Living in India and Working Remotely for a Foreign Startup: How Your Salary Is Taxed, How to Get Paid, and the Risk You Create for Your Employer

You have moved back to Pune, or you never left, and a Series B startup in San Francisco or Berlin hired you to write code, run growth, or manage a support team. The pay is in dollars or euros, it lands in your account every month, and the company has no office in India, no Indian entity, no payroll here at all. Nobody deducted any tax. The natural assumption, the one I hear constantly, is that because the employer is foreign and the money is foreign, this is somehow foreign income that India does not get to touch. That assumption is wrong, and it is the kind of wrong that produces a notice eighteen months later with interest attached.

The 30-second answer: If you live in India and work from India, you are an Indian tax resident, and a resident is taxed on worldwide income. Your foreign salary is Indian income because the services are rendered in India under Section 9(1)(ii), taxed at slab rates with the Rs 75,000 standard deduction if you are an employee. A foreign employer with no Indian entity will not deduct TDS, so you pay advance tax in four instalments (15 June, 15 September, 15 December, 15 March) and file ITR-2. Contractors over Rs 20 lakh must register for GST and file a Letter of Undertaking to export services zero-rated. Foreign tax paid abroad is recovered via Form 67 and the DTAA. Your work can create a permanent establishment for the employer if you conclude contracts here.

This guide is for the person who is already settled in India and earning from abroad, not the NRI abroad earning from an Indian employer, which is a different problem covered in remote work for an Indian employer from abroad. What follows is the full chain: why you are taxed at all, how an employee differs from a contractor and why it changes everything, how to actually get the money in and document it, the GST that catches contractors, the permanent-establishment risk you quietly create for the people who hired you, what happens to your foreign RSUs, and how to make sure you are not taxed twice.

Where you live decides the tax, not where the employer sits

The single misunderstanding underneath every other mistake here is that the employer's location or the currency of payment determines whether India taxes you. It does not. Two things determine it: your residential status under Section 6, and where the services are rendered under Section 9.

Residential status turns on days in India, not on your passport, your employer, or the bank the salary lands in. If you are physically in India for 182 days or more in a financial year, you are a resident. There is also a second trigger that catches people who think they are safe: 60 days or more in the year plus 365 days or more across the four preceding years. For someone who lives in India and works remotely, you are clearly resident; you are here all year. Residents are taxed on global income. The salary from the Berlin startup is global income.

Then comes the second, independent reason it is taxable. Even setting residency aside, Section 9(1)(ii) deems salary to accrue or arise in India if it is earned for services rendered in India. You are sitting in Pune writing the code. The service is rendered in India. So the income has an Indian source as well. Both doors lead to the same room. The foreignness of the employer, which everyone fixates on, is irrelevant to either test.

The narrow exception is residential status itself. If you spent most of this year abroad and only recently relocated, you might be non-resident for the year, in which case only Indian-source income is taxed. And if you have just returned to India after years as an NRI, you may qualify as Resident but Not Ordinarily Resident (RNOR), which shields foreign-source income that is not from a business controlled in India, often for two financial years. RNOR is genuinely valuable and genuinely time-limited, and the rules are precise enough that I will not compress them here; read the residency and RNOR guide before you assume you qualify. If you are a settled India resident working remotely, none of these apply and the whole salary is taxable.

Nobody is deducting your tax, so the deadlines are now yours

A salaried employee in India almost never thinks about advance tax, because the employer deducts TDS every month and the system mostly self-corrects. A foreign employer with no Indian presence does none of that. There is no TDS, no Form 16, no Form 26AS entry. The compliance that an Indian employer handled silently is now entirely your job, and the system does not warn you.

The mechanism is advance tax. If your total tax liability for the year exceeds Rs 10,000, which on a foreign salary it will many times over, you must pay it in four instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March. Miss the schedule and you pay interest under Sections 234B and 234C, which is not a penalty in name but functions as one. People who are used to TDS doing the work routinely discover this only when they file, by which point the interest has been running for a year.

You file ITR-2, the form for individuals with foreign income and no business income. Inside it, the foreign salary goes into the salary schedule, and you must also complete Schedule FSI (foreign source income) and Schedule TR (tax relief), plus Schedule FA if you hold any foreign assets such as a foreign bank account the salary first lands in, or vested RSUs. Schedule FA is where the teeth are, and I will come back to it.

Employee or contractor: the question that rewrites your entire filing

Here is the distinction that most articles gloss over and that changes your GST position, your deductions, your social security, and your paperwork. Foreign startups hire Indians one of two ways, and they often use the words loosely, so you have to look at the substance.

As an employee, even of a foreign company, your income is salary. You get the Rs 75,000 standard deduction under the new regime. You have no GST obligation at all, because employment is not a supply of services under GST. You generally cannot deduct your laptop, your home internet, or your co-working desk, because salary income does not allow business expenses. Many foreign companies route this through an Employer of Record (EOR) such as Deel, Remote.com, or Rippling, which creates a local Indian employment relationship, runs Indian payroll, deducts TDS, gives you a Form 16, and even runs EPF. If you are on an EOR, much of this guide's compliance burden is handled for you, and your filing looks like an ordinary salaried person's. That convenience is exactly what the employer is paying the EOR for, and it also neutralises most of the permanent-establishment risk discussed below.

As a contractor or consultant, your income is business or professional income, filed on ITR-3 (or ITR-4 if you opt for presumptive taxation). You get no standard deduction, but you can deduct genuine business expenses: your laptop's depreciation, your internet, your home-office share, software subscriptions. Better still, if your gross receipts are under Rs 75 lakh and at least 95% comes through banking channels, professionals can opt for presumptive taxation under Section 44ADA, declaring just 50% of receipts as income and paying tax on that, with no books and no audit. On Rs 50 lakh of contractor receipts, that means offering Rs 25 lakh to tax, which is often far less than your real profit, a genuinely large and legal saving. The trade-off: as a contractor you also enter the world of GST, which an employee never touches.

So before anything else, establish which one you are. A contract that calls you a "contractor" but pays a fixed monthly amount, gives you a company email, sets your hours, and treats you as part of the team can be re-characterised as employment by the tax department, and the presumptive benefit can be denied. Substance beats the label.

How the money actually comes in, and the document you must keep

The salary or invoice payment arrives one of a few ways, and the route matters for your records. Foreign employers and EORs typically wire to your regular resident savings account in INR after conversion, or to a USD-denominated account. Contractors increasingly receive through Wise, Payoneer, or specialist exporters like Skydo and BriskPE, which collect the foreign currency abroad and settle INR to you.

For an employee, the bank statement and your contract are usually enough proof. For a contractor exporting services, you need to prove the money came in as convertible foreign exchange, because that is one of the four conditions for your service to count as an export and stay GST-free. This is where the FIRC comes in, and there is a common confusion worth clearing.

The old physical Foreign Inward Remittance Certificate (FIRC) is no longer issued for routine export remittances. Since the RBI moved to the Export Data Processing and Monitoring System (EDPMS) in 2016, banks issue an e-FIRA (Foreign Inward Remittance Advice) or a Foreign Inward Remittance Statement instead. A plain transaction credit advice from your bank is not the same thing and will not satisfy a GST or FEMA query; the e-FIRA on the bank's letterhead, naming the remitter and the purpose, is what you keep. Payment platforms like Wise and Payoneer can generate an FIRA-equivalent on request, and you should request it for every payment, not scramble for it at year-end.

There is also a FEMA timeline that contractors forget. Export proceeds must be realised and repatriated to India within nine months from the date of the supply of service under the current RBI rules. For a freelancer this is rarely an issue, because clients pay within weeks, but if you let invoices sit unpaid abroad for the better part of a year, you can technically breach FEMA. Keep the cycle short and documented.

The GST trap that only catches contractors

If you are an employee, skip this section; employment is outside GST entirely. If you are a contractor, this is the part that quietly creates liability.

The threshold first. A service provider must register for GST once aggregate turnover crosses Rs 20 lakh in a financial year (Rs 10 lakh in a few special-category states). Many contractors blow past Rs 20 lakh on a single foreign client and never register, on the theory that "exports are not taxed". They are right that exports are not taxed, and wrong that this means they can ignore GST.

Export of services is a zero-rated supply, not an exempt one, and the difference is the whole game. Zero-rated means you charge 0% to the foreign client but remain inside the GST system and must comply. You can export in one of two ways. Either you pay 18% IGST on your invoice and claim it back as a refund, which ties up your cash for months, or you file a Letter of Undertaking (LUT) in Form RFD-11 and invoice without paying any IGST at all. The LUT is the obvious choice, it takes ten to fifteen minutes on the GST portal, and the one rule people break is that it must be re-filed before the start of each financial year. Your LUT for FY 2025-26 expired on 1 April 2026; you needed a fresh LUT for FY 2026-27 in place before that date. If you let it lapse and keep invoicing, every invoice in the gap is treated as a normal taxable supply, and the department can demand 18% IGST on it, refundable later but locking up working capital you did not budget for.

To qualify as an export at all, all four conditions under Section 2(6) of the IGST Act must hold: you (the supplier) are in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange (your e-FIRA proves this), and the supplier and recipient are not merely establishments of the same person. That last condition matters if you set up your own company abroad and "invoice" yourself; that is not an export. For a genuine third-party foreign client, all four are easily met.

The permanent-establishment risk you create for your employer

This is the part nobody tells the remote worker, and it is the part that can blow up the relationship. When you work from India for a foreign company, your activity can create a permanent establishment (PE) for that company in India. A PE is the trigger, under every tax treaty India has signed, that lets India tax a foreign company's business profits attributable to its Indian activity. No PE, India generally cannot reach the employer's profits. A PE, and a slice of the employer's global income becomes Indian-taxable, with interest and penalties on top, and the company will not thank the employee whose desk in Bengaluru caused it.

There are three flavours of PE risk, and they are not equal. A fixed-place PE arises if the company has a fixed place of business at its disposal in India; a single home office of one employee usually does not rise to this, but a company-leased space or premises the company controls can. A dependent-agent PE (DAPE) is the one remote setups trip most often: it arises if a person in India habitually exercises authority to conclude contracts in the company's name, or habitually plays the principal role leading to contract conclusion. A service PE can arise where employees furnish services in India beyond treaty thresholds.

The practical reading is that role, not residence, drives the risk. An engineer, a designer, a support agent, a back-office analyst, none of them sign contracts or close revenue, and they carry low PE risk. A country head, a senior executive taking key managerial decisions for the company from India, or a salesperson who negotiates and closes deals with customers from India carries real risk, because that is the activity that constitutes carrying on the business in India. The risk is highest when the India-based person is both senior and revenue-facing.

There is genuinely helpful recent law here, and it is worth knowing because it is grey enough that you should not overstate it. In December 2025, the Delhi High Court in CIT v. Clifford Chance Pte Ltd. held that physical presence in India is a precondition for a service PE under the India-Singapore treaty, and that virtual or digital service delivery alone does not create one. Separately, the OECD's late-2025 commentary update flagged that remote employees spending 50% or more of working time in a country should face PE assessment. So the position is genuinely unsettled at the edges: a junior remote engineer is almost certainly fine; a senior deal-closer working full-time from India is genuinely exposed, and the honest answer is that it depends on facts the courts are still working through. The clean mitigations are real: keep contract-signing authority out of India, document that the India person does not conclude contracts, and for senior or revenue roles, use an EOR, which by interposing a local employer materially reduces (though does not by itself eliminate) the DAPE exposure. Tell your employer about this before they find out the hard way.

Your foreign RSUs and ESOPs do not escape Indian tax

If the startup pays you partly in equity, the Indian tax treatment is the same as for an Indian employee with US RSUs, and it surprises people who expect foreign shares to be a foreign matter. The mechanics deserve their own guide, covered in RSU and ESOP taxation, but the headline for a remote worker is this.

There are two taxable events. At vesting, the fair market value of the shares on the vesting date, converted at that day's exchange rate, is a perquisite taxed as salary at your slab rate. If your employer runs Indian payroll or an EOR, they may withhold against it; a pure foreign employer will not, so it folds into your advance-tax obligation. Then at sale, the gain over the vesting-date value is a capital gain, and because these are foreign unlisted shares for most startups, the holding period for long-term treatment is 24 months, with long-term gains taxed at 12.5% and short-term at your slab rate.

The compliance landmine is Schedule FA. As a resident, once RSUs vest you hold a foreign asset, and you must disclose it in Schedule FA of your ITR every year you hold it, reporting the country, the peak value during the year, and the closing balance. Omission is not a small slip. Non-disclosure of foreign assets is penalised under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, which carries penalties that apply independently of whether any tax was due, and the department has been actively matching foreign-broker data against returns. File Schedule FA even in a year you sold nothing.

Putting real numbers on a USD salary taxed in India

Take Arjun, who lives in Bengaluru and works as a senior engineer for a US startup that has no Indian entity. He is paid USD 90,000 a year as an employee, roughly Rs 75,00,000 at Rs 83.3 to the dollar. No one deducts Indian tax; the US company also does not withhold US federal tax because he is not a US person performing US work, though this varies and he confirms it with the company.

As an employee under the new regime, he takes the Rs 75,000 standard deduction, leaving Rs 74,25,000 taxable. Run through the FY 2025-26 new-regime slabs, his tax before surcharge and cess is roughly Rs 18,00,000; because his income crosses Rs 50 lakh, a 10% surcharge applies, and then 4% cess, bringing the total to approximately Rs 20,60,000. He pays this himself as advance tax across the four instalments, and files ITR-2. Had he ignored advance tax and paid only at filing, he would owe interest under Sections 234B and 234C of roughly Rs 1,50,000 to Rs 2,00,000 on top, money lost purely to not knowing the deadlines were his.

Now compare the contractor path. Suppose the same company instead engages Arjun as a consultant for the same Rs 75,00,000, and he opts for presumptive taxation under Section 44ADA (he is just under the Rs 75 lakh professional limit). He offers 50%, Rs 37,50,000, to tax. His tax on that, with surcharge and cess, comes to roughly Rs 9,30,000, less than half the employee bill, because the law presumes half his receipts are expenses. He files ITR-4, registers for GST because he is over Rs 20 lakh, files an LUT so his exports are zero-rated, and keeps an e-FIRA for each payment. The arithmetic is dramatic, and it is legal, but it only holds if the relationship is genuinely contractor in substance and his receipts stay under Rs 75 lakh; cross that, or get re-characterised as an employee, and the benefit vanishes.

Here is the trap on the other side. Suppose the US startup did withhold some US tax, say the equivalent of Rs 4,00,000, perhaps because Arjun travelled to the US for part of the year. He does not lose that money to double tax, but he only recovers it if he acts. He claims a foreign tax credit under the India-US DTAA, capped at the lower of the US tax paid and the Indian tax on that same income, by filing Form 67 before the end of the assessment year and reporting the income in Schedules FSI and TR. Skip Form 67 and the credit can be denied at processing, turning Rs 4,00,000 of already-paid tax into a real double-tax loss. The full mechanics are in foreign tax credit and Form 67.

A quick comparison of the two ways you might be hired

Feature	Employee (incl. via EOR)	Contractor / consultant
Income head	Salary	Business / professional
ITR form	ITR-2	ITR-3, or ITR-4 if presumptive
Standard deduction	Rs 75,000	None
Business expenses	Not deductible	Deductible
Presumptive option	No	Yes, 44ADA at 50% if under Rs 75 lakh
GST	None	Register over Rs 20 lakh, file LUT
Who deducts tax	EOR yes, foreign employer no	No one; you pay advance tax
PE risk to employer	Lower (EOR interposes)	Depends on role

Edge cases

The year you returned to India. If you came back mid-year after years abroad, you may be RNOR, and foreign-source salary for work done abroad before you relocated may not be taxable in India. But salary for work done after you landed and started working from India is rendered in India and is taxable regardless of RNOR. Split the year carefully; do not assume RNOR shields the whole salary.

Working from India for a few months while technically employed abroad. A growing pattern is the "workation", where someone keeps a foreign job but spends, say, four months working from India. If you stay under 182 days and the other-trigger conditions do not catch you, you may remain non-resident for the year, and only Indian-source income is taxed. But if those India days push you over the line, the whole salary can become taxable, and you may have created PE exposure for the employer during those months. The day count is not a technicality here; it is the whole answer.

US persons living in India. If you are also a US citizen or green-card holder, you file US returns on worldwide income too. The India-US DTAA and the foreign earned income exclusion interact in ways that need a cross-border preparer; the FTC flows both directions and the ordering matters. Do not run this on a single jurisdiction's logic.

The contractor who later hires people. The moment you stop being a solo freelancer and start sub-contracting work to others in India, you may be building toward your own business with its own compliance, and on the employer's side, if those people conclude contracts, the DAPE risk rises. Scale changes the analysis.

The closing read

The honest read is that "the employer is foreign so India can't tax me" is the most expensive sentence in this whole area, and it is simply false for anyone living and working in India. You are a resident, the work is done here, and the salary is Indian income from the first rupee, full stop. The grey areas are real but narrow: RNOR in your first year or two back, the day-count if you are only part-year in India, and the permanent-establishment question for senior revenue-facing roles, where the law is genuinely still settling and the December 2025 Clifford Chance ruling helps but does not close the question.

For the common case, a settled India resident working remotely, here is what I would do. First, work out whether you are truly an employee or a contractor, because if you are a genuine contractor under Rs 75 lakh, Section 44ADA presumptive taxation roughly halves your tax, and that single decision dwarfs everything else on this page. Second, since no one is deducting your tax, pay advance tax on the four dates and do not let Sections 234B and 234C quietly bill you for the lesson. Third, if you are a contractor, register for GST over Rs 20 lakh and re-file your LUT before every 1 April, and keep an e-FIRA for every payment. Fourth, disclose RSUs and any foreign account in Schedule FA every single year, because the Black Money Act penalises the omission independently of any tax. And fifth, if you are senior and revenue-facing, tell your employer about PE risk and let them decide whether an EOR is worth it; it is their exposure, but you will be the one explaining it. Where your situation is a large equity payout, a part-year move, or a US-person filing, that is the point to pay a cross-border CA, not to rely on a guide, this one included.

Related guides

• Remote work for an Indian employer from abroad
• Freelancing and consulting as an NRI
• NRI residency and RNOR rules
• Foreign tax credit and Form 67
• RSU and ESOP taxation
• Sending money to India
• All Jobs guides
• All Taxation guides

This guide is educational and general in nature. It is not individual tax advice. Your outcome depends on your exact residential status, the employee-versus-contractor substance of your engagement, your country of residence and its treaty, and several rules here (PE thresholds, GST timelines, advance-tax dates) carry penalties for getting them wrong, so confirm your specific position with a qualified chartered accountant before you file.