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pk · ‎March 16, 2025

@kruthika , sorry if I missed to answer that query explicitly --- FEIE is for all earned/ active income == wages from qualified employer ( i.e. foreign /private employer ); Self-employed earnings ( including sole proprietorship ). When in retail / manufacturing, there is a fine line ( especially in India , where the owner's role is more like an investor and rarely "hands on" ).

My ref. From 26 U.S. Code § 911 - Citizens or residents of the United States living abroad | U.S. Code | US Law |...

" 2. Earned income

(A)In general

The term “earned income” means wages, salaries, or professional fees, and other amounts received as compensation for personal services actually rendered, but does not include that part of the compensation derived by the taxpayer for personal services rendered by him to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered.

(B)Taxpayer engaged in trade or business

In the case of a taxpayer engaged in a trade or business in which both personal services and capital are material income-producing factors, under regulations prescribed by the Secretary, a reasonable allowance as compensation for the personal services rendered by the taxpayer, not in excess of 30 percent of his share of the net profits of such trade or business, shall be considered as earned income."

Hope this clarifies the situation. Is there more I can do for you ?

pk

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