NRI Tax Guide India 2026–27
Updated as per Income Tax Act 2025 (effective 1 Apr 2026). Residency rules, India-taxable income, new Sec 393(2) TDS codes for non-residents, DTAA benefits, Form 128 lower TDS, ITR filing, FEMA & repatriation — complete guide for NRIs and returning Indians.
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Determining Your Residential Status
Your tax liability in India depends entirely on your residential status for the financial year (1 April – 31 March). Three statuses exist under the Income Tax Act 2025 — rules remain unchanged from ITA 1961.
| Status | Condition | India-sourced Income | Foreign Income |
|---|---|---|---|
| Resident & Ordinary Resident (ROR) | In India ≥182 days in FY, OR ≥60 days in FY + ≥365 days in last 4 FYs | Taxable | Taxable (worldwide) |
| Resident but Not Ordinarily Resident (RNOR) | NRI for 9 of last 10 FYs, OR in India <729 days in last 7 FYs | Taxable | Only if India-derived |
| Non-Resident Indian (NRI) | In India <182 days in FY (or <60 days for Indian citizen abroad) | Taxable | Not taxable in India |
💡 Special Rule for Indian Citizens Going Abroad for Employment
If you are an Indian citizen leaving India for employment (or as a crew member), you become NRI only if you are in India for less than 182 days (the 60-day rule does not apply to you). This is a common area of confusion that can lead to filing errors.
What Income is Taxable in India for NRIs?
As an NRI, only income that accrues or arises in India, or is received in India, is taxable here.
| Income Type | Taxable for NRI? | Notes |
|---|---|---|
| Rental income from Indian property | Yes | TDS @ 30% deducted by tenant; can claim deductions |
| Capital gains on Indian shares/MF/property | Yes | STCG 20%, LTCG 12.5% (equity, exemption up to ₹1.25L); LTCG 12.5% on property (no indexation); surcharge may apply. NRIs cannot set off LTCG against basic exemption limit. |
| Interest on NRE account | Exempt | Fully exempt for NRIs |
| Interest on NRO account | Yes | TDS @ 30% + applicable surcharge & cess |
| Interest on FCNR deposits | Exempt | Exempt during NRI status |
| Salary for work performed in India | Yes | Even if paid abroad — source is India |
| Salary paid by Indian company for work done abroad | Partially | Taxable if received in India; DTAA may reduce/eliminate |
| Dividends from Indian companies | Yes | Taxable at slab rates; TDS @ 20% deducted |
| Foreign salary / pension for work outside India | Exempt | Accrues outside India |
TDS Rates Applicable to NRIs
Under ITA 2025, NRI TDS provisions are governed by Section 393(2) (codes 1039–1057), replacing old Section 195. Rates are deducted at source — claim refund by filing ITR. Apply for lower TDS via Form 128 (replaced old Form 13) under Sec 395(1).
| Income Type | TDS Rate | ITA 2025 Sec | DTAA Reduce? |
|---|---|---|---|
| NRO account interest | 30% + surcharge + 4% cess | 393(2) | Yes |
| Rental income from Indian property | 30% + surcharge + 4% cess | 393(2) | Yes |
| LTCG on equity (listed) — above ₹1.25L exemption | 12.5% | 393(2) | Yes |
| STCG on equity (listed) | 20% | 393(2) | Yes |
| LTCG on property (held >24 months) | 12.5% (no indexation) | 393(2) | Yes |
| STCG on property (held ≤24 months) | 30% + surcharge + cess | 393(2) | Yes |
| Dividends from Indian companies | 20% | 393(2) | Yes |
| Professional fees / royalty / FTS | 10% – 40% | 393(2) | Yes |
How NRIs File Income Tax Returns in India
NRIs who have taxable income in India must file ITR-2. The due date is 31 July (or 31 October if audit required).
• Old Sec 195 (NRI TDS) → Sec 393(2) with codes 1039–1057 • Lower TDS application: Form 128 (was Form 13, Sec 395(1)) • TDS certificate to NRI: Form 131 (was Form 16A) • DTAA governed by Sec 159(8) • LTCG equity exemption ₹1.25 lakh • Property LTCG holding period now 24 months (was 2 years — same)
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