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Tax Considerations Guide For Freelancers Working Abroad

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Created on
July 18, 2023


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Indian freelancers working for international clients in foreign currencies are exempt from paying GST up to a certain limit. Although there is no mandatory requirement, you should register yourself or your firm under GST and obtain a letter of undertaking from the government to ensure complete tax compliance. 

On the other hand, tax considerations for freelancers working abroad are pretty different. Keep reading as we discuss more income tax returns for freelancers working abroad and other tax considerations.

What Are the Tax Considerations for Freelancers Working Abroad?

If you are a freelancer working overseas, you should be aware of the specific tax regulations relating to the type of work in the country you’re living. The following tax considerations are applied in all countries:

  • Pay taxes regardless of stay duration or nature.
  • Most countries, except the United States and Eritrea, require residents to pay taxes while living abroad.
  • Complete required tax forms for your income and foreign status.
  • Eligibility for tax deductions on work-related expenses.
  • Long-term residence abroad may lead to taxation under the permanent establishment (PE) concept.

Taxes and deductions for freelancers vary greatly between host nations. Therefore, get acquainted with the tax legislation of that country before beginning freelance work in a new nation.

Determining Tax Residency While Freelancing Abroad

As a freelancer working outside India, you must determine your tax residency status to understand the amount of tax you need to pay. Under the Income Tax Act in India, there are three types of residential status:

  • Resident and Ordinarily Resident (ROR)
  • Resident but Not-Ordinarily Resident (RNOR)
  • Non-Resident (NR)

If you fulfil the following criteria, you could be classified as an Indian resident: 

  • Spend 182 days in India in one financial year.
  • Stay for at least 60 days in the country during the previous financial year, or reside in India for 365 days in the past four years.

For Indian citizens working abroad or PIOs visiting India, only the first condition applies. PIO individuals are those whose parents or grandparents were born in undivided India.  Others are considered Non-Resident Indians (NRIs).

Tax Treaties: Avoid Double Taxation

Similar to Tax Deducted at Source (TDS) in India, your client may also charge tax on your income, depending on the rules of the country your client belongs to. This means your income is taxed in your foreign and home country. Double Taxation Avoidance Agreement (DTAA) avoids this. 

DTAA is a treaty two or more countries sign to avoid double taxation. That is, DTAA ensures that if your income is taxed in one country, it is not taxed again in the other. 

For example, if your client lives in the United States, you need to send Form W8BEN. Tell them you pay taxes in India and request tax exemption. India has DTAAs with various countries to prevent double payment of income tax for freelancers. Verify the applicable DTAA for the country where you earned income as exemption rates vary.


Freelancers who pay income taxes in India must submit Form ITR 3 or Form ITR 4 and have the necessary paperwork. ITR 3 applies to income earned from doing business. However, professionals can choose the presumptive taxation system, file ITR 4, and declare 50% of their gross receipts as their income.

And, if you’re a freelancer in the United States and are considering investing in US stocks, Fi Money can help you. It simplifies the trading experience by not charging brokerage charges and helping you make investing decisions with its in-app explainers. Besides, it helps new investors make decisions using its Curated Collections (such as All-Time Favourites) of stocks.

Frequently Asked Questions

1. Do I need to pay taxes in both my home country and the country where I am freelancing? 

Yes, if you are a resident Indian, then your global income (including what you have generated outside India) is taxable in India. Although, if this income is taxable in another country, you can take advantage of the DTAA.

2. Do I need to report my foreign freelance income in my home country?

This depends on your home country. For example, if you are an Indian resident, then yes, you need to report your foreign freelance income.

3. What is the tax rate for freelancers?

As a freelancer, if your annual income is till INR  2.5 lakhs you don’t have to pay taxes. But if you’re earning anywhere between Rs 2.5–5 lakhs, then you need to pay 10% of your total income as tax.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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