Wrong Foreign Salary in ITR? Fix It — But Lose FTC

If you wrongly showed foreign salary as taxable in India, you can correct your ITR. But there's a catch: if that income is exempt under DTAA, you cannot also claim a foreign tax credit for taxes paid abroad.

Here's what happened: A Delhi tax tribunal ruled that taxpayers can revise their ITR to correct wrongly reported overseas salary income under DTAA provisions.. However, if the foreign income qualifies as exempt under a Double Tax Avoidance Agreement, the taxpayer cannot simultaneously claim a Foreign Tax Credit for taxes paid in that country.. This ruling directly affects NRIs, returning expats, and residents who earned salary abroad and mistakenly included it as Indian taxable income..

What you should do: Check your last 2 years' ITRs — if you reported foreign salary under the wrong head, file a revised return before the deadline to correct it.. Confirm with your CA whether your foreign income is exempt under the applicable DTAA (India has treaties with 90+ countries including UAE, USA, UK, and Singapore).. Choose between DTAA exemption OR Foreign Tax Credit — you cannot claim both; calculate which saves you more tax before filing or revising..

Pro tip: UAE salary is fully exempt under the India-UAE DTAA since UAE has no income tax — yet thousands of returning NRIs still report it as taxable income and pay unnecessary tax.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.