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<p>In today's time, it is very common to earn income from overseas. However, such income&nbsp;bring with them the complexity of tax calculation on the earned amount.</p>

<p>Let's first understand when is an income considered to have been earned from a foreign source. An overseas income means an income earned by an individual like interest, royalties, fees, or dividends from sources which are outside the country.</p>

<h2><strong>How is income tax calculated on overseas income in India?</strong></h2>

<p>The income is considered to have been earned from overseas when the activity of the ultimate beneficiary is happening outside the country even though the individual is providing services while being in India.</p>

<p><strong>Also Read:&nbsp;</strong><a href="https://www.wionews.com/business-economy/money-wise-planning-to-save-taxes-on-interests-earned-heres-how-you-can-in-india-756209">Money-Wise: Planning to save taxes on interests earned? Here's how you can in India</a></p>

<p>Generally, two rules are followed by the countries to calculate tax on income earned from overseas.</p>

<p>First, is the source rule, as per which the government taxes the income in the country it is earned, regardless of who is earning the income. Second is the residence rule, which says that all the income earned by residents is taxed by their country, no matter where they are earning it.</p>

<p>The taxability over an income is dependent on what type of residential status an individual has in India.</p>

<p>Simplifying the complication involved in this calculation of tax, Siddharth Maurya, Founder &amp; Managing Director of Vibhavangal Anukulakara Private Limited said to WION, "As per the Income Tax Act, an individual is either a Resident, Non-resident, or Resident but Not Ordinarily Resident (RNOR status) and this essentially determines the scope of one’s global income tax liabilities."</p>

<p><strong>Watch:&nbsp;Indian Cabinet Approves PAN 2.0</strong></p>

<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/indian-cabinet-approves-pan-20-779462/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>

<p>So, the global income of ordinary residents in India is entirely taxable even if they pay tax on the income in the country where they are earning it.</p>

<p>In the case of the Not Ordinary Residents/Non-Residents, the income becomes taxable only if it is accrued or received in India.</p>

<h2><strong>How can you save tax on overseas income?</strong></h2>

<p>Our expert, Siddharth Maurya, Founder &amp; Managing Director of Vibhavangal Anukulakara Private Limited, shares&nbsp;thumb rules on managing tax on overseas income.</p>

<ul>
	<li>For residents living in India, global income is regarded as taxable in India, however, there are certain exceptions specified such as Double Taxation Avoidance Agreements (DTAAs) with various countries.</li>
	<li>Determination of Residential status is done on the basis of the number of days an individual stays in the territory of India during the course of the financial year and there are tax obligations associated with certain thresholds.</li>
	<li>Any income earned from foreign sources has to be declared and includes salary, capital gains after selling an asset, dividends after investing in shares and rental income.</li>
	<li>However, such a strategic tax plan can also include taking advantage of the available provisions for non-residents in a DTT, which can alleviate double taxation and lower total taxes.</li>
	<li>A taxpayer can claim offset due to foreign taxes, and certain exemption thresholds, consolidate sources of revenue and endorse tax efficiency.</li>
	<li>International tax specialist has to be consulted and strong records have to be kept to deal with this complex web of taxes and comply with the country as well as the foreign tax laws.</li>
</ul>


In today's time, it is very common to earn income from overseas. However, such income bring with them the complexity of tax calculation on the earned amount. Let's first understand when is an income considered to have been earned from a foreign source.

In today's time, it is very common to earn income from overseas. However, such income bring with them the complexity of tax calculation on the earned amount. Let's first understand when is an income considered to have been earned from a foreign source. An overseas income means an income earned by an individual like interest, royalties, fees, or dividends from sources which are outside the country. How is income tax calculated on overseas income in India? The income is considered to have been earned from overseas when the activity of the ultimate beneficiary is happening outside the country even though the individual is providing services while being in India. Also Read: Money-Wise: Planning to save taxes on interests earned? Here's how you can in India Generally, two rules are followed by the countries to calculate tax on income earned from overseas. First, is the source rule, as per which the government taxes the income in the country it is earned, regardless of who is earning the income. Second is the residence rule, which says that all the income earned by residents is taxed by their country, no matter where they are earning it. The taxability over an income is dependent on what type of residential status an individual has in India. Simplifying the complication involved in this calculation of tax, Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited said to WION, "As per the Income Tax Act, an individual is either a Resident, Non-resident, or Resident but Not Ordinarily Resident (RNOR status) and this essentially determines the scope of one’s global income tax liabilities." Watch: Indian Cabinet Approves PAN 2.0 So, the global income of ordinary residents in India is entirely taxable even if they pay tax on the income in the country where they are earning it. In the case of the Not Ordinary Residents/Non-Residents, the income becomes taxable only if it is accrued or received in India. How can you save tax on overseas income? Our expert, Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, shares thumb rules on managing tax on overseas income. For residents living in India, global income is regarded as taxable in India, however, there are certain exceptions specified such as Double Taxation Avoidance Agreements (DTAAs) with various countries. Determination of Residential status is done on the basis of the number of days an individual stays in the territory of India during the course of the financial year and there are tax obligations associated with certain thresholds. Any income earned from foreign sources has to be declared and includes salary, capital gains after selling an asset, dividends after investing in shares and rental income. However, such a strategic tax plan can also include taking advantage of the available provisions for non-residents in a DTT, which can alleviate double taxation and lower total taxes. A taxpayer can claim offset due to foreign taxes, and certain exemption thresholds, consolidate sources of revenue and endorse tax efficiency. International tax specialist has to be consulted and strong records have to be kept to deal with this complex web of taxes and comply with the country as well as the foreign tax laws.

Money-Wise: Worried about taxes on your overseas income? Here's how you can save them

<p>A common concern of all those investing their hard-earned money to earn some good interest amount is the taxes that will be levied on them.&nbsp;</p>

<p>First, let's understand how taxes are charged on the interest we earn over the investments made in different instruments.</p>

<p>According to the tax system in India, the Long Term Capital Gain (LTCG) tax of 12.5% is charged when the asset is sold after 24 months and the profit earned is more than Rs. 1.25 lakh in a fiscal year.</p>

<p>Meanwhile, the Short Term Capital Gain (STCG) of 20% is charged when the asset is sold in less than 12 months.</p>

<p>In the case of fixed deposits, the tax on the interest earned is calculated on the basis of the income tax slab.&nbsp;</p>

<p>Those who fall under the 30% tax slab, will pay 30% income tax and 4% cess on the interest earned.</p>

<p><strong>Also Read:&nbsp;</strong><a href="https://www.wionews.com/business-economy/money-wise-heres-how-tds-changes-in-indian-budget-2024-will-impact-your-salary-mutual-fund-investments-743799">Money-Wise: Here’s how TDS changes in Indian Budget 2024 will impact your salary, mutual fund investments</a></p>

<p>If the interest earned in the entire financial year is more than Rs 40,000 in AY 2024-24, a TDS of 10 per cent will be calculated on your Fixed Deposit (FD). The TDS on interest earned is exempted if the total interest income from FDs is less than Rs 40,000 in a year.&nbsp;</p>

<p>For those whose overall income is less than Rs 2.5 lakh in a year, no tax is charged on FD.&nbsp;</p>

<p>In the case of individuals, the exemption limit for TDS on FDs is Rs 40,000 and in the case of senior citizens, it is Rs 50,000.&nbsp;</p>

<h2><strong>Here's how you can save taxes on interest incomes</strong></h2>

<h3><strong>Tax on Capital Gains</strong></h3>

<p>For saving tax on Long-Term Capital Gain, the investor can buy a new residential house property and enjoy exemption on capital tax under Section 54 and Section 54F.</p>

<p>Another way is to purchase bonds issued by NHAI and RECL using the entire long-term capital gains to save tax under Section 54EC.</p>

<p>A third way out is opening a capital gain account scheme through which the investor can get tax exemptions without buying a residential property.</p>

<p><strong>Watch:&nbsp;China's retail investors turn to fixed-income over stocks</strong></p>

<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/chinas-retail-investors-turn-to-fixed-income-over-stocks-753330/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>

<p>The withdrawal of funds from this account is permitted only for purchasing houses and plots. In case, the funds are withdrawn and not utilised for the same purpose within three years of withdrawal, the LTCG tax is levied on the entire amount.&nbsp;</p>

<h3><strong>Tax on interests earned in Fixed Deposits</strong></h3>

<p>In order to save TDS on Fixed Deposits if the income is below the basic exemption limit, the investor needs to submit Form 15G and 15H to the bank at the start of the financial year.</p>

<h3><strong>Tax on interests earned in Savings Account</strong></h3>

<p>Unlike other interests earned which are taxed, the interests earned in Savings Account up to Rs 10,000 every year are exempted under Section 80TTA deduction of the Income Tax Act.&nbsp;</p>

<p>This exemption applies to all individuals and HUFs (who are above 60 years) apart from senior citizens.</p>

<h3><strong>Tax-free interest schemes</strong></h3>

<p>In India, an easy and safe way to save tax on interest gains is by investing money in tax-free interest schemes which are exempted under Section 80c of the Income Tax Act.</p>

<p>These tax-free investment schemes are:</p>

<ul>
	<li>National Pension Scheme (NPS)</li>
	<li>Unit Linked Insurance Plan (ULIP)</li>
	<li>Tax-Saver Fixed Deposit (FD) Scheme</li>
	<li>Sukanya Samriddhi Yojana (SSY)</li>
	<li>National Savings Certificate (NSC)</li>
	<li>Senior Citizens Savings Scheme (SCSS)</li>
	<li>Public Provident Fund (PPF)</li>
</ul>


A common concern of all those investing their hard-earned money to earn some good interest amount is the taxes that will be levied on them. First, let's understand how taxes are charged on the interest we earn over the investments made in different instruments.

A common concern of all those investing their hard-earned money to earn some good interest amount is the taxes that will be levied on them. First, let's understand how taxes are charged on the interest we earn over the investments made in different instruments. According to the tax system in India, the Long Term Capital Gain (LTCG) tax of 12.5% is charged when the asset is sold after 24 months and the profit earned is more than Rs. 1.25 lakh in a fiscal year. Meanwhile, the Short Term Capital Gain (STCG) of 20% is charged when the asset is sold in less than 12 months. In the case of fixed deposits, the tax on the interest earned is calculated on the basis of the income tax slab. Those who fall under the 30% tax slab, will pay 30% income tax and 4% cess on the interest earned. Also Read: Money-Wise: Here’s how TDS changes in Indian Budget 2024 will impact your salary, mutual fund investments If the interest earned in the entire financial year is more than Rs 40,000 in AY 2024-24, a TDS of 10 per cent will be calculated on your Fixed Deposit (FD). The TDS on interest earned is exempted if the total interest income from FDs is less than Rs 40,000 in a year. For those whose overall income is less than Rs 2.5 lakh in a year, no tax is charged on FD. In the case of individuals, the exemption limit for TDS on FDs is Rs 40,000 and in the case of senior citizens, it is Rs 50,000. Here's how you can save taxes on interest incomes Tax on Capital Gains For saving tax on Long-Term Capital Gain, the investor can buy a new residential house property and enjoy exemption on capital tax under Section 54 and Section 54F. Another way is to purchase bonds issued by NHAI and RECL using the entire long-term capital gains to save tax under Section 54EC. A third way out is opening a capital gain account scheme through which the investor can get tax exemptions without buying a residential property. Watch: China's retail investors turn to fixed-income over stocks The withdrawal of funds from this account is permitted only for purchasing houses and plots. In case, the funds are withdrawn and not utilised for the same purpose within three years of withdrawal, the LTCG tax is levied on the entire amount. Tax on interests earned in Fixed Deposits In order to save TDS on Fixed Deposits if the income is below the basic exemption limit, the investor needs to submit Form 15G and 15H to the bank at the start of the financial year. Tax on interests earned in Savings Account Unlike other interests earned which are taxed, the interests earned in Savings Account up to Rs 10,000 every year are exempted under Section 80TTA deduction of the Income Tax Act. This exemption applies to all individuals and HUFs (who are above 60 years) apart from senior citizens. Tax-free interest schemes In India, an easy and safe way to save tax on interest gains is by investing money in tax-free interest schemes which are exempted under Section 80c of the Income Tax Act. These tax-free investment schemes are: National Pension Scheme (NPS) Unit Linked Insurance Plan (ULIP) Tax-Saver Fixed Deposit (FD) Scheme Sukanya Samriddhi Yojana (SSY) National Savings Certificate (NSC) Senior Citizens Savings Scheme (SCSS) Public Provident Fund (PPF)

Money-Wise: Planning to save taxes on interests earned? Here's how you can in India

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