NRI Taxation Under ITA explained: this guide covers what NRI Taxation Under ITA means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Non-Resident Indians (NRIs) have specific tax obligations in India under the Income Tax Act 2025. Tax liability depends primarily on residential status and the source of income. This guide covers how residential status is determined, what income is taxable, and how to avail DTAA benefits.
Residential Status — The Key Determinant
Under ITA 2025, an individual is a Resident in India if:
- Present in India for 182 days or more during the Tax Year, OR
- Present in India for 60 days or more in the Tax Year AND 365 days or more in the 4 preceding years
The 60-day rule is relaxed to 120 days for Indian citizens/PIOs with Indian income above Rs. 15 lakh. If an Indian citizen has total income > Rs. 15 lakh and is not taxable anywhere else, they are deemed resident in India (RNOR → Resident).
Categories of Residential Status
| Category | Taxable Income |
|---|---|
| Resident and Ordinarily Resident (ROR) | Global income (India + foreign) |
| Resident but Not Ordinarily Resident (RNOR) | India income + foreign income from India-controlled business |
| Non-Resident (NR) | Only India-sourced income |
What Income is Taxable for NRIs?
- Salary for services rendered in India
- Business income from India operations
- Rental income from property in India
- Capital gains on India assets (shares, property)
- Interest income from NRO accounts
- Dividends from Indian companies
Exempt for NRIs: Interest on NRE (Non-Resident External) accounts, interest on FCNR deposits.
NRE vs NRO vs FCNR Accounts
| Account | Currency | Interest Taxable? | Repatriable? |
|---|---|---|---|
| NRE | INR (foreign source) | No (exempt) | Fully |
| NRO | INR (India income) | Yes (TDS 30%) | Up to $1M/year |
| FCNR | Foreign currency | No (exempt) | Fully |
DTAA Benefits for NRIs
India has DTAAs with 90+ countries. NRIs can claim lower withholding tax rates on dividends, interest, and royalties under the applicable DTAA. To claim DTAA benefit:
- Obtain Tax Residency Certificate (TRC) from the country of residence
- File Form 10F with the Indian deductor/tax authority
- Applicable beneficial rate will apply (e.g., US-India DTAA: 15% on dividends vs 20% default)
Capital Gains for NRIs
NRIs selling Indian property or shares must pay capital gains tax per ITA 2025 rates. TDS applies at source: 20% (LTCG) or 30% (STCG) before payment to NRI. NRI can apply to AO for lower TDS certificate (Form 13) if actual tax is lower.
ITR Filing by NRIs
NRIs must file ITR if Indian income exceeds Rs. 4 lakh (basic exemption) or if they have capital gains or want to claim refund of excess TDS. Applicable forms: ITR-2 (no business income) or ITR-3 (business income). Foreign bank accounts and assets must be disclosed in Schedule FA.
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