Key Highlights
- NRI status determined under Section 6, ITA 2025 (less than 182 days in India)
- NRIs taxed only on Indian-source income — not global income
- Higher TDS rates on NRI income: 20-30% on most investment income
- DTAA (Double Tax Avoidance Agreement) can reduce TDS — requires Tax Residency Certificate (TRC)
- NRE account interest: Exempt while NRI/RNOR; taxable once ROR
- NRO account interest: Taxable with 30% TDS
- NRI returning to India: RNOR status gives 2-3 years of foreign income exemption
- Special rates under Chapter XIII-E for NRI investment income
1. Overview
An NRI (Non-Resident Indian) is taxed in India only on income that arises in India, is deemed to arise in India, or is received in India. Their foreign income — salary earned abroad, foreign bank interest, overseas capital gains — is not taxable in India. This contrasts with Resident and Ordinarily Resident (ROR) taxpayers who are taxed on global income.
2. NRI Status Under ITA 2025
You are an NRI (Non-Resident) for a Tax Year if you do NOT satisfy either of these conditions:
- Present in India for 182 days or more during the Tax Year, OR
- Present in India for 60 days or more in current year AND 365 days or more in preceding 4 years
Modified rules for Indian citizens and PIOs visiting India — the 60-day threshold becomes 120 days if Indian income exceeds ₹15 lakh.
Deemed residency rule (Section 6(1A)): An Indian citizen not liable to tax anywhere else with Indian income >₹15 lakh is deemed Resident in India even if below 182 days.
3. What Income is Taxable for NRIs?
| Income Type | Taxable in India for NRI? |
|---|---|
| Salary for services rendered in India | Yes — slab rates |
| Salary credited to Indian account by foreign employer | Yes — received in India |
| Rent from property in India | Yes — arises in India |
| Capital gains from sale of Indian shares/property | Yes — arises in India |
| Dividend from Indian company | Yes — 20% TDS (Chapter XIII-E) |
| Interest on NRO accounts | Yes — 30% TDS |
| Interest on NRE accounts | No — exempt while NRI/RNOR |
| Foreign salary earned abroad | No — not Indian source |
| Foreign bank interest | No — not Indian source |
4. Special Tax Rates for NRIs (Chapter XIII-E)
| Income Type | TDS Rate | Section (ITA 2025) |
|---|---|---|
| NRO FD interest | 30% + surcharge + cess | Section 393 / Chapter XIII-E |
| Dividend from Indian company | 20% | Section 213 |
| LTCG on Indian equity (listed) | 12.5% (above ₹1.25L) | Section 195 |
| STCG on Indian equity (listed) | 20% | Section 196 |
| LTCG on immovable property | 12.5% | Section 195 |
| Rental income | 30% (as per Section 196) | TDS by tenant |
| Royalties and fees for technical services | 20% (or DTAA rate) | Section 396 |
5. DTAA Benefits: Reducing TDS
India has Double Tax Avoidance Agreements (DTAAs) with 90+ countries including USA, UK, UAE, Canada, Australia, Singapore, and Germany. Under a DTAA, NRIs can pay lower TDS rates than the statutory rates under ITA 2025.
To claim DTAA benefits:
- Obtain a Tax Residency Certificate (TRC) from the country of residence
- Submit Form 10F to the deductor (payer in India)
- Ensure the deductor applies DTAA rate instead of standard TDS rate
- File Form 67 in ITR to claim any foreign tax credit for taxes already paid abroad
6. RNOR Status: The Returning NRI Benefit
When an NRI returns to India, they typically qualify as RNOR (Resident but Not Ordinarily Resident) for 2–3 years — during which foreign income is NOT taxable in India. This transition window is valuable for:
- Liquidating foreign assets while still RNOR — gains not taxable
- Converting NRE FDs to resident FDs without immediate tax hit on accumulated interest
- Planning the transition of global income to India
RNOR conditions: Resident but NR in 9 of preceding 10 Tax Years, OR present in India ≤ 729 days in preceding 7 years.
7. NRI Selling Property in India: TDS Rules
When an NRI sells immovable property in India, the buyer must deduct TDS on the sale consideration (not just on capital gains):
- Long-term capital gains: 12.5% on full sale consideration (or application for lower TDS certificate)
- Short-term: 30% on full consideration
- The NRI can apply for a Certificate under Section 238 of ITA 2025 for nil/lower TDS deduction (based on actual capital gains calculation)
- TDS deposit: within 30 days from end of month of deduction
8. NRI ITR Filing Obligations
- Must file ITR if Indian income exceeds basic exemption (₹4 lakh under new regime)
- No age-based enhanced exemption for NRIs — same ₹4 lakh regardless of age
- No Section 157 rebate available (NRIs cannot claim Section 157)
- Schedule FA (foreign assets) disclosure NOT required for NRIs — only for ROR taxpayers
- DTAA benefits must be claimed in ITR with TRC and Form 10F
9. Latest Updates Under ITA 2025
- NRI provisions now in Chapter XIII-E (Sections 213–229) replacing scattered old sections
- Deemed residency rule (₹15L threshold) retained from Finance Act 2020
- 120-day rule for Indian citizens visiting India with >₹15L Indian income retained
- DTAA override provisions continue under Section 162 (GAAR exceptions)
10. Why TaxClue
NRI taxation involves residential status determination, TDS compliance for Indian income, DTAA planning, and RNOR transition strategy. TaxClue's NRI tax specialists handle complete NRI tax compliance — from residential status advisory to ITR filing and foreign tax credit claims. Contact us for NRI tax planning and filing.
11. Resources & Checklist
- ☐ Determine residential status using passport and day-count analysis
- ☐ Check deemed residency rule if Indian income >₹15 lakh
- ☐ Obtain TRC from country of residence for DTAA benefits
- ☐ Submit Form 10F to all Indian deductors
- ☐ File ITR if Indian income >₹4 lakh
- ☐ Claim foreign tax credit via Form 67 in ITR
- ☐ Plan RNOR window before returning to India permanently
12. Contact Us
NRI tax compliance is complex but manageable with the right advisor. Contact us for complete NRI tax services under the Income Tax Act, 2025.