NRI Taxation in India —
Status, India Income & DTAA
How your residential status is decided by the 182-day rule, which India-source income is taxable, how NRO, NRE and FCNR accounts are taxed, the Section 195 TDS on property, and how to claim DTAA relief.
You are a Non-Resident Indian (NRI) for a year if you stay in India for fewer than 182 days (or fewer than 60 days when India-source income exceeds Rs 15 lakh, combined with 365 days across the prior 4 years). An NRI is taxed only on India-source income — foreign salary and foreign earnings are not taxed in India. NRE and FCNR interest is exempt; NRO interest bears 30% TDS; the sale of Indian property triggers TDS under Section 195 on the full sale value. NRIs do not get the Section 87A rebate.
The residential-status rules of Section 6 of the Income-tax Act, 1961 have been re-enacted, largely unchanged, in the Income-tax Act, 2025 effective AY 2026-27; some references style the period as "Tax Year 2026-27". The 182-day / 60-day tests, the NRI, RNOR and resident categories, and DTAA relief all continue. This page uses the familiar FY 2025-26 (AY 2026-27) naming. Confirm your position against the latest wording on incometax.gov.in.
Resident vs NRI vs RNOR — Status & What Is Taxed
Your residential status for the year decides the scope of income taxed in India. NRIs and RNORs escape tax on foreign income; only a resident-and-ordinarily-resident (ROR) is taxed on worldwide income.
| Status | Broad test (stay in India) | India income | Foreign income |
|---|---|---|---|
| Resident & Ordinarily Resident (ROR) | ≥182 days, and resident in 2 of prior 10 yrs, and ≥730 days in prior 7 yrs | Taxable | Taxable (worldwide) |
| Resident but Not Ordinarily Resident (RNOR) | Resident, but NRI in 9 of prior 10 yrs, or ≤729 days in prior 7 yrs | Taxable | Mostly not taxable* |
| Non-Resident Indian (NRI) | <182 days (or <60 days if India income > Rs 15L) | Taxable | Not taxable |
* RNOR: foreign income is not taxed unless it is from a business controlled or profession set up in India. A "deemed resident" rule can treat an Indian citizen with no tax liability abroad as resident regardless of days of stay.
The Section 87A rebate (income up to Rs 12 lakh tax-free under the new regime) and the higher basic-exemption limits for senior citizens are available to residents only. An NRI is taxed from the first rupee of India-source income under the applicable slab, so filing an ITR to reclaim excess TDS is often worthwhile even on modest income.
India-Source Income Taxable for an NRI
An NRI is taxed on income that accrues, arises or is received in India. The new tax regime is the default (basic exemption Rs 4 lakh); the old regime with deductions remains optional. Common India-source income and its TDS:
| Income type | Taxable? | TDS | Notes |
|---|---|---|---|
| Salary for services rendered in India | Yes | Slab | Employer deducts TDS on salary |
| Rent from Indian property | Yes | u/s 195 | Tenant deducts TDS; 30% standard deduction u/s 24(a) on annual value |
| Capital gain on listed equity / equity MF | Yes | — | LTCG 12.5% over Rs 1.25L (112A); STCG 20% (111A) |
| Capital gain on immovable property | Yes | u/s 195 | LTCG 12.5%, no indexation; buyer deducts TDS on full sale value |
| Interest on NRO account | Yes | 30% | + surcharge & cess; DTAA can reduce the rate |
| Dividend from Indian company | Yes | 20% | u/s 195; DTAA often 10–15% with TRC + Form 10F |
| Interest on NRE / FCNR account | Exempt | Nil | Exempt while NRI status is maintained |
| Foreign salary / foreign business income | No | Nil | Earned and received abroad — outside Indian tax for an NRI |
Rates are for FY 2025-26 (AY 2026-27). Capital-gains rates follow the regime effective 23 July 2024; the 20%-with-indexation option on old property is a resident-only choice and is not available to NRIs.
Selling Indian property or unsure what TDS applies to your income?
Talk to an NRI Tax Expert →NRO vs NRE vs FCNR — Tax & Repatriation
The account you route money through changes both the tax and how freely you can repatriate. In short: NRE and FCNR interest is tax-free; NRO interest is taxed at 30% TDS.
| Account | Holds | Interest tax | Repatriation |
|---|---|---|---|
| NRO (Non-Resident Ordinary) | India income — rent, dividends, pension | 30% TDS · taxable | Up to USD 1M / year, after tax |
| NRE (Non-Resident External) | Foreign earnings converted to INR | Exempt | Freely repatriable |
| FCNR (Foreign Currency NR) | Foreign earnings in foreign currency | Exempt | Freely repatriable, no FX risk |
NRE/FCNR interest exemption applies only while NRI status is maintained. On return to India as ROR, the interest becomes taxable.
When you become a resident again, NRE/FCNR interest stops being exempt and NRE accounts must be redesignated (typically to a resident or RFC account). Continuing to claim exemption after your status changes is a common error flagged during assessment.
DTAA — Avoiding Tax in Two Countries
India has DTAAs with 90+ countries (USA, UK, UAE, Canada, Australia, Singapore, Germany and more). Relief is given either by exemption in one country or by a tax credit for tax paid in the other (Section 90). It usually shows up as a lower TDS rate at source.
| Income | Standard TDS | With DTAA | How to claim |
|---|---|---|---|
| NRO interest | 30% | 10–15% (many treaties) | TRC + Form 10F to the bank |
| Dividends | 20% | 10–15% (most treaties) | TRC + Form 10F to the company before payment |
| Royalty / technical fees | 20% | 10–15% | TRC + Form 10F to the payer |
| Capital gain on property | 12.5% LTCG | Often taxable only in India | Claim while filing the Indian ITR |
DTAA rates vary by country. A beneficial-ownership declaration may also be required by the deductor.
How to claim DTAA relief
A lower DTAA rate can only be applied at source if the TRC and Form 10F reach the deductor before payment — TDS cannot be reduced retroactively. If the standard rate was already deducted, you recover the excess only by filing your Indian ITR (ITR-2) and claiming a refund.
When Must an NRI File an Indian ITR?
- India-source income exceeds the basic exemption (Rs 4 lakh, new regime)
- Capital gains arise on Indian assets — even if TDS was fully deducted
- Excess TDS is to be refunded (very common for NRIs)
- You want to carry forward a capital loss
- DTAA relief / foreign-tax credit is to be claimed
- ITR-2 for investment income & capital gains (ITR-1 is not available to NRIs)
Want your NRI return, DTAA relief and TDS refund handled end to end?
Get NRI ITR Help →NRI Taxation — Frequently Asked Questions
Related TaxClue Services
Next in this income-tax cluster
NRI Taxes, DTAA & TDS Refunds — Handled
Our CA-led team files your NRI return, applies DTAA relief with TRC and Form 10F, manages Section 195 TDS on property and recovers excess TDS as a refund — 100% online, wherever you live.