NRI Taxation — Status, Income Tax, DTAA & NRO/NRE Guide (Tax Year 2026-27)

Updated: 3 June 2026 | Income-tax Act, 2025 | Section 6 (Residential Status)

An individual is a Non-Resident Indian (NRI) if they stay in India for fewer than 182 days in a Tax Year (or fewer than 60 days if India-sourced income exceeds ₹15 lakh). NRIs are taxed only on India-sourced income — foreign earnings are not taxable in India. The new tax regime is the default from Tax Year 2026-27; NRIs must opt out if they prefer the old regime.

182 Days

The key threshold for NRI status determination
Stay in India fewer than 182 days in a Tax Year = NRI status. Special rule: if income from outside India exceeds ₹15 lakh, the threshold drops to 60 days (combined with 365+ days in the preceding 4 Tax Years).

Terminology note: "Financial Year 2025-26" and "Assessment Year 2026-27" are legacy terms under the repealed Income Tax Act, 1961. Under the Income-tax Act, 2025 (effective 01-Apr-2026), the correct term is Tax Year 2026-27. Residential status rules are now under Section 6 of the Income-tax Act, 2025. DTAA provisions remain operative; section cross-references have been renumbered.

Resident vs NRI vs RNOR — Status & Tax Treatment

Residential status under Section 6 of the Income-tax Act, 2025 determines the scope of taxable income for each Tax Year.

Status	Conditions (Stay in India)	India-Sourced Income	Foreign Income
Resident & Ordinarily Resident (ROR)	≥ 182 days in the Tax Year, AND resident in 2 of preceding 10 TYs, AND ≥ 730 days in preceding 7 TYs	Taxable	Taxable (worldwide income)
Resident but Not Ordinarily Resident (RNOR)	Qualifies as resident BUT: NRI in 9 of preceding 10 TYs, OR in India ≤ 729 days in preceding 7 TYs	Taxable	Not taxable (except business/profession controlled from India)
Non-Resident Indian (NRI)	< 182 days in Tax Year (general rule). < 60 days if India-sourced income > ₹15 lakh	Taxable	Fully exempt from Indian tax

Note: "Deemed resident" rule (Section 6(1A), now re-enacted in Income-tax Act 2025) applies to Indian citizens with no tax liability in any country abroad — they are treated as resident in India irrespective of days of stay.

India-Sourced Income Taxable for NRIs

NRIs are taxed in India only on income that accrues or arises in India, or is received in India.

Income Type	Taxable for NRI?	TDS Rate	Notes
Salary for services rendered in India	Yes	Slab rate	Taxed as salary income; employer deducts TDS
Rental income from India property	Yes	30% + surcharge + cess	Tenant must deduct TDS under Section 195
Capital gains on India assets (equity, property)	Yes	LTCG 12.5% / STCG 20–30%	LTCG on equity: 12.5% above ₹1.25L; property LTCG: 12.5%
Interest on NRO account	Yes	30% TDS	TDS at 30% (+ surcharge + cess); DTAA may reduce rate
Dividends from India companies	Yes	20% TDS	TDS under Section 194 of Income-tax Act 2025; DTAA relief available
Interest on NRE / FCNR account	Exempt	Nil	Fully exempt from Indian tax as long as NRI status is maintained
Foreign salary / business income	Exempt	Nil	Income earned and received outside India is not taxable in India for NRIs

NRO vs NRE vs FCNR — Bank Account Tax Treatment

Account Type	Currency	Can Hold India Income?	Interest Tax Treatment	Repatriation
NRO (Non-Resident Ordinary)	INR	Yes (rent, dividends, pension)	30% TDS — taxable in India	Up to USD 1 million/year (after tax)
NRE (Non-Resident External)	INR (from foreign earnings)	No (only foreign earnings converted)	Fully exempt from Indian income tax	Freely repatriable
FCNR (Foreign Currency NR)	Foreign (USD, GBP, EUR, etc.)	No (only foreign earnings)	Fully exempt from Indian income tax	Freely repatriable (no conversion risk)

NRE and FCNR interest exemption applies only while the account holder maintains NRI status. Upon return to India as an ROR, the interest becomes taxable.

DTAA — Double Taxation Avoidance Agreement

India has DTAAs with 90+ countries including the USA, UK, UAE, Canada, Australia, Singapore, Germany, and the Netherlands. DTAA prevents the same income from being taxed twice — once in India and once in the country of residence.

How DTAA Relief Works for NRIs

Income Type	Without DTAA	With DTAA (e.g., India–USA)	How to Claim
NRO account interest	30% TDS	15% (India–USA DTAA)	Submit Form 10F + Tax Residency Certificate to bank
Dividends from India companies	20% TDS	15% (most DTAAs)	Submit TRC + Form 10F to company/deductor before payment
Capital gains on India property	LTCG 12.5%	Varies by DTAA; often taxable only in India	Claim while filing Indian ITR
Royalties / fees for technical services	20% TDS	10–15% under most DTAAs	Submit TRC + Form 10F to payer

Steps to Claim DTAA Benefit

Obtain a Tax Residency Certificate (TRC) from the tax authority of your country of residence (e.g., IRS Form 6166 for USA residents).
Fill Form 10F on the Indian income tax portal (incometax.gov.in) with your foreign address, PAN, and TRC details. This is mandatory since 2023.
Submit TRC + Form 10F to the Indian payer (bank, company, tenant) before the income is paid — so they deduct TDS at the DTAA rate instead of the standard rate.
File your Indian ITR (ITR-2 for NRIs with capital gains / investment income) and claim credit for TDS deducted and foreign taxes paid under the DTAA.
Claim TDS refund if excess TDS was deducted — the Income Tax portal processes refunds to NRO/NRE accounts or a bank account outside India.

Capital Gains on India Assets — NRI Tax Rates

Asset Type	Holding Period for LTCG	LTCG Rate	STCG Rate
Listed equity shares / equity MF	> 12 months	12.5% (above ₹1.25L)	20%
Immovable property (land/building)	> 24 months	12.5% (no indexation)	30% + surcharge + cess
Unlisted shares / foreign assets	> 24 months	12.5%	30%
Debt mutual funds	> 24 months	12.5%	Slab rate

For NRI sellers of immovable property: the buyer deducts TDS under Section 195 (not Section 194IA). See TDS on Property Purchase for details.

ITR Filing for NRIs — When Is It Required?

NRIs must file an Indian ITR if any of the following apply:

India-sourced income exceeds the basic exemption limit (₹4 lakh under the new regime for Tax Year 2026-27)
Capital gains arise on sale of India assets — even if TDS was fully deducted — to carry forward losses
Refund of excess TDS is to be claimed
The NRI holds signing authority for a foreign bank account or has assets outside India exceeding prescribed limits (Schedule FA / Schedule FSI)

NRIs file ITR-2 (investment income + capital gains) or ITR-3 (business income from India). ITR-1 is not available to NRIs.

Frequently Asked Questions

What is the NRI status criteria under Indian tax law?

An individual is a Non-Resident Indian (NRI) for a Tax Year if they stay in India for fewer than 182 days during that Tax Year. A special rule applies: if total income from sources outside India exceeds ₹15 lakh, the threshold is reduced to 60 days (in the Tax Year) combined with 365 days in the preceding 4 Tax Years. These rules are under Section 6 of the Income-tax Act, 2025. A third status — RNOR (Resident but Not Ordinarily Resident) — applies to those who qualify as resident but were NRI for 9 of the preceding 10 Tax Years or were in India for 729 days or fewer in the preceding 7 Tax Years.

Which bank accounts should an NRI use — NRE vs NRO vs FCNR?

NRE (Non-Resident External) accounts hold foreign earnings converted to INR. Interest is fully tax-exempt in India as long as the account holder holds NRI status. NRO (Non-Resident Ordinary) accounts hold India-sourced income (rent, dividends, pension). Interest on NRO accounts is taxed at 30% TDS under Section 194A of the Income-tax Act, 2025. FCNR (Foreign Currency Non-Resident) accounts hold foreign earnings in foreign currency (USD, GBP, EUR, etc.); interest is exempt from Indian tax for NRIs. Funds in NRE and FCNR accounts are freely repatriable; NRO repatriation is limited to USD 1 million per Tax Year subject to RBI guidelines.

What TDS applies when an NRI sells property in India?

When an NRI sells immovable property in India, the buyer must deduct TDS under Section 195 of the Income-tax Act, 2025 (not Section 194IA, which applies only to resident sellers). The applicable TDS rates are: Long-Term Capital Gains (property held > 24 months) — 12.5% plus applicable surcharge and 4% cess; Short-Term Capital Gains — 30% plus surcharge and cess. The buyer deducts TDS on the full sale consideration (not just the gain). An NRI can apply for a lower TDS certificate from the Income Tax Officer before the sale to avoid excess deduction.

Is ITR filing mandatory for NRIs?

An NRI must file an Income Tax Return (ITR) in India if their India-sourced income (before allowing DTAA relief or deductions) exceeds the basic exemption limit applicable to them. NRIs are not entitled to the enhanced exemption limits available to senior citizens under the old regime unless they are ordinarily resident. Under the new regime (default from Tax Year 2026-27), the basic exemption limit is ₹4 lakh. ITR filing is also required if the NRI has capital gains on India assets, even if TDS has been deducted at source, to claim excess TDS as refund or to carry forward capital losses.

What is the DTAA benefit for NRIs and how to claim it?

DTAA (Double Taxation Avoidance Agreement) prevents the same income from being taxed in both India and the country of residence. India has DTAAs with 90+ countries including the USA, UK, UAE, Canada, Australia, Singapore, and Germany. To claim DTAA relief, an NRI must obtain a Tax Residency Certificate (TRC) from their country of residence and submit Form 10F to the Indian income tax portal. The benefit typically takes the form of reduced TDS rates (e.g., interest TDS at 10–15% instead of 30% under the India-USA DTAA) or an exemption. DTAA relief is claimed when filing the Indian ITR or by presenting Form 10F to the deductor before TDS is deducted.

TDS on Property Purchase Income Tax Slabs 2026-27 Income Tax Return Filing PAN-Aadhaar Linking Capital Gains Calculator

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