Freelancing for overseas clients? Don't slip up on FA and FSI rules

If you earn via contracts, content creation, YouTube or X, you should fully report the income in your tax return

- Shipra Singh

Income earned by freelancers from foreign clients—whether through contracts, content creation, or platforms like YouTube and X (formerly Twitter)—is fully taxable in India. But beyond paying taxes, a bigger concern is accurate reporting of income in your income tax return (ITR).

Such income must be disclosed in both Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income). Failing to do so may trigger scrutiny under the Black Money Act, which carries severe penalties.

As you prepare to file your ITR for FY25, make sure you understand the tax treatment of your foreign freelance income and report it correctly to avoid future trouble.

How is foreign income taxed?

Foreign payments received for services—whether from a US company or a global platform—are treated as export of services and taxed as business income under "Profits and Gains from Business or Profession," based on your tax slab.

This includes earnings from platforms such as X, where payouts come from the US headquarters.

In case of YouTube, the tax treatment depends on whether the payment is made by its Indian or foreign entity, says Akhil Chandna, partner at Grant Thornton Bharat.

"Income generated from platforms such as X or YouTube may be classified as either domestic or foreign income, depending on the origin of the payment. If the payment is made directly by a foreign entity, it is treated as foreign-sourced income. Conversely, if the payment is through an Indian entity, the income is treated as Indian-sourced."

Experts are divided on how income earned through social media should be classified for tax purposes—whether it falls under profits from business or profession or under 'Income from Other Sources' (IFOS).

According to Akhil Chandna, partner at Grant Thornton Bharat, if content creation is your primary occupation, such earnings are typically treated as business income.