If you are an Indian living abroad, understanding your tax obligations in India is not optional — it is essential. This NRI Tax Guide India covers everything you need to know: how your residential status is determined, which incomes are taxable, what TDS rates apply, how to claim treaty benefits, and how to file your ITR as an NRI.
Updated for FY 2025-26 (AY 2026-27) under the new tax regime introduced by the Finance Act 2025.
Table of Contents
- Who Qualifies as an NRI Under Indian Tax Law?
- What Income Is Taxable for NRIs in India?
- NRI Income Tax Rates for FY 2025-26
- TDS Rates Applicable to NRIs
- Double Tax Avoidance Agreement (DTAA)
- NRI Property Sale and TDS on Property
- NRO vs NRE Account Taxation
- ITR Filing for NRIs
- Frequently Asked Questions
Who Qualifies as an NRI Under Indian Tax Law?
Your tax liability in India depends entirely on your residential status under the Income Tax Act, 1961 — not on your passport or citizenship. The Act defines three categories: Resident and Ordinarily Resident (ROR), who are taxed on global income; Resident but Not Ordinarily Resident (RNOR), taxed only on India-sourced income; and Non-Resident Indian (NRI), taxed only on income earned or accrued in India.
You are classified as an NRI for a financial year if you were present in India for fewer than 182 days during that year, or fewer than 60 days in that year and fewer than 365 days in the preceding four years. Note: the 60-day limit is extended to 182 days for Indian citizens working abroad or serving on Indian ships.
What Income Is Taxable for NRIs in India?
As an NRI, you pay Indian tax only on income that is received, accrued, or deemed to accrue in India. This includes: rental income from property in India, capital gains from sale of Indian property or shares, interest on NRO accounts (NRE and FCNR interest is exempt), dividends from Indian companies, salary for services rendered in India, and business income from operations in India. Income earned abroad — such as your foreign salary — is not taxable in India.
NRI Income Tax Slab Rates — FY 2025-26 (AY 2026-27)
Under the New Tax Regime (default from FY 2023-24), the following slab rates apply to NRIs on regular income from India:
| Total Income (INR) | Tax Rate |
|---|---|
| Up to 3,00,000 | Nil |
| 3,00,001 to 7,00,000 | 5% |
| 7,00,001 to 10,00,000 | 10% |
| 10,00,001 to 12,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Surcharge applies at 10% (income 50L-1Cr), 15% (1Cr-2Cr), and 25% (above 2Cr). Health and Education Cess of 4% applies on tax plus surcharge. Special capital gain rates — such as 12.5% for LTCG on equity/property and 20% for STCG on equity — override these slab rates.
TDS Rates for NRIs — FY 2025-26
Tax Deducted at Source (TDS) is how most NRI income is taxed at source. Unlike residents, NRIs face higher TDS rates with no threshold exemptions. The payer (tenant, buyer, bank) deducts TDS before paying you.
| Nature of Income | Section | TDS Rate |
|---|---|---|
| Interest on NRO account | 195 | 30% + surcharge + 4% cess |
| Rental income from Indian property | 195 | 30% + surcharge + 4% cess |
| STCG on property (held under 24 months) | 195 | 30% + surcharge + 4% cess |
| LTCG on property (held over 24 months) | 195 | 12.5% + surcharge + 4% cess |
| LTCG on listed equity and mutual funds | 195 | 12.5% + surcharge + 4% cess |
| STCG on listed equity and mutual funds | 195 | 20% + surcharge + 4% cess |
| Dividends from Indian company | 195 | 20% + surcharge + 4% cess |
| Professional or technical fees | 195 | 10% + surcharge + 4% cess |
| Salary for services rendered in India | 192 | As per applicable slab |
Lower TDS Certificate (Form 13 / Section 197): If your actual tax liability is lower than the TDS rate, apply to your Assessing Officer before the transaction for a certificate permitting lower or nil deduction. This is critical for property sales.
Double Tax Avoidance Agreement (DTAA)
India has signed DTAAs with over 90 countries including the USA, UK, Canada, UAE, Australia, Singapore, and Germany. A DTAA allows you to pay tax at the lower of the Indian rate or the treaty rate on specific types of income. For example, UAE-resident NRIs can claim zero or reduced tax on interest from India under the India-UAE DTAA.
To claim DTAA benefits, you must provide a valid Tax Residency Certificate (TRC) from your country of residence and a completed Form 10F to the payer before the TDS is deducted. Without a TRC, the payer must deduct at the full domestic rate.
NRI Property Sale in India: TDS and Capital Gains
Selling Indian property as an NRI triggers significant TDS. The buyer must deduct TDS on the entire sale value — not just the profit — which creates a serious cash flow problem when the effective gain is small relative to the sale price.
- LTCG (property held over 24 months): TDS at 12.5% on the full sale amount (no indexation after July 2024 Budget).
- STCG (property held 24 months or less): TDS at 30% on the full sale amount.
- Lower TDS Certificate: Apply via Form 13 before the sale closes. On a Rs 1 crore sale with a Rs 5 lakh actual tax liability, this saves over Rs 10 lakhs in cash at closing.
- Capital gains exemptions: Reinvest gains in bonds under Section 54EC (up to Rs 50 lakh) or in a new residential property under Section 54 or 54F to claim exemption.
- Form 145 and Form 146: These are the new remittance forms (replacing Form 15CA/15CB) required by the buyer or bank when remitting proceeds of property sale abroad.
NRO vs NRE Account: Tax Treatment
| Feature | NRO Account | NRE Account |
|---|---|---|
| Holds India-sourced income | Yes (rent, dividends, etc.) | No — foreign remittances only |
| Interest taxability | Taxable at 30% TDS (Section 195) | Fully exempt from Indian tax |
| Repatriation | Up to USD 1 million per year (after tax) | Freely repatriable |
| Joint holding with resident Indian | Allowed | Not allowed |
ITR Filing for NRIs
An NRI must file an Indian Income Tax Return if their gross India-sourced income exceeds the basic exemption limit (Rs 3 lakh under new regime), or if they have capital gains from Indian assets, or if they want to claim a refund of excess TDS. The correct ITR form is ITR-2 (no business income) or ITR-3 (business income). The deadline for FY 2025-26 is July 31, 2026. NRIs do not need to disclose foreign assets in Schedule FA — that obligation is only for Resident Indians.
Frequently Asked Questions — NRI Tax Guide India
Do NRIs pay tax on their foreign salary in India?
No. Salary earned abroad for services rendered outside India is not taxable in India for an NRI. Only salary for services rendered in India, or received in India, is liable to Indian tax.
Is rental income from Indian property taxable for NRIs?
Yes. Rental income from property in India is taxable in India regardless of where you live. The tenant must deduct TDS at 30% (plus surcharge and cess) under Section 195. You report this in your Indian ITR and can claim deductions for municipal taxes paid and a 30% standard deduction on the net annual value.
What is Form 13 and how does it help NRIs on property sales?
Form 13 is an application to your Income Tax Assessing Officer requesting a Lower or Nil TDS Certificate under Section 197. When you sell Indian property, the buyer deducts TDS at 12.5% or 30% on the entire sale value by default. If your actual tax liability is less — because you are reinvesting under Section 54 or your gain is small — a Form 13 certificate lets the buyer deduct at a lower rate. This must be obtained before the sale closes.
What are Form 145 and Form 146?
Form 145 and Form 146 replaced the older Form 15CA and Form 15CB for NRI remittances from India. Form 145 is a declaration by the remitter (buyer or bank) about the nature of the remittance. Form 146 is a certificate issued by a Chartered Accountant confirming that taxes have been paid or TDS has been deducted correctly. These are required when remitting sale proceeds, rent, or other NRI income abroad.
Can NRIs claim DTAA benefits on property sale gains?
Generally, capital gains from Indian immovable property are taxable in India under most DTAAs — the treaties usually allocate taxing rights on immovable property to the country where the property is located (India). However, DTAA may still help reduce tax on interest, dividends, or certain other income. You must submit a valid TRC and Form 10F to claim any treaty benefit.
What documents does an NRI need for ITR filing in India?
You need: PAN card, Passport, Form 26AS and AIS from the income tax portal, NRO and NRE bank statements, sale deed and cost documents for property transactions, TRC and Form 10F if claiming DTAA benefits, Form 16 if salary was paid in India, and TDS certificates (Form 16A) for other income. A CA can help you compile these and file accurately.
Can an NRI from the USA invest in Indian mutual funds?
Most Indian mutual fund houses do not accept investments from US or Canada-based NRIs due to FATCA compliance obligations. A few fund houses do accept such investments but require additional documentation. NRIs from other countries can invest through the NRE or NRO route. Capital gains are taxable in India: LTCG above Rs 1.25 lakh at 12.5%, STCG at 20%.
Need personalised NRI tax advice? CA Kirti Goyal specialises exclusively in NRI taxation — from Lower TDS certificates and Form 145 and Form 146 for property sales, to ITR filing and DTAA claims. Book a consultation