In India, income tax liability depends on an individual’s residential status. Taxpayers are classified into three categories: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR). Not every NRI is automatically treated as a non-resident for income tax purposes. An individual’s status depends on whether they meet the prescribed stay requirements in India.
Taxable Income for NRIs in India
| Type of Income | Taxability in India for NRIs |
|---|---|
| Salary earned in India or for services performed in India | Taxable in India |
| Rental income from property situated in India | Taxable in India |
| Capital gains from selling Indian shares or immovable property located in India | Taxable in India |
| Interest earned on NRO accounts | Taxable in India |
| Interest earned on NRE accounts | Exempt from Indian tax, subject to applicable conditions |
| Interest earned on FCNR accounts | Exempt from Indian tax, subject to applicable conditions |
What Is NRI Income Tax in India?
Individuals who do not meet the prescribed stay requirements under the Income Tax Act, 1961, are generally classified as non-residents. Consequently, many Non-Resident Indians (NRIs) living abroad fall under the non-resident category.
For NRIs classified as non-residents under the applicable provisions, not all income is taxable in India. Generally, income that accrues or arises in India, or is received in India, falls within the scope of Indian taxation. This includes salaries for services performed in India, rental income from Indian properties, capital gains from Indian assets, and interest earned on Indian bank accounts.
How to Determine the Residential Status of an NRI
Before calculating your tax liability, you must establish your residential status. The law specifies the criteria for determining this status, which influences whether your worldwide income is subject to tax in India.
You are generally considered a resident of India for a financial year if you meet either of the following conditions:
- You stay in India for 182 days or more during the financial year; or
- You stay in India for at least 60 days during the current year and 365 days during the preceding four years.
For individuals, residential status is further divided into the following categories:
- Resident and Ordinarily Resident
- Resident but Not Ordinarily Resident
Tax Rates for Non-Residents
For non-resident individuals, income is generally taxed according to the applicable income tax slab rates, except where special tax rates apply. The following tables show the slab rates under the old and new tax regimes for non-residents.
1. Income Tax Slabs Under the Old Tax Regime for FY 2025–26
| Income Tax Slab | Applicable Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001–₹5,00,000 | 5% on income exceeding ₹2,50,000 |
| ₹5,00,001–₹10,00,000 | ₹12,500 + 20% on income exceeding ₹5,00,000 |
| Above ₹10,00,000 | ₹1,12,500 + 30% on income exceeding ₹10,00,000 |
2. Income Tax Slabs Under the New Tax Regime (Default) for FY 2025–26
| Income Tax Slab | Applicable Tax Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh–₹8 lakh | 5% |
| ₹8 lakh–₹12 lakh | 10% |
| ₹12 lakh–₹16 lakh | 15% |
| ₹16 lakh–₹20 lakh | 20% |
| ₹20 lakh–₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
Capital Gains Tax Rates
The following table outlines how different categories of capital gains are taxed for non-residents.
| Asset / Income Type | Short-Term Capital Gains | Long-Term Capital Gains | Applicable Section |
|---|---|---|---|
| Listed equity shares and equity mutual funds (where STT is paid) | 20% | 12.5% on gains exceeding ₹1.25 lakh per year | 111A / 112A |
| Other assets, including immovable property, gold, unlisted shares, and debt assets | Applicable slab rates | 12.5% without indexation | 112 |
| FPIs / specified funds (Category III AIF) | As per Section 115AD | As per Section 115AD | 115AD |
Is Foreign Income Earned by NRIs Taxable in India?
An NRI’s income tax liability in India depends on their residential status for the relevant year, as determined under the income tax rules discussed above.
- If you qualify as a resident, your worldwide income is taxable in India. If you are classified as an NRI, generally only your income earned in India is taxable in India.
- Income earned outside India is generally not taxable in India for non-residents.
- Examples of income earned in India include:
- Salary received in India for services performed in India.
- Income generated from a house property located in India.
- Capital gains arising from the transfer of an asset situated in India.
- Interest income from fixed deposits or savings bank accounts.
Salary Income
- Salary income is generally considered to arise in India when the services are performed in India.
- Salary paid for services rendered in India is taxable in India, regardless of where the payment is received, including when the recipient is a non-resident.
- Salary received in India is taxable even if the services for which it is paid are performed outside India.
- If you are an Indian citizen employed by the Government of India and perform your duties outside India, your salary income is taxable in India.
- Exception to point 4: Salary income of diplomats and ambassadors is exempt from tax.
Illustration: Ajay worked in China on a project for an Indian company for three years. He wanted to receive his salary in India to support his family and pay his housing loan instalments. However, because salary received by Ajay in India would be subject to Indian tax laws, he chose to receive his salary in China instead.
Income from House Property
- Income generated from a property located in India is taxable in the hands of an NRI.
- The rules for calculating tax and claiming deductions against house property income are generally similar for residents and non-residents.
- Rental income from house property is taxed according to the applicable income tax slab rates.
- The tenant must deduct TDS from rent payments as applicable, even when the rent does not exceed the threshold limits specified under Section 194-IB.
- The tenant must also submit Forms 15CA and 15CB, where required, when remitting rent payments to a non-resident landlord.
Illustration: Nandini owns a house in Goa that she has rented out while residing in Bangkok. She has arranged for the rental payments to be deposited directly into her bank account in Bangkok. Despite receiving the rent in a foreign bank account, Nandini’s income from the property located in India remains taxable in India.
Income from Other Sources
Interest earned on fixed deposits and savings accounts maintained with Indian banks is taxable in India. However, interest earned on NRE and FCNR accounts is exempt from tax, while interest earned on NRO accounts is fully taxable.
Income from Business and Profession
Any income earned by an NRI from a business established or controlled in India is taxable in India.
Income from Capital Gains
- Capital gains arising from the transfer of a capital asset, such as property located in India, are taxable in India.
- When purchasing property from a non-resident, the buyer must deduct TDS at 10%.
- Capital gains exemptions may be available by reinvesting in a residential property under Section 54 or in specified capital gains bonds under Section 54EC.
- Capital gains earned from investments in Indian shares and securities are also taxable in India.
Special Provisions Relating to Investment Income
NRIs who invest in certain specified Indian assets are subject to tax at 20% on the income earned from those investments. If this investment income is the NRI’s only income for the financial year and TDS has already been deducted, the individual is not required to file an income tax return.
Income from the following Indian assets acquired in foreign currency is taxable at 20%:
- Shares in public or private Indian companies.
- Debentures issued by publicly listed Indian companies, excluding private companies.
- Deposits held with banks and public companies.
- Securities issued by the Central Government.
- Other Central Government assets specified for this purpose in the Official Gazette.
Deductions under Section 80 are not available when calculating investment income.
Tax Benefits Available to NRIs
The following are some of the commonly available tax benefits for taxpayers classified as non-residents under the Income Tax Act.
Foreign Income Exemption
For non-resident taxpayers, only income taxable in India is subject to Indian income tax. Income arising outside India generally has no Indian tax implications for non-residents, who are not required to report their worldwide income for Indian income tax purposes.
Chapter VI-A Deductions
Non-residents can claim most deductions available under Chapter VI-A of the Income Tax Act. Some of the commonly applicable deductions are listed below.
Like resident taxpayers, NRIs may also qualify for various deductions and exemptions from their total income. These are outlined below.
Deductions Available to Non-Residents
| Section | Deduction |
|---|---|
| Section 80C | Deductions for eligible investments, up to a maximum of Rs. 1.5 lakh |
| Section 24 | Deductions relating to house property income, including the standard deduction, home loan interest, and principal repayment |
| Section 80EE / Section 80EEA | Additional interest deductions for first-time homebuyers |
| Section 80D | Deduction for health insurance premiums paid for oneself, spouse, dependent children, and parents |
| Section 80E | Deduction for interest paid on an education loan |
| Section 80G | Deduction for donations made to specified charitable causes |
| Section 80TTA | Deduction on savings account interest, up to Rs. 10,000 |
| Section 54 | Exemption on long-term capital gains from selling a residential house, subject to reinvestment in another residential property |
| Section 54EC | Exemption on long-term capital gains from selling a residential house, subject to reinvestment in specified bonds |
| Section 54F | Exemption on long-term capital gains from selling any capital asset, subject to reinvestment in a residential property |
Although most deductions are available to both resident and non-resident taxpayers, certain deductions cannot be claimed by non-residents.
Deductions Not Available to Non-Residents
| Section | Deduction |
|---|---|
| Section 80C | Investments in PPF accounts opened by non-residents, NSCs, the Post Office 5-year deposit scheme, and the Senior Citizen Savings Scheme (SCSS) |
| Section 80DD | Deduction for the maintenance or medical treatment of a dependent with a disability |
| Section 80DDB | Deduction for medical treatment of a dependent suffering from a specified disease or disability |
| Section 80U | Deduction for the taxpayer’s own disability |
When Must NRIs File an Income Tax Return in India?
NRIs must file an income tax return if their income taxable in India exceeds the applicable basic exemption limit. Even when income falls below this threshold, filing a return can help them claim refunds for TDS deducted on interest, rental income, or other payments.
- Exemption limit under the old tax regime: Rs. 2.5 lakh for individuals below 60 years of age.
- Exemption limit under the new tax regime for FY 2025–26: Rs. 4 lakh.
- Due date: 31 July 2026, unless extended for FY 2025–26.
- Due date for business income: For non-residents earning business income in India, the due date is extended to 31 August 2026. This change is permanent and applies from the current assessment year.
Case Study
Srishti, an Indian citizen, left India on 3 July 2025 to take up a job in the USA and has lived there since. After checking her Form 26AS online, she discovered that TDS of Rs. 21,000 had been deducted at 30% on the interest earned from her NRO account. She has no other income in India. Does Srishti have to pay tax in India, and is she required to file an income tax return?
Whether Srishti’s income is taxable in India depends on her residential status. Let us first determine her status for the relevant financial year.
Srishti’s Residential Status
- Srishti is an Indian citizen who moved to the USA for employment. She would generally qualify as a resident if she stayed in India for 182 days or more during the financial year.
- She left India on 3 July 2025. During FY 2025–26, which runs from 1 April 2025 to 31 March 2026, she spent fewer than 182 days in India.
- Therefore, Srishti qualifies as an NRI for Indian income tax purposes.
Srishti’s Taxable Income
Since Srishti is an NRI, her income earned in the USA is not taxable in India under the general rules applicable to non-residents. Only her interest income from the NRO account, which is Indian income, is taxable in India.
Srishti’s ITR Filing Requirements
- For FY 2025–26, the basic exemption limit is Rs. 2.5 lakh under the old tax regime and Rs. 4 lakh under the new tax regime.
- If her income for the financial year falls within the applicable basic exemption limit, she is generally not required to file an income tax return.
- Srishti’s total income in India is below both limits. Therefore, she is not required to file an ITR under the stated circumstances.
- However, since TDS has already been deducted, she can file an income tax return to claim a refund of the tax deducted.
Surcharge Rates for NRIs
- A surcharge of 10% applies to the income tax payable when total income exceeds Rs 50 lakh but does not exceed Rs 1 crore.
- A surcharge of 15% applies to the income tax payable when total income exceeds Rs 1 crore but does not exceed Rs 2 crore.
- A surcharge of 25% applies to the income tax payable when total income exceeds Rs 2 crore but does not exceed Rs 5 crore.
- A surcharge of 37% applies to the income tax payable when total income exceeds Rs 5 crore.
Marginal relief is available on the surcharge, which also applies to NRI income.
Note: Under the new tax regime, the maximum surcharge is capped at 25%.
Rebate Under Section 87A
Non-residents are not eligible for the rebate under Section 87A under either tax regime.
TDS on NRI Income
Tax Deducted at Source (TDS) applies to many types of income earned by NRIs. The person making the payment is responsible for deducting the applicable tax before releasing the amount.
| Income Type | TDS Rate |
|---|---|
| Rent | 30% |
| Property sale | 12.5% |
| NRO account interest | 30% |
| Dividend | 20% |
Do NRIs Need to Pay Advance Tax?
NRIs are required to pay advance tax when their tax liability exceeds Rs 10,000 during a financial year. If advance tax is not paid, interest may be charged under Sections 234B and 234C.
ITR Forms Applicable to NRIs
Selecting the appropriate ITR form is essential for meeting tax compliance requirements. NRIs cannot file their returns using ITR-1 or ITR-4. They must select the suitable form based on the nature and structure of their income.
| ITR Form | Income Type and Legal Status |
|---|---|
| ITR-2 | Salary, property, capital gains and foreign assets |
| ITR-3 | Business or professional income |
| ITR-5 | For NRI firms |
| ITR-6 | For NRI companies |
Documents Required for NRI ITR Filing
A) Identity and Residency Documents
- Passport
- PAN card or Tax Identification Number
- Tax Residency Certificate (TRC)
Note: A Tax Residency Certificate is issued by the income tax authority of a taxpayer’s country of residence to establish their residency in that country for a specific financial year.
In India, taxpayers can request a TRC from the Income Tax Department by submitting Form 10FA. If the assessing officer is satisfied with the application, the certificate is issued through Form 10FB.
B) Income Documents
- Form 16: A certificate issued by the employer under Section 203, showing the salary paid to the employee.
- Form 16A: A quarterly certificate issued by the deductor under Section 203 for TDS on income other than salary, such as rent and interest.
- Form 26AS: A tax credit statement accessible through the e-filing portal that records TDS and TCS deducted against the taxpayer’s PAN.
- AIS (Annual Information Statement): Available on the e-filing portal, it contains details of TDS/TCS, SFT information, tax payments, demand and refund details, and information received from foreign governments.
C) Bank Account Documents
- NRO account statement
- NRE account statement
- FCNR(B) account statement
D) Capital Gains Documents
- Sale deed or purchase deed
- Records showing the cost of acquisition
- Capital gains statement
How to File an ITR as an NRI: Step-by-Step Guide
- Confirm your residential status.
- Select the appropriate ITR form.
- Choose your tax regime.
- Gather all the necessary documents.
- Sign in to the Income Tax e-Filing Portal.
- Calculate your taxable income.
- Claim the eligible deductions.
- Apply the applicable special provisions for NRI capital gains.
- Claim DTAA benefits, where applicable.
- Submit and verify your ITR.
NRI Tax Implications in Specific Cases
1. Resident Individual on a Temporary Foreign Assignment
Rahul worked in Singapore for four months on a temporary assignment and received his earnings in Singaporean dollars during this period. The income was credited to his bank account in India. He has now returned to India. How should he file his income tax return?
Rahul’s tax liability for the financial year will depend on his residential status. Since he has not stayed outside India for more than 182 days, he will be treated as a resident and must file his income tax return in India for that year.
His taxable income will also include the salary earned during his assignment in Singapore. If his assignment extends beyond 182 days, his residential status may change, and he may be required to pay tax only on the Indian income earned up to that point. It is important to note that Rahul’s foreign income credited to an Indian bank account is taxable in India.
2. Resident Individual Who Recently Moved Abroad
Prashant moves to the US for a new assignment. His US earnings are credited to an NRE account in India. He continues to hold fixed deposits and has savings in an Indian bank account. He has also received Form 16 from his Indian employer. Does he need to file an income tax return in India this year?
Regardless of whether a person is an NRI, an individual must file an income tax return if their income exceeds the basic exemption limit. However, NRIs are generally taxed only on income earned or received in India. Therefore, Prashant will be liable for tax on his Indian income, including earnings from fixed deposits and savings accounts.
Prashant’s Income from India
| Income Source | Amount |
|---|---|
| Income from Indian employer | Rs 3,00,000 |
| Interest income from FDs | Rs 25,000 |
| Savings account interest | Rs 4,500 |
| Gross total income | Rs 3,29,500 |
Deductions
| Deduction | Amount |
|---|---|
| Section 80C – LIC premium | Rs 20,000 |
| Section 80TTA exemption | Rs 4,500 |
| Taxable income | Rs 3,05,000 |
| Tax Details | Amount |
|---|---|
| Tax at the 5% slab rate | Rs 2,750 |
| Cess at 4% | Rs 110 |
| TDS deducted by employer | Rs 3,000 |
| TDS deducted by bank | Rs 2,500 |
| Tax refund | Rs 2,640 |
3. Resident with Global Income
If you qualify as a resident Indian for tax purposes, your global income is taxable in India, regardless of whether it was earned or received in India or abroad. If the same income is also taxed in another country, you may be eligible for relief under a Double Taxation Avoidance Agreement (DTAA).
Case Study
Shreya returned to India in 2010 after spending more than five years in London. The French company she previously worked for continues to engage her as a consultant and pays her fees in pounds. Her earnings are credited to a bank account in the UK, where she pays tax. Does she need to pay tax on this income or report it in her Indian income tax return?
Shreya qualifies as an Indian resident. The taxability of income in India depends on the individual’s residential status. Residents are generally required to pay tax on their worldwide income. They must disclose income earned from all sources and countries in their Indian income tax return and pay the applicable tax in India. In contrast, an NRI is generally taxed only on income earned or accrued in India.
Consequently, all of Shreya’s income, including consulting fees received in foreign currency, will be taxable in India.
Her income received in pounds must be converted into Indian rupees for tax computation and included in her total income. The applicable income tax slab rates will then be applied.
Since Shreya has already paid tax on this foreign income in the UK, she may claim relief under the DTAA. Subject to the applicable provisions of the agreement between the two countries, this relief can help prevent the same income from being taxed twice.
How Can NRIs Avoid Double Taxation?
NRIs can prevent double taxation, where the same income is taxed in both India and a foreign country, by claiming relief under the Double Taxation Avoidance Agreement (DTAA) signed between the two countries.
The DTAA provides two methods for obtaining tax relief:
- Exemption Method: Under this approach, the income is taxed in one country and exempted from tax in the other.
- Tax Credit Method: When the same income is taxed in both countries, the taxpayer can claim tax relief in their country of residence.
In Budget 2021, the Finance Minister proposed introducing Section 89A to establish rules addressing difficulties faced by NRIs (specified persons) due to double taxation of funds accumulated in foreign retirement accounts.
This provision applies when income from these accounts is not taxed when it accrues, but the notified foreign countries tax it when the funds are withdrawn or redeemed.
NRI Taxation – Changes Under the Income Tax Act 2025
Although the Income Tax Act 2025 comes into effect on 1 April 2026, the provisions of the Income Tax Act 1961 continue to apply for AY 2026–27, as this assessment year relates to income earned up to 31 March 2026.
| Topic | Income Tax Act 1961 | Income Tax Act 2025 |
|---|---|---|
| Investments and principal deductions | Section 80C | Section 123 |
| Interest deduction on home loans | Section 24 | Sections 22(1)(b) and 22(2) |
| Additional interest deduction for loans taken in 2016–17 | Section 80EE | Section 130 |
| Additional interest deduction for loans taken between 2019 and 2022 | Section 80EEA | Section 313 |
| Health insurance premiums | Section 80D | Section 126 |
| Interest on education loans | Section 80E | Section 129 |
| Donations to charitable funds | Section 80G | Section 133 |
| Savings account interest | Section 80TTA | Section 153(2)(a) |
| Capital gains investments in specified bonds | Section 54F | Section 86 |