Foreign-source income

Foreign-Source Income Foreign-Source Income refers to any income earned from activities, investments, or business operations outside the taxpayer’s country of residence. It represents earnings that originate from a foreign jurisdiction, regardless of where the payment is received. Such income can include salaries or wages earned abroad, profits from overseas businesses, interest or dividends from foreign investments, royalties, rental income from foreign properties, or capital gains on the sale of assets located in another country. For tax purposes, foreign-source income is usually subject to taxation both in the country where it is earned and in the country of residence of the taxpayer. To avoid double taxation, countries often provide foreign tax relief or enter into Double Taxation Avoidance Agreements (DTAAs).

Example: An Indian resident earns dividends from shares of a U.S. company. The dividends constitute foreign-source income because the income is generated in the United States, even though it is received in India