What Is This Tool?

If you earn interest from overseas bank accounts, international deposits, or foreign financial institutions as an Indian resident, you're taxed on this foreign-source income under India's global income principle. This calculator is specifically designed for Indian Residents (Resident & Ordinarily Resident – ROR) earning foreign bank interest for FY 2025–26. For NRIs: Foreign interest income is NOT taxable in India. Only Indian-source income is taxable for NRIs. This calculator returns ₹0 Indian tax for NRI cases. For Residents: Your foreign interest is taxed progressively under the New Regime slabs with relief available under Section 91 for foreign taxes already paid. Whether your funds are in UK savings accounts, US Treasury bonds, or Australian deposits, this calculator shows your exact Indian tax liability, foreign tax credit eligibility, and net amount due.

Why This Can Be Confusing

Foreign interest taxation becomes complicated due to: (1) Foreign taxes already paid in another country, (2) Currency conversion using the correct RBI reference rate on receipt date, (3) India's progressive New Regime slab rates for residents only, (4) The misunderstanding that NRIs owe Indian tax on overseas interest (they don't), and (5) The Foreign Tax Credit (Section 91) calculation which is limited to the Indian tax on that income. Many individuals unknowingly face confusion because they misunderstand their residency status, use incorrect exchange rates, or don't properly claim Section 91 relief. This tool eliminates that confusion by clearly separating Resident vs NRI taxation with precise Section 91 FTC calculations.

How This Tool Works

This calculator applies FY 2025–26 statutory provisions: For Resident Individuals: Your foreign interest income is taxed under the New Regime progressive slabs (0% up to ₹4L, then 5%, 10%, 15%, 20%, 25%, 30% as income rises). Surcharge (up to 37%) and 4% Health & Education Cess are added. Foreign Tax Credit under Section 91 is calculated as the LOWER of (a) foreign tax paid, or (b) Indian tax on that income. For NRIs: Foreign interest income is taxed at 0% (no slab rates apply). Indian tax liability is ₹0. For both: Currency conversion uses the RBI reference rate on the date interest was credited to your account.

Step-by-Step: How to Use This Tool

1. 1.Select your residency status: Resident (ROR) or Non-Resident Indian (NRI). This determines your entire tax treatment.
2. 2.Enter your foreign interest income in INR (converted using RBI reference rate on the date interest was credited to your account).
3. 3.Enter any foreign tax already paid on this interest income (from your foreign country's tax return or bank statement).
4. 4.The calculator applies the New Regime slab rates (residents only) and Section 91 Foreign Tax Credit logic.
5. 5.For Residents: You'll see base Indian tax, surcharge, 4% cess, and then FTC reduction (limited to the lower of foreign tax paid vs. Indian tax on that income).
6. 6.For NRIs: The result is ₹0 Indian tax, with a clear note that foreign interest is not taxable in India for non-residents.

Real-Life Situations Where This Tool Helps

• ✓A retired Indian resident (ROR) living in the UK with a GBP-denominated savings account earning interest — must calculate New Regime slab tax on INR-converted amount and claim FTC for UK taxes already withheld.
• ✓A software engineer in India with a US bank account earning USD interest while maintaining India residency — needs to convert to INR using RBI reference rate and understand how US taxes reduce Indian liability via Section 91.
• ✓An Indian business owner with foreign subsidiary accounts earning interest income — requires accurate FTC calculation to understand net amount due to India after credits for foreign taxes.
• ✓A resident individual with interest spread across UK, Singapore, and Australia accounts — needs to aggregate all foreign interest, convert using correct RBI rates, and calculate combined FTC relief.
• ✓A senior citizen (aged 60+) with international investments earning overseas interest — must file ITR-1 with foreign income details and attach FTC documentation for assessment.

Common Mistakes

• ⚠Using today's exchange rate instead of RBI rate on receipt date: This causes significant conversion errors. The Income Tax Department requires the official RBI reference rate on the date interest was actually credited to your foreign account, not the current rate.
• ⚠Assuming foreign tax automatically credits: Foreign taxes paid don't automatically reduce Indian liability. You must claim Section 91 relief in your ITR, and the credit is capped at the Indian tax on that income (not the actual foreign tax paid).
• ⚠Misunderstanding the ₹0 NRI rule: If you're an NRI, stop here — foreign interest is taxed at 0% in India. Only Indian-source income is taxable. Many NRIs incorrectly calculate 30% tax on overseas interest.
• ⚠Calculating tax only on base slab rate: This ignores surcharge (which can be 10%-37% depending on income) and 4% Health & Education Cess, both of which significantly increase actual tax payable for higher incomes.
• ⚠Forgetting to report foreign income in ITR: All worldwide income must be reported in your ITR, including foreign interest. Omitting this triggers scrutiny notices and penalties, even if tax was paid in the foreign country.
• ⚠Not documenting the exchange rate used: The Income Tax Department may ask for proof of the RBI rate used for conversion. Keep dated records of the rate and the source (RBI website) to substantiate your calculation.
• ⚠Misunderstanding resident status: Only true Residents (meeting physical presence tests) can use this calculator. If unsure, consult your CA to determine your residency status before proceeding.

Benefits

This calculator removes the complexity from foreign interest taxation. You get a clear, step-by-step breakdown showing: • Exact Indian tax liability under the New Regime FY 2025–26 slabs • Correct Section 91 Foreign Tax Credit calculation (limited to lower of foreign tax vs. Indian tax) • Impact of surcharge and 4% cess on your total liability • Clear distinction between Resident (progressive tax) and NRI (₹0 tax) treatment • Your net amount payable to India (or refund due) after all credits This transparency is invaluable for ITR filing, financial planning, and discussions with your Chartered Accountant. All calculations follow CBDT guidelines and the latest Finance Act provisions for FY 2025–26.

✅ Verified Accuracy – 14 Test Cases Passed

This calculator has been rigorously tested against CBDT guidelines and real-world scenarios. All test cases passed verification.

Legal Basis & Statutory References

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Frequently Asked Questions