NRI Taxation · AY 2026-27

Tax on NRI Income —
India-Source Only

Q: What income is taxable for an NRI in India?

An NRI is taxed only on income that accrues, arises or is received in India: rent from Indian property, salary for services rendered in India, interest on NRO accounts, capital gains on Indian assets (shares, mutual funds, property) and dividends from Indian companies. Income earned abroad — foreign salary and overseas bank interest — is not taxable in India for a non-resident, and NRE and FCNR account interest is fully exempt.

Q: Who qualifies as an NRI for income tax?

For a financial year you are a non-resident if you are in India for fewer than 182 days. A secondary test applies to visitors: if you are in India for fewer than 60 days in the current year and fewer than 365 days across the four preceding years, you are also non-resident. Income-tax residency is determined separately from FEMA residency, and a returning NRI may first pass through RNOR status. Verify the exact tests at incometax.gov.in.

Q: Is foreign income of an NRI taxable in India?

No. A non-resident is taxed only on India-source income. Salary earned abroad, interest on overseas accounts and other foreign income are outside the Indian tax net. This is the key difference from a resident, who is taxed on worldwide income. A Resident but Not Ordinarily Resident (RNOR) also gets transitional relief on most foreign income.

Q: Is rental income from Indian property taxable for an NRI?

Yes. Rent from property located in India is taxable under the head income from house property. You get the 30% standard deduction under Section 24(a) and can claim home-loan interest under Section 24(b). The tenant must deduct TDS under Section 195 (typically 30% for an NRI landlord), which you reconcile when you file your ITR.

Q: What is the TDS rate on NRI income?

TDS on payments to NRIs is governed by Section 195 and is usually higher than for residents. NRO interest and rent attract 30%, listed-equity STCG (111A) 20% and LTCG (112A) 12.5% over Rs 1.25 lakh, LTCG on property 12.5%, and dividends 20% — all before surcharge and 4% cess. NRE and FCNR interest carry no TDS. A DTAA rate or a Section 197 certificate can reduce the deduction.

Q: What is the TDS when an NRI sells property in India?

The buyer must deduct TDS under Section 195 on the full sale consideration. For long-term gains (property held over 24 months) the rate is 12.5% plus surcharge and cess; for short-term gains it is at the applicable slab rate (commonly 30%). Because TDS is on the whole sale value and not just the gain, it usually over-deducts — so apply for a lower or nil deduction certificate under Section 197 before the sale, or claim the refund by filing an ITR.

Q: How can an NRI reduce or avoid excess TDS?

Two routes: (1) claim a DTAA rate by giving the payer a valid Tax Residency Certificate (TRC) plus Form 10F and your PAN, if the treaty rate is lower than the domestic rate; or (2) obtain a lower or nil deduction certificate under Section 197 from the Income Tax Department, especially for property sales. NRIs cannot use Form 15G/15H, which are only for residents.

Q: How are NRE and NRO accounts taxed differently?

NRE (Non-Resident External) account interest is fully exempt from Indian income tax and freely repatriable. NRO (Non-Resident Ordinary) account interest is taxable at 30% plus surcharge and cess, with TDS deducted at source; NRO holds India-source income like rent and dividends, and repatriation is capped at USD 1 million per financial year after tax. FCNR (B) deposits, held in foreign currency, are also exempt while you are a non-resident.

Q: Is NRE fixed deposit interest tax-free?

Yes, while you are a non-resident. Interest on NRE deposits is exempt under Section 10(4)(ii) and no TDS is deducted. The exemption is linked to your non-resident status — if you return to India and become a resident, NRE interest can become taxable, so many NRIs convert NRE accounts to resident accounts on return.

Q: What is DTAA and how does an NRI claim it?

A Double Taxation Avoidance Agreement is a treaty between India and another country that prevents the same income being taxed twice. India has DTAAs with 90+ countries. To claim relief, get a TRC from your country of residence, file Form 10F on the e-filing portal, and give both plus your PAN to the payer so a lower treaty rate applies. Foreign tax credit for tax paid in India is claimed with Form 67. Treaty rates apply only when lower than domestic rates.

Which income an NRI is taxed on in India, the higher TDS rates under Section 195, how NRE, NRO and FCNR accounts differ, DTAA relief, and the ITR rules for FY 2025-26.

Updated for FY 2025-26 CA Reviewed TDS & DTAA Guide

Get NRI ITR Help See TDS table

30%TDS on NRO / rent

12.5%LTCG 112A over Rs 1.25L

ExemptNRE & FCNR interest

90+DTAA treaty countries

Quick Answer

An NRI is taxed in India only on income that accrues, arises or is received in India — rent from Indian property, capital gains on Indian assets, interest on NRO accounts, and salary for services rendered in India. Foreign income is not taxable, and NRE and FCNR account interest is fully exempt. TDS is deducted under Section 195 at higher rates (often 30%), which you reconcile by filing an ITR; DTAA relief can reduce the rate where a treaty applies.

NRO interest / rent 30% TDS

LTCG 112A 12.5%

NRE / FCNR interest Exempt

Foreign income Not taxed

Residential status decides everything

You are a Non-Resident for a year if you are in India for under 182 days (with a secondary 60-day / 365-days-in-4-years test for visitors). A returning NRI may qualify as Resident but Not Ordinarily Resident (RNOR) for a transitional period, during which foreign income stays outside the Indian tax net. Income-tax residency is separate from FEMA residency. See our RNOR status guide.

Scope of tax

What NRI Income Is Taxable in India?

Only India-source income is taxed. The table below shows the common heads and whether they are taxable for a non-resident.

Income	Taxable in India?	Head / Note
Rent from property in India	Yes	House property; 30% std deduction u/s 24(a)
Capital gains on Indian shares / MF / property	Yes	Capital gains; see rates below
Interest on NRO account / deposits	Yes	Taxed at 30% + surcharge + cess
Salary for services rendered in India	Yes	Deemed to accrue in India
Interest on NRE account	No	Exempt u/s 10(4)(ii)
Interest on FCNR (B) account	No	Exempt while non-resident u/s 10(15)
Foreign salary / overseas bank interest	No	Foreign-source — outside Indian tax

Position for a Non-Resident. RNOR and Resident status change the treatment of foreign income. Verify specifics at incometax.gov.in.

Section 195

TDS Rates for NRIs — Higher Than Residents

Payments to a non-resident are subject to TDS under Section 195 (and Section 194-IA / 195 on property), generally at higher rates than for residents. The payer withholds before remitting; you claim any excess back by filing an ITR.

Income	TDS — NRI	TDS — Resident	Note
NRO / bank / FD interest	30%	10%	Plus surcharge & 4% cess; DTAA may reduce
Rent from Indian property	30%	10%	Section 195 (NRI) vs 194-I (resident)
STCG on listed equity / equity MF (111A)	20%	20%	On/after 23 Jul 2024
LTCG on listed equity / equity MF (112A)	12.5%	12.5%	Over Rs 1.25L/yr; no indexation
LTCG on immovable property	12.5%	12.5%	Buyer deducts u/s 195; no indexation
STCG on property (held < 24 months)	30%	—	Taxed at applicable slab / rate
Dividends from Indian companies	20%	10%	DTAA rate often lower
NRE / FCNR interest	Nil	—	Exempt — no TDS

Rates before surcharge (10% above Rs 50L, 15% above Rs 1cr, 25% above Rs 2cr, 37% above Rs 5cr — 25%/37% do not apply to 111A/112A gains) and 4% cess. Confirm current rates at incometax.gov.in.

On property sale, TDS is on the sale value — not the gain

When an NRI sells property, the buyer must deduct TDS under Section 195 on the full sale consideration, not just the gain — which usually over-deducts. To avoid a large refund lock-up, apply for a lower / nil deduction certificate under Section 197 before the sale so tax is withheld only on the actual gain.

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Account choice

NRE vs NRO vs FCNR — Tax & Repatriation

The account you route money through decides your tax exposure. NRE and FCNR interest is exempt and freely repatriable; NRO holds India-source income and its interest is fully taxable.

Feature	NRE	NRO	FCNR (B)
Interest taxable in India	Exempt	Taxable 30%	Exempt
Currency held	Indian Rupees	Indian Rupees	Foreign currency
Repatriation	Freely repatriable	Up to USD 1M/yr (post-tax)	Freely repatriable
Source of funds	Foreign earnings	Indian + foreign income	Foreign earnings
TDS	No	Yes — 30%+	No
Best for	Parking foreign salary	Indian rent / dividends	Avoiding currency risk

NRE/FCNR exemption applies while you are a non-resident; interest may become taxable if you become resident. Verify at incometax.gov.in.

Nil

NRE / FCNR — exempt

Interest fully exempt from Indian tax
No TDS deducted
Freely repatriable, principal + interest
Funds must originate from foreign earnings

30%

NRO — taxable

Interest taxed at 30% + surcharge + cess
TDS withheld at source
Holds Indian rent, dividends, pension
Repatriation capped at USD 1M/year post-tax

Treaty relief

DTAA — Cut Double Tax with a Treaty

India has Double Taxation Avoidance Agreements with 90+ countries. If you are resident in a treaty country, DTAA can lower the TDS on interest, dividends and royalties, and lets you claim credit for tax paid in India against your home-country tax. See our DTAA relief guide.

Get a TRCTax Residency Certificate from your country

→

File Form 10FOnline self-declaration on the e-filing portal

→

Share PANGive PAN & TRC to the payer / bank

→

Lower TDSTreaty rate applied if below domestic rate

→

Claim creditForm 67 for foreign tax credit where due

NRIs cannot use Form 15G/15H

Forms 15G/15H (nil-TDS declarations) are for residents only. To reduce TDS as an NRI you must either use a DTAA rate (with a valid TRC + Form 10F) or obtain a Section 197 lower-deduction certificate. DTAA rates apply only when they are lower than the domestic rate.

Compliance

ITR Filing for NRIs

An NRI should file an ITR in India when total India-source income exceeds the basic exemption limit, even if TDS was already deducted — and it is the only way to claim a refund of excess TDS.

Scenario	ITR Form	Due date
Salary / house-property / other income (no CG, no foreign assets)	ITR-2	31 Jul
Capital gains on shares / property	ITR-2	31 Jul
Business or professional income in India	ITR-3	31 Jul / 31 Oct*
NRI with foreign assets / foreign income (RNOR)	ITR-2 / ITR-3	31 Jul

*31 Oct if accounts are subject to tax audit. NRIs generally cannot use ITR-1 (Sahaj). Confirm the current-year forms and due dates at incometax.gov.in.

The Section 87A rebate is not available to NRIs

The Section 87A rebate (which makes income up to Rs 12 lakh tax-free under the new regime for residents) is not available to non-residents. An NRI is taxed on the whole India-source income at the applicable slab / special rates, with the standard deduction and treaty relief being the main levers.

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Government sourcesNRI taxation, TDS & forms: incometax.gov.in · Section 195 (TDS on payments to non-residents), Income-tax Act · NRE exemption s.10(4)(ii); FCNR exemption s.10(15) · Capital gains (23 Jul 2024): 111A (20%), 112A (12.5% over Rs 1.25L), property 12.5% no indexation · DTAA relief u/s 90 — TRC + Form 10F + Form 67 (foreign tax credit)

Tax on NRI Income — Frequently Asked Questions

What is taxable

What income is taxable for an NRI in India?

An NRI is taxed only on income that accrues, arises or is received in India: rent from Indian property, salary for services rendered in India, interest on NRO accounts, capital gains on Indian assets (shares, mutual funds, property) and dividends from Indian companies. Income earned abroad — foreign salary and overseas bank interest — is not taxable in India for a non-resident, and NRE and FCNR account interest is fully exempt.

Who qualifies as an NRI for income tax?

For a financial year you are a non-resident if you are in India for fewer than 182 days. A secondary test applies to visitors: if you are in India for fewer than 60 days in the current year and fewer than 365 days across the four preceding years, you are also non-resident. Income-tax residency is determined separately from FEMA residency, and a returning NRI may first pass through RNOR status. Verify the exact tests at incometax.gov.in.

Is foreign income of an NRI taxable in India?

No. A non-resident is taxed only on India-source income. Salary earned abroad, interest on overseas accounts and other foreign income are outside the Indian tax net. This is the key difference from a resident, who is taxed on worldwide income. A Resident but Not Ordinarily Resident (RNOR) also gets transitional relief on most foreign income.

Is rental income from Indian property taxable for an NRI?

Yes. Rent from property located in India is taxable under the head income from house property. You get the 30% standard deduction under Section 24(a) and can claim home-loan interest under Section 24(b). The tenant must deduct TDS under Section 195 (typically 30% for an NRI landlord), which you reconcile when you file your ITR.

TDS

What is the TDS rate on NRI income?

TDS on payments to NRIs is governed by Section 195 and is usually higher than for residents. NRO interest and rent attract 30%, listed-equity STCG (111A) 20% and LTCG (112A) 12.5% over Rs 1.25 lakh, LTCG on property 12.5%, and dividends 20% — all before surcharge and 4% cess. NRE and FCNR interest carry no TDS. A DTAA rate or a Section 197 certificate can reduce the deduction.

What is the TDS when an NRI sells property in India?

The buyer must deduct TDS under Section 195 on the full sale consideration. For long-term gains (property held over 24 months) the rate is 12.5% plus surcharge and cess; for short-term gains it is at the applicable slab rate (commonly 30%). Because TDS is on the whole sale value and not just the gain, it usually over-deducts — so apply for a lower or nil deduction certificate under Section 197 before the sale, or claim the refund by filing an ITR.

How can an NRI reduce or avoid excess TDS?

Two routes: (1) claim a DTAA rate by giving the payer a valid Tax Residency Certificate (TRC) plus Form 10F and your PAN, if the treaty rate is lower than the domestic rate; or (2) obtain a lower or nil deduction certificate under Section 197 from the Income Tax Department, especially for property sales. NRIs cannot use Form 15G/15H, which are only for residents.

Accounts

How are NRE and NRO accounts taxed differently?

NRE (Non-Resident External) account interest is fully exempt from Indian income tax and freely repatriable. NRO (Non-Resident Ordinary) account interest is taxable at 30% plus surcharge and cess, with TDS deducted at source; NRO holds India-source income like rent and dividends, and repatriation is capped at USD 1 million per financial year after tax. FCNR (B) deposits, held in foreign currency, are also exempt while you are a non-resident.

Is NRE fixed deposit interest tax-free?

Yes, while you are a non-resident. Interest on NRE deposits is exempt under Section 10(4)(ii) and no TDS is deducted. The exemption is linked to your non-resident status — if you return to India and become a resident, NRE interest can become taxable, so many NRIs convert NRE accounts to resident accounts on return.

DTAA

What is DTAA and how does an NRI claim it?

A Double Taxation Avoidance Agreement is a treaty between India and another country that prevents the same income being taxed twice. India has DTAAs with 90+ countries. To claim relief, get a TRC from your country of residence, file Form 10F on the e-filing portal, and give both plus your PAN to the payer so a lower treaty rate applies. Foreign tax credit for tax paid in India is claimed with Form 67. Treaty rates apply only when lower than domestic rates.

What is Form 10F and is it mandatory for NRIs?

Form 10F is a self-declaration giving details not already in your TRC (status, nationality, tax identification number, address). It must now be filed electronically on the income-tax e-filing portal. To claim a DTAA benefit an NRI generally needs both a valid TRC and Form 10F; without them the payer will deduct TDS at the higher domestic rate.

ITR

Do NRIs need to file an ITR in India?

An NRI must file an ITR when total India-source income exceeds the basic exemption limit for the year, even if TDS has already been deducted. Filing is also the only way to claim a refund of excess TDS or DTAA relief. NRIs generally use ITR-2 (or ITR-3 with business income) and cannot use ITR-1 if they have foreign assets. The usual due date is 31 July, or 31 October where a tax audit applies.

Can an NRI claim the Section 87A rebate?

No. The Section 87A rebate — which makes taxable income up to Rs 12 lakh tax-free under the new regime for residents in FY 2025-26 — is available only to resident individuals. An NRI is taxed on the full India-source income at the applicable slab and special rates, without this rebate.

Can an NRI opt for the old or new tax regime?

Yes. Like residents, an NRI can choose between the default new regime (lower slabs, higher Rs 75,000 standard deduction, but almost no deductions) and the old regime (with Chapter VI-A deductions such as 80C, and home-loan interest under 24(b)). Because the 87A rebate does not apply to NRIs, the comparison usually turns on how much deduction you have — run both before filing.

How are capital gains of an NRI taxed after 23 July 2024?

Listed-equity short-term gains (Section 111A) are taxed at 20% and long-term gains (Section 112A) at 12.5% on gains above Rs 1.25 lakh a year, with no indexation. Long-term gains on other assets, including immovable property, are taxed at 12.5% without indexation (property acquired before 23 July 2024 has an optional 20%-with-indexation route for residents/HUFs). Exemptions under Sections 54, 54F and 54EC, and the Capital Gains Account Scheme, remain available.

How is an NRI taxed on crypto or F&O income in India?

Virtual digital assets (crypto) are taxed at a flat 30% under Section 115BBH with 1% TDS under Section 194S, no set-off of losses and only the cost of acquisition allowed as a deduction — the same rules that apply to residents. F&O is non-speculative business income taxed at slab rates, with audit thresholds under Section 44AB where turnover crosses the limits. These apply to the extent the income is India-source.

Done-for-you

Related TaxClue Services

NRI ITR FilingCA-managed NRI returns, TDS reconciliation and refund claims.Explore →NRI Income Tax GuideFull walkthrough of NRI residency, income heads and compliance.Explore →DTAA ReliefClaim treaty rates with TRC, Form 10F and foreign tax credit.Explore →RNOR Tax StatusTransitional relief on foreign income for returning NRIs.Explore →

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