Tax on NRI Income from India — Rates, TDS & Rules FY 2025-26
Updated: 3 June 2026 | Income-tax Act 2025 | FY 2025-26
NRIs face higher TDS rates than residents. NRO savings/FD interest and rent from Indian property attract 30% TDS plus surcharge and cess — effective ~31.2%. DTAA can reduce this if applicable.
Who is an NRI for Income Tax Purposes?
Under the Income-tax Act 2025, an individual is a Non-Resident Indian (NRI) for a financial year if they stay in India for fewer than 182 days during the year. An additional test applies for those who visit India: if they stayed fewer than 60 days in the current year AND fewer than 365 days cumulatively in the 4 preceding years, they are also NRIs.
Note: The residential status determination under the Income Tax Act may differ from FEMA classification. Both matter — Income Tax residency affects which income is taxable; FEMA residency determines which accounts you may hold.
TDS Rates for NRI vs Resident Indian
TDS (Tax Deducted at Source) for NRIs is governed by Section 195 and is typically higher than for residents. The payer must deduct TDS at these rates before remitting funds to the NRI.
| Income Type | TDS — NRI | TDS — Resident | Notes |
|---|---|---|---|
| NRO / FD Interest | 30% | 10% | Plus 4% cess; DTAA can reduce |
| Rent from Indian property | 30% | 10% | Section 194-I vs Section 195 |
| STCG on equity / equity MF | 20% | 20% | As per Finance Act 2024 |
| LTCG on equity / equity MF | 12.5% | 12.5% | Above ₹1.25L; no indexation |
| LTCG on property (sale proceeds) | 12.5% | 12.5% | Buyer deducts on entire sale value |
| STCG on property | 30% | 30% | Held < 24 months |
| Dividends from Indian companies | 20% | 10% | DTAA rates available |
| NRE account interest | 0% (Exempt) | — | Fully exempt — Section 10(4) |
| FCNR account interest | 0% (Exempt) | — | Fully exempt — Section 10(15) |
All TDS rates exclude surcharge and 4% health & education cess. Effective rates are higher. Surcharge applies at 10% for income 50L–1Cr, 15% for 1Cr–2Cr, 25% for 2Cr–5Cr, 37% above 5Cr.
NRE vs NRO vs FCNR — Tax Comparison
Choosing the right account type determines your tax exposure on Indian savings. Here is a side-by-side comparison:
| Feature | NRE Account | NRO Account | FCNR Account |
|---|---|---|---|
| Interest taxability (India) | Fully Exempt | Taxable at 30% | Fully Exempt |
| Currency held | Indian Rupees (INR) | Indian Rupees (INR) | Foreign currency |
| Repatriation | Freely repatriable | Up to USD 1M/year (post-tax) | Freely repatriable |
| Source of funds | Foreign earnings only | Indian + foreign income | Foreign earnings only |
| TDS applicable | No | Yes — 30%+ | No |
| Best for | Parking foreign salary | Receiving Indian rent, dividends | Avoiding currency risk |
DTAA — Reducing Tax via Double Taxation Avoidance Agreement
India has DTAA treaties with 90+ countries (USA, UK, UAE, Singapore, Canada, Australia, Germany, etc.). An NRI resident in a DTAA country can apply for reduced TDS rates on income like dividends, interest, and royalties. To claim DTAA benefit:
1. Obtain a Tax Residency Certificate (TRC) from your country of residence. 2. Submit Form 10F (self-declaration) to the payer. 3. Provide your PAN. Note: NRIs cannot use Form 15G/15H (available only to residents). DTAA rates apply only if they are lower than domestic rates.
ITR Filing for NRIs
An NRI must file an ITR in India if total Indian income exceeds ₹2.5 lakh in the financial year, even if TDS has already been deducted. Key filing rules:
| Scenario | ITR Form | Due Date |
|---|---|---|
| Salary/pension only (no foreign assets) | ITR-1 (Sahaj) | 31 July |
| Capital gains from shares / property | ITR-2 | 31 July |
| Business / profession income in India | ITR-3 | 31 July / 31 Oct* |
| NRI with foreign assets or foreign income | ITR-2 | 31 July |
*31 October applies if accounts are subject to tax audit. NRIs cannot claim the Section 87A rebate of ₹60,000 available to resident taxpayers under the new regime.
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