NRI with Income from Both Indian and Foreign Employer: How Indian Tax Works When Two Payrolls Cross a Single Year

Rajeev worked for a Bengaluru-based IT services company from January to September 2024 while posted on a client assignment in the Netherlands. His Indian employer paid his salary in rupees, depositing it in his NRO account. In October 2024 the assignment ended and he moved back to Bengaluru permanently, continuing with the same employer. When his chartered accountant sat down to file his FY 2024-25 return, two questions sat on the table at once: was Rajeev an NRI or a resident for the year, and what happened to the nine months of salary he drew while sitting in Amsterdam?

Both questions have answers, but the answers interact in ways that catch people off guard. The residency question turns entirely on counting days. The salary question turns on Section 9 of the Income Tax Act, which sources income to India regardless of where you physically sat if the employer is Indian and the payment structure does not squarely fit the proviso. Getting either question wrong produces a return that either under-declares income or over-declares it, both of which create problems: one creates a tax demand with interest, the other creates an unnecessarily large tax bill.

The 30-second answer: Your residential status for the entire financial year is decided by days in India from April 1 to March 31. Cross 182 days and you are Resident, making your global salary from both employers taxable in India. Stay under 182 and you are an NRI, but Section 9(1)(ii) still pulls Indian-employer salary into the Indian net unless the salary was specifically for services rendered outside India and paid outside India. A November arrival typically leaves you just under 182 days, making you NRI with Indian-source income taxable and foreign-source income not. Aggregate both payrolls in ITR-2 Schedule S, claim the foreign tax credit via Form 67 for taxes the foreign employer deducted on any doubly taxed slice, and file by 31 July 2026.

Two-employer situations arise in three distinct patterns. The first is the mid-year return: someone who has been working abroad for years comes back to India, continues with either the same Indian entity or a new Indian employer, and the financial year straddles both phases. The second is the overseas assignment: an employee on the rolls of an Indian company is posted abroad for a period, drawing Indian-employer salary while sitting in another country. The third is the parallel arrangement: an individual holds a consulting or employment arrangement with a foreign company while also drawing Indian income, for example, a professional who moved back but retained a foreign client on a retainer denominated in dollars. Each pattern produces a different factual matrix, but the analytical framework is the same across all three.

Residential status is decided once for the year, not month by month

The most important thing to understand about Indian residency for tax purposes is that it is a binary outcome for a full financial year, not a sliding scale that shifts each month. You are either a Resident or a Non-Resident for FY 2024-25 as a whole. That single label, determined by your physical presence in India during that year, then governs the tax treatment of every rupee you earned anywhere in the world during those twelve months.

The primary test under Section 6(1) of the Income Tax Act is simple: if you are in India for 182 days or more during the financial year, you are a Resident. Days of arrival and departure both count. If you are below 182 days, you are a Non-Resident.

There is a secondary test under Section 6(1)(b) that can catch you as Resident even below 182 days: if you were in India for 60 or more days during the year and for 365 or more days in the preceding four financial years combined. This secondary test is modified for Indian citizens or persons of Indian origin who are resident abroad: for them, the 60-day threshold is raised to 120 days (if total Indian income, meaning income taxable in India, exceeds Rs 15 lakh during the year). If you are a returning NRI with Indian income above that threshold, the 120-day trap is your exposure, not the 60-day secondary test that applies to ordinary residents.

The practical upshot for a November return: if you land in India on, say, November 10, 2024 and remain there until March 31, 2025, you have been in India for approximately 141 days in FY 2024-25, which keeps you comfortably below 182. You are an NRI for FY 2024-25 even though you have physically moved back. If you had landed on October 1, 2024 instead, you would have accumulated around 182 days by March 31, crossing the threshold and becoming a Resident for the full year, with your global income suddenly in scope.

This matters enormously for the treatment of your foreign-period salary. If you are an NRI for the year, only your Indian-source income is taxable in India. If you are a Resident, your worldwide income, including every dollar or euro your foreign employer paid you during the first half of the year, is pulled into the Indian net.

Once you have established Resident status, the next check is whether you are Resident and Ordinarily Resident (ROR) or Resident but Not Ordinarily Resident (RNOR). RNOR is a transitional status available to individuals who have been non-resident in India in nine out of ten preceding financial years, or who have been in India for 729 days or fewer in the preceding seven years. An RNOR is resident but is taxed on foreign-source income only if it is received in India or derived from a business controlled in India. For someone returning from a long stint abroad, RNOR can shelter the foreign employer's salary from Indian tax even in a year when the day count makes them Resident. Check NRI residency and RNOR rules for the precise eligibility conditions and how to establish them on your return.

Section 9: why Indian-employer salary can be taxable in India even when you are abroad

If residential status were the whole story, an NRI with only Indian-employer salary during their overseas posting might assume the foreign-period income is simply outside the Indian net. Section 9 of the Act is why that assumption is unreliable.

Section 9(1)(ii) provides that income accruing or arising, whether directly or indirectly, through or from any salary, if it is earned in India, shall be deemed to accrue or arise in India. The proviso carves out salary payable for services rendered outside India, but only where the salary is paid by a non-resident employer or by a foreign office or branch of an Indian employer. Where an Indian company pays salary from its Indian payroll to an employee posting abroad, the income is generally treated as Indian-source and taxable here even if the employee is a Non-Resident.

The practical question for someone like Rajeev, drawing Indian-employer salary while sitting in Amsterdam, is whether the income was "earned in India" or whether the Section 9(1)(ii) proviso genuinely applies. The factors that determine this include: whether the salary continued on an Indian employment contract rather than a local Netherlands contract, whether the salary was credited to an Indian bank account (NRO or otherwise), whether the Indian employer deducted TDS at source and deposited it with the Indian treasury, and whether the assignment letter characterised the arrangement as a deputation on Indian terms versus a local hire. In most standard corporate deputation models, none of these conditions shift: the employee stays on Indian payroll, TDS is deducted, and the income is Indian-source. Tax is owed in India on that income whether or not the employee ever set foot in India during the relevant months.

The assignment letter is the document that anchors this analysis. A well-drafted deputation letter specifies: the period of the assignment, whether the employee is on secondment to a foreign entity (which may create a local employment relationship there) or simply working at a client site for the Indian employer, where salary is payable, and what tax equalisation policy applies. Revenue officers ask to see this document. If your letter is silent or ambiguous on these points, the default assumption will be that Indian-employer salary is Indian-source.

The NRI period and the Indian period: two different tax treatments in one year

Take the clearest dual-employer structure, the kind Rajeev had: one employer throughout (the same Indian company), nine months abroad and three months in India, with NRI status for the year. His income actually breaks into two analytically distinct slices.

The first slice is the January-to-September salary drawn while he was abroad. This is salary from an Indian employer, paid from India. Under Section 9(1)(ii) and the usual deputation structure, this is Indian-source income and is taxable in India even during his NRI period. His employer would have been deducting TDS on this salary under Section 192 and depositing it. This income is declarable in India.

The second slice is the October-to-March salary drawn while working in Bengaluru. This is straightforwardly salary rendered in India, from an Indian employer, taxable in India. No ambiguity here.

If Rajeev had instead had two separate employers, say an Indian entity from October onwards and a Dutch employer from January to September, with no Indian-employer TDS on the foreign period, the first slice changes character significantly. The Dutch employer's salary, paid in euros, credited to a Netherlands account, with Dutch income tax withheld, is foreign-source income. As an NRI, Rajeev is not taxable in India on foreign-source income. That Dutch salary stays outside the Indian net. The Dutch government taxes it; India does not.

The difference between these two cases, same Indian employer throughout versus a true foreign employer for the foreign period, is the difference between everything being Indian-source and only some of it being Indian-source. It is also the difference between a much larger Indian tax bill and a smaller one. The structure of the employment arrangement, not just the geography, determines the answer.

A worked example: November return, Indian employer throughout

Rajeev's numbers make the computation concrete. His annual salary package is Rs 24,00,000, paid equally across 12 months at Rs 2,00,000 per month, all on an Indian employer's payroll with monthly TDS under Section 192.

He was outside India from April 1, 2024 through October 9, 2024 (approximately 193 days abroad) and in India from October 10, 2024 to March 31, 2025 (approximately 173 days in India). Total Indian days in FY 2024-25: 173. He is an NRI for FY 2024-25.

His income:

• January to September 2024 (nine months, outside India, Indian employer): 9 multiplied by Rs 2,00,000 equals Rs 18,00,000.
• October to March 2025 (six months, in India, Indian employer): 6 multiplied by Rs 2,00,000 equals Rs 12,00,000.
• Total salary: Rs 30,00,000.

Wait: the article specified nine months as January to September and four months as October to March, making thirteen months. The scenario is for the financial year April 2024 to March 2025, so the nine-month foreign period is April to September (six months) and the return was in October or November. Let us use the article's scenario cleanly: the employee was on an Indian employer from January 2024, was abroad through September 2024 (which is nine calendar months including three months in the prior FY and six in the current FY), then returned in October 2024. For FY 2024-25, the relevant split is April to September (six months abroad) and October to March (six months in India).

Restructured example:

Rajeev's salary is Rs 25,00,000 per year, paid monthly at Rs 2,08,333 per month.

• April to September 2024 (six months abroad, Indian employer's Indian payroll): Rs 12,50,000.
• October 2024 to March 2025 (six months in India, same employer): Rs 12,50,000.
• Total FY 2024-25 salary: Rs 25,00,000.
• Standard deduction: Rs 75,000 (available to employees under the new regime for AY 2025-26, confirmed at Rs 75,000 from FY 2024-25 onward; if Rajeev opts for the old regime, the figure remains at Rs 50,000 but other deductions may apply).

Under new regime with standard deduction: taxable income is Rs 25,00,000 minus Rs 75,000, which equals Rs 24,25,000.

Tax under new regime slabs for FY 2024-25: Rs 0 to Rs 3,00,000 at nil, Rs 3,00,001 to Rs 7,00,000 at 5% equals Rs 20,000, Rs 7,00,001 to Rs 10,00,000 at 10% equals Rs 30,000, Rs 10,00,001 to Rs 12,00,000 at 15% equals Rs 30,000, Rs 12,00,001 to Rs 15,00,000 at 20% equals Rs 60,000, Rs 15,00,001 to Rs 24,25,000 at 30% equals Rs 2,77,500. Total tax: Rs 4,17,500. Plus 4% health and education cess: Rs 16,700. Total tax and cess: Rs 4,34,200.

This entire Rs 25,00,000 is Indian-taxable. His Indian employer would have been deducting TDS across the year under Section 192. Any shortfall or excess in TDS, arising for instance from the employer not accounting correctly for the foreign-posting period, shows up in Form 26AS and the annual tax computation.

Now change the scenario: suppose Rajeev had instead taken up employment with a Dutch company in Amsterdam from April to September 2024, drawn a salary equivalent to Rs 12,50,000 (say, EUR 14,000 at the average exchange rate for the period), paid in euros into a Netherlands bank account, with Dutch wage tax withheld by the Dutch employer. He then joined an Indian company in October 2024 on a salary of Rs 2,50,000 per month.

His FY 2024-25 income picture:

• Dutch employer salary (April to September, foreign-source, NRI period): Rs 12,50,000 equivalent. Not taxable in India. The Dutch employer withheld Dutch income tax; that is between Rajeev and the Dutch tax authority.
• Indian employer salary (October to March): 6 multiplied by Rs 2,50,000 equals Rs 15,00,000. Taxable in India.

Indian taxable income under new regime: Rs 15,00,000 minus Rs 75,000 standard deduction equals Rs 14,25,000.

Tax on Rs 14,25,000 under new regime: Rs 0 to Rs 3,00,000 nil, Rs 3,00,001 to Rs 7,00,000 at 5% equals Rs 20,000, Rs 7,00,001 to Rs 10,00,000 at 10% equals Rs 30,000, Rs 10,00,001 to Rs 12,00,000 at 15% equals Rs 30,000, Rs 12,00,001 to Rs 14,25,000 at 20% equals Rs 45,000. Total tax: Rs 1,25,000. Plus 4% cess: Rs 5,000. Total: Rs 1,30,000.

The two scenarios, same gross income, same financial year, but different employer structures, produce a tax bill difference of approximately Rs 3,04,200. The structure of the employment, not the geography of where Rajeev sat, makes that difference.

What if you are Resident for the year? The day-count tips over 182

Now suppose Rajeev had returned to India on September 15, 2024 rather than October 10. From September 15 to March 31, 2025 is approximately 197 days, making him a Resident for FY 2024-25.

If he was also RNOR (having been non-resident for nine of the ten preceding financial years, which a returning long-term expat typically satisfies), his foreign-source income, meaning the Dutch employer's salary from April to September, is still sheltered from Indian tax because it is foreign income not received in India. The RNOR shield would cover exactly the Dutch-employer salary and make his tax position in this scenario identical to the NRI position above.

If he is ROR (for example, he returned after only five years abroad and does not satisfy the RNOR conditions), the Dutch salary is pulled into the Indian net. He would declare the equivalent of Rs 12,50,000 from the Dutch employer alongside the Rs 15,00,000 from his Indian employer, for a total of Rs 27,50,000 before standard deduction.

Tax on Rs 27,50,000 minus Rs 75,000 equals Rs 26,75,000 under new regime: Rs 0 to Rs 3,00,000 nil, Rs 3,00,001 to Rs 7,00,000 at 5% equals Rs 20,000, Rs 7,00,001 to Rs 10,00,000 at 10% equals Rs 30,000, Rs 10,00,001 to Rs 12,00,000 at 15% equals Rs 30,000, Rs 12,00,001 to Rs 15,00,000 at 20% equals Rs 60,000, Rs 15,00,001 to Rs 26,75,000 at 30% equals Rs 3,52,500. Total tax: Rs 4,92,500. Plus 4% cess: Rs 19,700. Total: Rs 5,12,200.

Against this he would claim the foreign tax credit for the Dutch wage tax already paid on the Rs 12,50,000. If the effective Dutch rate on that income was, say, 35%, and the Dutch tax was approximately Rs 4,37,500 equivalent, the credit is the lower of the Dutch tax paid and the Indian tax on that doubly taxed income. The Indian tax attributable to the Rs 12,50,000 of Dutch salary can be estimated by apportioning: Rs 12,50,000 of Rs 26,75,000 of taxable income is approximately 46.7% of income, and 46.7% of the total Indian tax of Rs 5,12,200 is roughly Rs 2,39,200. The credit is the lower of Rs 4,37,500 and Rs 2,39,200, so Rs 2,39,200. Net Indian tax after credit: Rs 5,12,200 minus Rs 2,39,200 equals Rs 2,73,000. Still higher than the NRI scenario, but significantly reduced from the gross figure. This is the foreign tax credit working as designed.

Form 16 from the Indian employer, and what to do with foreign-employer payslips

Your Indian employer issues Form 16 under Section 203 at the end of the financial year (by June 15 following the close of the financial year). Part A shows TDS deducted and deposited by the employer quarter by quarter, referencing the TAN of the employer. Part B, which can be prepared by the employer or the employee, shows a salary break-up, deductions claimed, and the total income and tax. This flows directly into ITR-2.

Your foreign employer issues no Form 16. What you have instead is payslips covering the months you were employed abroad, and in many countries a year-end tax document. In the US this is a W-2; in the UK a P60; in the Netherlands a jaaropgaaf; in Germany a Lohnsteuerbescheinigung. These documents confirm the salary paid, the employer's identity, and the taxes withheld by the foreign country. They serve as your substantiation for the foreign income declared in ITR-2 and for the foreign tax credit claimed via Form 67.

The conversion to rupees is done using the telegraphic-transfer buying rate published by the State Bank of India for the relevant currency. For salary paid monthly, the principled approach is to use the rate for each month's payment date. In practice, many practitioners use the average SBI TT buying rate for the year or a government-prescribed average; the key is to be consistent and to document the rate used.

One friction point in dual-employer years is that your Indian employer's Form 16 covers only the salary it paid. The foreign employer's income does not appear in Form 26AS (which reflects only Indian TDS and Indian-source receipts). You are responsible for aggregating both in your ITR-2.

Aggregating both income streams in ITR-2: Schedule S and Form 67

ITR-2 is the correct form for most NRI and returning-resident dual-employer situations. It covers individuals with income from salary, house property, capital gains, and other sources, and it includes the schedules needed for foreign income, foreign assets, and the foreign tax credit. ITR-1 does not accommodate foreign income or the tax credit claims required here.

In Schedule S (Details of Income from Salary), you will make separate entries for each employer. For the Indian employer, the details flow from Part B of Form 16: name, TAN, salary paid, perquisites, TDS deducted. For the foreign employer, you enter the employer's name and address, the salary amount converted to rupees, and zero for TDS (since no Indian TDS was deducted by a foreign employer). The total of both entries is your gross salary income.

If you are a Resident for the year and the foreign salary is taxable in India, you will also complete Schedule FSI (Foreign Source Income), which captures income from each foreign country, the tax paid to that country, and the claimed relief. The relief itself is computed in Schedule TR (Tax Relief). The Form 67 that substantiates the foreign tax credit is filed online separately on the income tax portal before or alongside the return.

If you are an NRI and your foreign salary is genuinely foreign-source and not Indian-taxable, it does not appear in Schedule S or Schedule FSI at all. You declare only the Indian-source salary. The foreign income drops off the return entirely.

Keep all supporting documents, the foreign payslips, the SBI conversion rate printouts, the foreign tax deduction certificate, and the Indian Form 16, together. The income tax department's AIS (Annual Information Statement) will show what it knows about you from Indian sources, and a return that shows only Indian-source income when the department has reason to believe there is foreign income can trigger a scrutiny notice. Where you are an NRI with legitimately excluded foreign income, a covering note in the return's self-assessment working or a ready response to any notice is worth preparing. Our guide on responding to NRI tax notices covers that scenario.

The foreign tax credit via Form 67: claiming relief on doubly taxed salary

The mechanism that prevents paying tax twice on the same salary slice is the foreign tax credit under Section 90 or Section 91, claimed on Form 67.

Form 67 is filed electronically on the income tax portal. You fill in: the name of the foreign country, the income from that country offered to Indian tax (the amount in rupees), the foreign tax paid on that income (in rupees, converted at the SBI rate), and the claimed credit, which is the lower of the foreign tax paid and the Indian tax payable on that same income.

You attach: the foreign employer's income and tax document (W-2, P60, jaaropgaaf, or equivalent), payslips if the year-end document is unavailable, and proof of actual tax remittance to the foreign government (this can be the foreign tax return, the employer's withholding summary, or in some countries a certificate of tax deducted).

The 2024 amendment to Rule 128(9) extended the time limit for filing Form 67 to the deadline for filing a belated or revised return under Section 139(4) or 139(5), which for AY 2026-27 is December 31, 2026. Tribunals have also held that Form 67 is a directory requirement, not a mandatory condition precedent, so a timing slip does not automatically forfeit the treaty right. The conservative approach is still to file Form 67 by the original return deadline of July 31, 2026 for non-audit cases. Do not plan to rely on the extended deadline or the tribunal position; use the return deadline as the target.

One situation where the credit is not straightforwardly available: where you are an NRI and the foreign salary is not Indian-taxable at all, there is nothing to credit. The credit only offsets Indian tax on doubly taxed income. If the foreign income is outside the Indian net, the foreign employer's withholding is purely a foreign-country matter. You may be entitled to a refund from the foreign country under its own rules if you were overtaxed there, but that is separate from Form 67 and the Indian return.

For the treaty mechanics and the Tax Residency Certificate you may need to present to the foreign employer or foreign tax authority to get proper treatment under the applicable DTAA, see DTAA mechanics, TRC and Form 10F and DTAA relief for NRIs.

The assignment letter and why it anchors everything

The assignment letter (sometimes called a deputation letter or secondment agreement) is the single most important document in a dual-employer situation, because it determines the answers to three of the most consequential questions: what country employed you during the foreign period, where was the salary contractually payable, and what tax arrangements apply.

A standard corporate deputation keeps the employee on the Indian entity's payroll, specifies Indian law as the governing employment law, and pays salary in rupees to an Indian account. Under this structure, as discussed above, Section 9(1)(ii) treats the salary as Indian-source regardless of where the employee physically worked. The Dutch or US client site is just a location for service delivery; the employment relationship, the payroll, and the tax remain Indian.

A genuine secondment to a foreign entity is structurally different. The employee enters a local employment relationship with the foreign entity, receives a foreign payroll, is subject to the host country's labour law during the assignment, and may have no salary at all flowing from the Indian entity during the foreign period. Under this structure, the foreign period salary is genuinely foreign-source and, for an NRI, outside the Indian net.

Many real-world assignments sit between these poles, with a hybrid structure, an Indian base salary topped up by a foreign allowance or a cost-recharge arrangement between the Indian parent and the foreign subsidiary. Hybrid structures require careful analysis: the Indian base salary remains Indian-source; the foreign allowance or recharge may or may not be, depending on who is contractually obligated to pay it.

The assignment letter is what the assessing officer will ask for if the return is selected for scrutiny. If the letter is comprehensive, it answers the source question cleanly. If it is silent or boilerplate, the assessing officer will form their own view, usually one that is unfavourable to the taxpayer. Request a clear assignment letter before accepting any foreign posting, and keep a copy indefinitely.

Advance tax, TDS gaps, and interest exposure

In a dual-employer year, TDS may not cover the full liability. Your Indian employer deducts TDS based on the salary it pays and the declarations you submit. It knows nothing about the foreign employer's income. If the foreign salary is Indian-taxable, the Indian employer's TDS will under-withhold against your total liability.

Where total tax liability after TDS exceeds Rs 10,000, advance tax is due in four instalments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. An under-payment of advance tax attracts interest under Sections 234B and 234C. For a dual-employer year where the foreign salary is Indian-taxable, estimate your total liability early in the year, compute the shortfall from expected TDS, and pay advance tax instalments on the balance. The advance tax guide for NRIs has the mechanics and the payment process on the portal.

If you are an NRI whose foreign salary is not Indian-taxable, this does not arise: your only Indian-taxable income is from the Indian employer, and the employer's TDS should substantially cover the liability. The residual is usually a small self-assessment tax payment at the time of filing.

The closing read

A dual-employer year is not inherently complicated, but it requires you to resolve three questions in the right order. First, count your days in India for the full financial year, because residential status for the entire year is decided by that single number. Second, apply Section 9 to the Indian employer's salary for the foreign-posting period, because the employer's identity and payroll structure often make that salary Indian-source regardless of your physical location. Third, check whether the foreign employer's salary (if any) is Indian-taxable under your status, and if it is, match it with the foreign tax credit on Form 67 so you are not paying twice.

The difference between "Indian employer throughout, posted abroad" and "genuine foreign employer for the foreign period" is larger than most people expect. In Rajeev's case above, the same gross income produced a tax difference of Rs 3,04,200 purely from employer structure. That is not a matter of tax planning; it is a matter of correctly characterising the existing arrangement.

File ITR-2, not ITR-1. Aggregate both salary streams in Schedule S. If any foreign income is Indian-taxable, complete Schedule FSI, Schedule TR, and Form 67. Keep the assignment letter, payslips, foreign tax documents, and SBI rate printouts together. Pay advance tax if TDS undercoverage is material. And establish your residential status before you do anything else, because the entire analysis sits downstream of that one determination.

Related guides

• NRI residency and RNOR rules
• ITR filing for NRIs, AY 2026-27
• DTAA relief for NRIs
• DTAA mechanics, TRC and Form 10F
• Foreign tax credit and Form 67
• TDS for NRIs and how to get refunds
• Lower TDS certificate, Form 13
• Advance tax for NRIs
• NRI tax calendar 2026, key dates
• Responding to NRI tax notices
• PAN for NRIs
• Tax on NRO interest
• NRI gratuity, leave encashment and pension tax
• NRE, NRO and FCNR accounts explained
• NRI belated, revised and updated return (ITR-U)

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Disclaimer: This guide is general information for Indian expatriates and returning NRIs, not personal tax advice. Residential status, the source of salary income under Section 9(1)(ii), the applicability of the Section 9 proviso to a specific assignment structure, the interaction of RNOR conditions with foreign-income sheltering, the computation and timing of foreign tax credits under Section 90 or Section 91, and the exact treatment of dual-employer arrangements all depend on facts specific to you and on tax provisions that can be amended. The rates and rules described reflect the position as understood for AY 2026-27 (FY 2025-26) under the Finance Act 2024, including new-regime slabs effective from AY 2025-26. Verify current provisions and obtain a written opinion from a qualified chartered accountant or cross-border tax adviser before filing or making any decisions based on this guide.