-27

Residential status is the defining factor that decides an expat’s entire tax outcome in India, determining whether the Income Tax Act taxes everything earned worldwide or only what’s earned within its borders.

Expatriate taxation in India comes down to how many days someone was physically present in the country during the tax year.

Physical presence determines residential status in India, which shapes the scope of taxation. Final tax liability may still depend on income source, tax regime, and any applicable DTAA relief.

In this article, we cover everything you need to know about expatriate taxation in India. This includes what counts as an expatriate under Indian law. It also covers how residential status is determined. We look at the FY 2026-27 tax slabs. And we explain what changes for US citizens filing from India.

What Is Expatriate Taxation in India?

Expatriate taxation in India determines how foreign nationals and Indian citizens working abroad are taxed on their income. Unlike many tax systems that go by nationality, India’s tax framework is built entirely on residential status.f

Residential status itself is determined by how many days a person was physically present in the country during the financial year.

What makes expatriate taxation in India distinct is that salary for services rendered in India is generally treated as income accruing in India and is taxable here, subject to the Income Tax Act and any applicable DTAA relief. The tax outcome still depends on the expatriate’s residential status, the source of income, and the documentation needed to claim treaty benefits.

The tax rate for expats in India depends entirely on residential status, since it decides whether India taxes only this India-sourced salary or the expatriate’s entire global income.

Note: Inbound expatriates are foreign nationals coming to India to work for an Indian company or multinational. Outbound expatriates are Indian citizens working abroad for foreign entities or Indian multinationals.

How Is Residential Status Determined for Expatriates in India?

Residential status under Section 6 of the Income Tax Act is the starting point for all expatriate tax calculations. It determines whether India’s tax net covers just local income or everything an expatriate earns globally.

The Income Tax Act sets two separate day-count thresholds to make that determination, and crossing either one is enough to qualify as a resident.

The 182-Day Rule

An individual who is physically present in India for 182 days or more in a financial year qualifies as a resident for that year.

The count includes both the day of arrival and the day of departure. An expatriate who does not meet this threshold moves on to the second test.

The 60-Day Rule and Exceptions

The 60-day rule applies as an alternative. An individual qualifies as a resident if they are present in India for 60 days or more during the current financial year and 365 days or more across the four preceding financial years.

There are two exceptions for expatriates:

• Indian citizens leaving India for employment abroad, or crew members of Indian ships, must meet the 182-day threshold instead of 60 days.
• Indian citizens or persons of Indian Origin visiting India with total Indian income (excluding foreign sources) above ₹ 15 lakh qualify as residents if present for 120 days or more in the current year, combined with 365 days or more across the four preceding years.

An individual who does not meet either day-count threshold is classified as a Non-Resident (NR) for that year.

For those who do qualify as residents, the classification does not stop there. Residents are further divided into two sub-categories, each carrying a different scope of tax liability.

RNOR vs ROR: Understanding the Difference

Meeting the resident threshold is only half the answer. Residents then fall into one of two sub-categories that carry different tax treatment.

For most inbound expatriates arriving in India for the first time, RNOR status applies in the early years before they cross the 730-day presence threshold. The NRI taxation implications shift significantly once they become ROR.

This also changes how payroll compliance obligations get structured for their employer.

Income Tax Slabs for Foreigners in India (FY 2026-27)

The applicable tax slab depends on residential status first, and income level second. Budget 2026 made no changes to either regime’s slab structure, so the rates that came into force with Budget 2025 continue to apply for FY 2026-27 under the Income Tax Act 2025.

New Tax Regime (Section 115BAC): Default Regime

The new regime is the default for all taxpayers including expatriates, unless the old regime is actively elected. Salaried expatriates get a standard deduction of ₹75,000 under the new regime.

One point that directly affects expats: the ₹60,000 rebate under Section 87A, which makes income up to ₹12 lakh effectively tax-free, applies only to resident individuals. Non-residents and RNOR taxpayers do not get the rebate and pay tax from the first slab.

Old Tax Regime: When to Consider It

The old regime is opt-in only. Expatriates who can claim large deductions under Section 80C, Section 80D, or HRA may find it lowers their net tax liability compared to the new regime.

The math changes depending on the total deduction value, so it’s worth running both calculations before filing.

Note: A rebate of up to ₹12,500 is available under Section 87A for resident individuals with taxable income up to ₹5 lakh, significantly lower than the ₹60,000 rebate available under the new regime. Non-residents do not get the rebate under either regime.

Surcharge and cess apply on top of both regimes:

A 4% health and education cess applies to every taxpayer’s total tax liability, regardless of income level or regime.

These TDS on salary obligations and investment declaration requirements carry through to expatriate payroll in the same way they do for resident employees.

Recommended reading: Understanding Income Tax – A Detailed Guide

DTAA Benefits for Expatriates in India

Double taxation is the default outcome when the same income gets reported to two tax authorities. The India-US DTAA, signed in 1989 and effective from December 1990, exists to prevent that.

For expatriates, it is the mechanism that decides which country has the first right to tax a particular type of income and how much the other country can claim on top.

How DTAA Works: Exemption Method vs Credit Method

The treaty operates through two relief methods, and India primarily uses the credit method.

• Under the exemption method, income is taxed once in the source country and fully exempt from tax in the other.
• Under the credit method, tax already paid abroad is credited against the domestic tax liability, capped at the Indian tax due on that foreign income.

For expatriates with Indian salary income already taxed abroad, the credit method works in two stages:

• At source: Submit a valid Tax Residency Certificate and Form 10F to the Indian payer before payment. The payer then applies the lower DTAA withholding rate instead of the standard domestic TDS rate.
• In the return: File Form 67 on the income tax portal before submitting the ITR. The credit details flow into Schedule FSI, where the expatriate declares the foreign income, taxes paid abroad, the applicable DTAA article, and the relief claimed.

Documents Required for TRC and Form 10F

Form 10F is a self-declaration form filed by non-resident taxpayers to claim DTAA benefits under Section 90 of the Income Tax Act. It goes alongside the Tax Residency Certificate, which the expatriate’s home country issues to confirm their tax residency status.

The TRC must contain the taxpayer’s name, foreign address, Tax Identification Number, and taxpayer status. If it does not contain all of these, Form 10F must be filed electronically on the income tax portal.

Here are the documents needed to file Form 10F:

• PAN card (no longer mandatory for non-residents without a PAN, who can now register directly on the portal)
• Proof of residential address in the country of residence
• Duration of residential status as stated in the TRC
• Taxpayer status (individual, company, firm, trust, etc.)
• Tax Identification Number or equivalent from the country of residence
• Digital signature certificate to authenticate the filing

Non-residents without a PAN can now register directly on the income tax portal and file Form 10F electronically without one.

These payroll compliance and Form 10E tax relief obligations apply to the Indian entity making the payment, not just to the expatriate filing their own return.

US Citizen Living in India: Specific Tax Implications

The US taxes its citizens on worldwide income regardless of where they live. A US citizen working in India files a return with the IRS every year covering global income, and separately files in India on income sourced here.

The two obligations run in parallel, and neither cancels out the other automatically.

Dual Filing Obligations for FBAR and FATCA

Beyond the standard income tax return, US citizens in India face two additional reporting requirements tied to foreign financial accounts.

FBAR applies to any US person who holds a financial interest in, or signature authority over, at least one account outside the United States, if the aggregate value of those foreign accounts exceeded $10,000 at any point during the calendar year.

The deadline is April 15, with an automatic extension to October 15. No request is needed for the extension.

FATCA requires US citizens to report certain foreign financial assets on Form 8938 if their value crosses applicable thresholds. Unlike the FBAR, which is filed separately through FinCEN’s BSA E-Filing System, FATCA reporting goes directly into the federal income tax return.

Both requirements apply even if the Indian income was fully taxed in India and no US tax is ultimately owed.

Avoiding Double Taxation with Foreign Tax Credit and Foreign Earned Income Exclusion

US citizens in India have two main tools to reduce or eliminate US tax on income already taxed in India. Many expats use both in the same return.

• Form 2555 (FEIE): Excludes a portion of foreign earned income from US taxable income entirely. Works best when the effective Indian tax rate is lower than the US rate on that income.
• Form 1116 (FTC): Credits Indian taxes paid against the US tax liability on the same income. Works better when Indian tax paid is equal to or higher than the US rate, since the credit offsets the US bill dollar for dollar.

Given India’s rebate structure zeroes out tax up to roughly ₹12.75 lakh under the new regime, expats in that income range may find Form 2555 more useful.

Those earning above that, where Indian rates climb toward 30%, tend to benefit more from the credit. A qualified tax preparer should confirm which approach fits the specific situation.

The Totalization Agreement Gap

The US and India do not have a totalization agreement, so cross-border employees may face overlapping social security exposure depending on how their assignment and payroll are structured. That makes EPF, FICA, and other contribution rules something payroll teams need to review carefully for each case.

For US citizens on Indian payroll, dual contributions are possible for the same period of employment, with no credit-sharing between the two systems.

It is a cost that tends to get overlooked until the first payroll reconciliation, and one that directly affects how cross-border payroll compliance gets structured and how TDS on salary for expatriates gets calculated at source.

Managing Expat Tax Compliance with Keka

Expat tax in India comes down to one calculation that everything else follows from: how many days was the employee physically present in the country. That number sets the residential status, which sets the tax scope, which sets every obligation downstream from TDS to DTAA claims.

Tax laws change with each Union Budget, and while Budget 2026 left the FY 2026-27 slabs unchanged, that won’t always be the case. The figures in this guide are accurate as of the current filing season but worth reconfirming before each return.

For situations involving dual filing, DTAA claims, or the FTC vs FEIE decision, a qualified tax advisor familiar with both Indian and US obligations will save more than their fee.

HR and payroll teams managing expatriate employees can use Keka to keep residential status tracking, TDS calculations, and compliance documentation in one place.

If you’d like to see how Keka handles this for your team, book a demo and explore what fits for you.

Frequently Asked Questions

1. What is the tax rate for expats in India?

Tax rates depend on residential status and the chosen regime. Under the new regime (Section 115BAC), rates range from nil to 30% based on income slabs, plus applicable surcharge and 4% cess. Non-residents pay the same slab rates but only on India-sourced income, and do not get the Section 87A rebate.

2. How are you taxed as an expat?

Expatriates are taxed based on residential status determined under Section 6 of the Income Tax Act. Residents and Ordinarily Residents are taxed on global income. RNOR and Non-Residents are taxed only on India-sourced income. Status depends entirely on days of physical presence in India during the financial year.

3. How does the India-US tax treaty prevent double taxation?

The DTAA allows US citizens to claim a Foreign Tax Credit for Indian taxes paid, avoiding taxation on the same income twice. Specific treaty provisions may also exempt certain income types or provide reduced withholding rates at source, provided valid TRC and Form 10F documentation is submitted.