Tax on Foreign Income: What Indian Freelancers Need to Know (2025)

You landed a client in the US. Another one in the UK. Your invoices are in dollars, your payments come through PayPal or Wise, and for the first time, you're earning in foreign currency.

Then tax season arrives, and you're stuck with questions: Do you need to report this income? How do you file a tax return with foreign income? What about money sitting in Payoneer, does that count?

If you're an Indian freelancer earning from international clients, this gets confusing fast. Here’s what you actually need to know about tax on foreign income, without the jargon or panic.

Tax on foreign income (for freelancers) — the one core rule

Here’s what matters: if you’re a Resident and Ordinarily Resident (ROR) in India, your global income is taxable in India. That includes payments from foreign clients and international platforms. 

The payment route doesn’t change this. Whether money lands in PayPal, Wise, Payoneer, Skydo, a USD/EUR account abroad, or directly into your Indian bank account — for most ROR freelancers working from India, this is still tax on foreign income in India.

For the rest of this guide, we’re focusing on ROR freelancers (which covers most people freelancing from India).

What counts as “foreign earned income” for freelancers?

Foreign-earned income isn’t a special category on your tax return. It’s simply the income you earned from clients or platforms outside India.

This includes:

For tax purposes, this usually falls under Profits and Gains of Business or Profession (PGBP) since freelancing is treated as your business.

One crucial detail: your tax is calculated in INR, not dollars or euros. Income in foreign currency is converted using the prescribed exchange-rate rule (commonly referenced as Rule 115 / SBI TT buying rate approach).

Save 50% on every international transfer

Receive from 150+ countries

Get global accounts

Zero forex margin

Sign up

How to file taxes on foreign income (ITR) — step-by-step

1) Choose the correct ITR form

Many freelancers use presumptive taxation under Section 44ADA because it simplifies reporting.

If you don’t use presumptive taxation (or you’re above the eligible threshold), you typically file a form like ITR-3 and report actual profit after expenses.

2) Report foreign income correctly

A clean tax return with foreign income declared correctly is non-negotiable.

Already taxed abroad? DTAA + Foreign Tax Credit (FTC)

Sometimes foreign clients/platforms withhold tax.

W-8BEN (common US client/platform scenario)

If you work with US platforms/clients, Form W-8BEN is commonly used to establish foreign status and claim treaty benefit eligibility; if you don’t provide it when requested, withholding can apply at a 30% foreign-person withholding rate. 

Claiming FTC in India

If tax was paid/withheld abroad and a DTAA applies, you can usually claim Foreign Tax Credit (FTC) in India (subject to rules and documentation).

Form 67 is the key compliance step for FTC. The Income Tax Department’s guidance generally links FTC to filing Form 67 within the specified timeline (commonly described as on or before the end of the assessment year).

Save 50% on every international transfer

Receive from 150+ countries

Get global accounts

Zero forex margin

Sign up

How to avoid surprise tax bills

Documents freelancers must keep (this actually matters)

When you file taxes on foreign income, documentation is what protects you.

Keep:

Save 50% on every international transfer

Receive from 150+ countries

Get global accounts

Zero forex margin

Sign up

Common mistakes (that cause real problems)

How Skydo helps with tax compliance (without “avoiding tax”)

Skydo isn’t about avoiding taxes. It’s about having clean numbers and clean proof.

Result: you pay the correct tax with less confusion and less paperwork panic.

Explore Skydo