Will I be taxed in India for consulting income from a US company?
- Name withheld on request
If you move back to India in August 2025 and stay for at least 182 days during the financial year (April 2025 to March 2026), you'll qualify as a resident under Indian tax law.
However, to determine whether you are an 'ordinary resident' or not, the law stipulates that an individual is classified as a 'resident but not ordinarily resident' (RNOR) if their total stay in India during the preceding seven financial years is less than or equal to 729 days.
Given that you have spent less than a month in India each year over the past six years, your cumulative presence in India will not exceed this threshold. Accordingly, you will be treated as an RNOR for FY 2025–26 under Indian tax law.
An individual classified as an RNOR is liable to tax in India only on income that: is received or deemed to be received in India;
accrues or arises in India; or
is deemed to accrue or arise in India.
Also read: How is foreign rental income taxed in India?
Income earned and accrued outside India is not taxable in India unless it is derived from a business controlled from or a profession set up in India.
Since you will be rendering consultancy services from India, even if such services are provided to an overseas entity, the income will be considered to accrue in India and will, therefore, be taxable in India. However, any employment income earned in the US prior to your permanent return to India will not be subject to Indian tax for FY 2025-26.
Any salary earned in the US before your move will not be taxed in India.
For US tax purposes, you can file a dual-status return for calendar year 2025. This means: You'll be taxed as a US resident up to your departure date,
And as a non-resident for the rest of the year (i.e. until 31 December 2025), after you move to India.
Consequently, you would not be subject to US taxation on a worldwide basis for the period following your departure, when you are treated as a non-resident alien.
As a non-resident alien, consultancy income earned for services performed outside the US is generally not taxable in the US. Furthermore, under the India-USA Double Taxation Avoidance Agreement (DTAA), if your consultancy income does not qualify as 'fees for included services' and you do not have a fixed base in the US, such income shall be taxable only in India, being your country of residence.
Harshal Bhuta is partner at P. R. Bhuta & Co. CAs
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