_1751708048.png){kind=small}
_1751707492.png){kind=small}
_1751707439.png){kind=small}
It is well known that the key foundation of the Indian economy is the taxes collected by the Indian government from its citizens. Whether you are an Indian resident or a non-Indian resident (NRI), taxation is a vital aspect of personal finance. In India, the income tax regulations applied to non-resident Indians are according to the Income Tax Act 1961 for NRIs, which are different from those of resident Indians. Want to know more about income tax for NRI in India? Then, you are at the correct destination. Here in this guide, we will discuss everything related to income tax implications for NRIs in India. But before we discuss NRI taxation, let's first know how to determine residential status in India. So, let's start reading.
For income tax purposes in India, you will be considered an Indian resident if you fulfill any of the following conditions:
Note: If you are an Indian citizen who works abroad or a crew member of an Indian ship, then in your case, only the first condition, i.e., the 180-day rule, applies. You will be considered an Indian citizen if you have resided in India for 182 days or more in the current accounting year. Additionally, for Persons of Indian Origin (PIOs), the same rule applies to those who have visited the country within the last year.
However, if the income of an Indian citizen or PIO exceeds INR 15 lakhs from sources other than foreign income, the 60-day requirement will be combined with a 120-day requirement.
Furthermore, if you do not fulfill any of the above conditions, then you are considered a Non-Resident Indian (NRI) in India.
Any person will be classified as RNOR in an accounting year if he/she fulfills any of the following conditions:
Note: The Finance Act 2020 has revised the provision related to residency in India to include Indian citizens/PIOs who come to India and shall be considered RNs if they fulfill the conditions mentioned above. Before this provision, the people were considered NRIs. Due to the amendment, the residential status of an individual classified as an RNOR results in the loss of DTAA benefits, several visa exemptions, an increased scope of taxable income, and more. Moreover, as per the mentioned amendment, a person staying in India for more than 182 days will be classified as an Indian resident, irrespective of their income level in the previous year.
The concept of "Deemed residency" was introduced by the Finance Act 2020. Accordingly, Indian citizens whose income exceeds INR 15 lakhs from Indian sources shall be deemed Indian residents if they are not liable for tax payments in any other country. Effective from the accounting year 2020-21, the deemed residents shall be identified as RNOR. This amendment was introduced to tax the income of Indian citizens who do not pay taxes in any country.
According to the above-stated income tax rule, an NRI's income tax liability depends on their residential status in India for the preceding year. If your status is found to be 'resident,' you have to pay tax on your global income in India. In case your status is "NRI," only the income accrued or earned in India is taxable. The country follows the "source rule," i.e., all the income that arises or accrues through or from a source in India is taxable in the country. Hence, identifying the income sources is of utmost importance.
Yes, every person whose income exceeds the exemption limit is required to pay tax in India.
Nia lives and works in Australia. When she checked her Form 26AS online, she found that she had to fill out the TDS entry of INR 20000. This 30% TDS is on the interest she earned from her NRO account in India. Other than this, she has no other income source in India. So, here's the question: Does she need to pay taxes in India and file an ITR?
Whether Nia has to pay tax in India depends on her residential status. So, first, let's find that.
Nia is an Indian citizen and works in Australia. If she stayed in India for 182 days or more, then she is an Indian resident and eligible to pay tax. On July 3, 2024, she left India and returned on March 15, 2025. Hence, in the accounting year that starts on April 1, 2024, and ends on March 31, 2025, she stayed in the country for less than 182 days. So, as per residential status, Nia is an NRI.
According to her residential status in India, only the income accrued or earned in India will be taxable. Also, interest earned on an NRO account is taxable. However, according to the new tax regime, an amount of INR 3 Lakh is exempt from tax. Nia's total income in India is INR 70,000, which is less than the exempt amount. Therefore, she does not need to pay tax on it and can claim a TDS refund for the interest she has earned. For this, she needs to file an ITR for that accounting year.
However, for NRIs, the last date to file an ITR in India is July 31 unless the Indian government extends the date. For the financial year 2024-2025 (Accounting Year 2025-26), the due date for filing the ITR for non-audit cases has been extended to September 15, 2025.
If the tax liability of an NRI exceeds INR 10000 in an accounting year, then they should pay advance tax in India. If NRIs do not pay the advance tax, interest under Sections 234B and 234C will apply to them.
In India, as mentioned above, NRIs are only liable to pay tax on the income they receive, earn, or are deemed to have accrued. However, if their total income is up to the maximum exempted amount of INR 2.5/4.0 Lakh, they must file an ITR. Generally, the last date to file the ITR is July 31 of the relevant accounting year. Moreover, for the following income, an NRI has to pay tax in India.
Under two circumstances in India, your NRI salary income is taxable. These are as follows:
Note: The Income of Ambassadors and Diplomats is exempt from income tax.
Any income from a property, whether it is residential or commercial, rented or lying vacant, situated in India, is taxable for an NRI. The calculation of house property income is calculated in the same manner as an Indian resident. To pay taxes and declare rental income, NRIs must file their ITR in India. Additionally, they can claim a standard deduction of up to 30%, etc., on property taxes. Apart from this, under Section 80C, they are also allowed a deduction for principal repayment and can also claim registration and stamp duty charges paid on buying a property in India. It is essential to note that if an NRI directly receives payment outside India or in their NRE account, they are still liable to pay tax on that income in India, as the source of the revenue is in India.
For instance, Dia owns a property in Mumbai, but since she lives in New York, she rents it out. She received the rent payments directly in her bank account in NY. However, she still needs to pay tax on it, as the source of her income is in India.
A tenant paying rent to an NRI needs to deduct 30% TDS on it, regardless of whether the payment is made to their Indian or NRI account.
For example, Shreya is a tenant, and her landlord is an NRI. She pays INR 30000 monthly to her landlord. While making the payment, she should deduct 30% TDS or INR 9,000 from the rent. Additionally, she needs to complete Form 15CA and submit it online through the Income Tax Department's website. The person needs to fill out Form 15CA if they are making a payment to an NRI. In certain situations, before filling out Form 15CA, a certificate from the CA in Form 15CB is required. In this, the CA provided the payment details, TDS rate, and deducted TDS as per the Income Tax Act, Section 195, any Double Tax Avoidance Agreement (DTAA) applicable, the remittance purpose, and other relevant details.
You do not need to submit Form 15CB when:
In all other circumstances, if there is a payment outside India, the person asking for the payment should take a certificate from a CA in Form 15CB. After obtaining the certificate, the person can submit Form 15CA online to the government.
Interest income earned from savings accounts and fixed deposits held in bank accounts in India is subject to taxation. In this regard, interest earned on FCNR and NRE accounts is tax-free, while interest earned on NRO accounts is fully taxable.
Capital gains that NRIs earn from the sale of assets situated in India are taxable. It includes gains from mutual funds, real estate, shares, and more. Additionally, capital gains from investments in securities and shares are also subject to taxation. For both short-term and long-term capital gains, different tax rates are present. For specified assets, NRIs can benefit from indexation on long-term capital gains.
If you sell a house property, a capital asset, then
However, as per Section 54, by investing in house property or as per Section 54EC investing in capital gain bonds, you can claim exemption on capital gains.
Income from Business and Profession
Any income earned by an NRI from a business or profession set up or controlled in India is taxable for the NRI.
Under the special provision associated with investment income and earned income, NRIs are required to pay a 20% tax on certain assets. If it is the only income they have in India during the accounting year, and TDS has also been deducted on this, then in this scenario, they do not need to file an ITR in India.
These are the following investment that qualifies for special treatment in India:
On these investments, under Section 80, no tax deduction is permitted.
Under section 80, if the long-term gains are earned from the transfer or sale of foreign assets, no tax deductions and the benefit of indexation are permitted to NRIs. However, under Section 115F, NRIs can request tax exemption on the profit when it is reinvested in India in different forms, such as:
If the price of the purchased assets is less than the total consideration, then the long-term capital gains are exempt from tax in proportion to the difference. However, if you sold or transferred the purchased asset within three years, the exempted profit on it will be added to your income for that year.
Furthermore, these benefits will apply to NRIs even if they become Indian resident until the purchased asset is converted to money or the assessing officer does not apply any special provision upon the submission of the asset.
Here, NRIs have the option to choose whether they want to be subject to this provision or opt out of it. If they exit this special provision, they will be required to pay tax on the long-term capital gains by the regular provisions of the IT Act.
Like Indian residents, NRIs are also eligible to claim several tax exemptions and deductions on their earned income in India. Want to know what they are? Read the next section and get your answers.
Under Section 80C, on the gross total income in an accounting year, up to INR 1.5 Lakh tax deduction is allowed to an NRI in India.
These are the following deductions NRIs are eligible for under Section 80C:
Besides the deductions mentioned above under Section 80C, NRIs are also eligible, like Indian residents, to claim several more tax deductions as per the Income Tax laws. Moving on, let's learn more about them.
As the title indicates, like Indian residents, NRIs can also claim a deduction on house property. It includes a residential property bought in India or income earned from a house in India. Apart from this, home loan interest and paid property tax are also claimed under tax deduction.
On the paid health insurance premiums, NRIs are eligible to claim tax deductions. To provide you with an idea of this, the table below shows the three possible circumstances and their tax benefits:
| Health Insurance Policy Taken For | Allowed Deduction | Total Tax Benefit |
|---|---|---|
|
|
INR 50000 |
|
|
INR 75000 |
|
|
INR 100000 |
Under section 80E, NRIs have the right to claim tax deductions on interest that they paid on an education loan. The loan may be taken for higher studies by an NRI, their spouse, children, or for an individual for whom they are a legal guardian. Unlike other sections, this section has no limit on the amount that can be deducted. Additionally, it is only available for eight years or till the NRI pays interest, whichever is earlier. However, the deduction is only allowed on interest on the principal repayment of the loan, so consider this when applying for a tax deduction.
According to Section 80 G of the Income Tax Act, if NRIs make eligible donations, they can claim a deduction for the contributions they give to social causes.
Do you know that, like Indian residents, NRIs can also claim tax deductions on interest they earn on their savings accounts? Yes, with Section 80TTA, they can claim a maximum deduction of INR 10,000 per year on the interest earned on their savings account in India. However, except for senior citizens who are 60 years of age or older, all individuals are eligible for this deduction.
Apart from the investments mentioned above, there are certain investments under Section 80C for which NRIs are not eligible to claim a deduction. Want to know what they are? Read the next section and get your answers:
Do you know that, for long-term capital gains, NRIs are required to pay a tax of around 20% plus a 20% TDS? To assist them in this regard, there are two sections under the IT Act 1961, namely Section 54 and Section 54F, which enable NRIs to save taxes on their long-term capital gains. Under the first section, NRIs can claim tax exemption in India by investing the capital gains they earn from selling a residential property to buy or construct another residential property. Section 54F provides NRIs with the opportunity to claim exemption on their long-term capital gain available on the sale of any property other than a residential house.
The above-mentioned tax exemptions are also applicable under Section 54EC when capital gains earned from the first sale of a property are reinvested in certain bonds. Such as:
Note: These are the following bonds under u/s 54EC of the IT Act that are eligible for tax exemption:
Moving on, let's know the tax implications in various cases.
For four months, on a temporary company project, Karan worked in Europe and earned in Euros, but his salary was credited to his Indian bank account. After completing the project, he returned to India. Now that he has returned, how should he file his ITR? The tax implications of Karan in India will depend on his residential status in India. Since he stayed outside the country for only four months and lived here for more than 182 days during the accounting year, he is considered an Indian resident and is required to file an ITR this year. The tax implications also include the salary he earned in a foreign country, as it was credited to his Indian bank account.
For a new assignment, Amit was sent to the UK by his company. During his UK project, he credited his salary to an NRE account in India. Additionally, while living outside the country, he maintained his Indian FDs and savings accounts. Recently, his Indian employer sent him Form 16. Now, the question is whether he needs to file an ITR this year in India or not.
Whether you are an NRI or an Indian resident, if your income is more than INR 250000, then you need to pay tax in India. However, NRIs only need to pay tax on the income they earn or receive in India. Considering this, in the case of Amit, he is only liable to pay tax on the income that accrued from his savings and FD account in India.
| Income Earned by Amit in India | |
|---|---|
| Salary from Indian Employer | Rs 300000 |
| Savings account interest | Rs 4500 |
| Interest earned on FDs | Rs 25000 |
| Total Income | Rs 329500 |
| Deductions | |
| Section 80C- LIC Premium | Rs 20000 |
| Section 80TTA exemption | Rs 4500 |
| Taxable income | Rs 305000 |
| Tax slab at 5% | Rs 2750 |
| Cess at 4% | Rs 110 |
| TDS deducted by the bank | Rs 2500 |
| TDS deducted by the employer | Rs 3000 |
| Tax Refund | Rs 2640 |
For three years, Aakash has been living in the UK, and he gets his salary in euros. He has invested his earned money in FDs and a savings account in India. I also bought an apartment there and rented it out. From that, he gets a monthly payment of Rs 35000. Apart from these investments, he also purchased a car for his parents and transfers Rs 10,000 to them every month so that they can manage their expenses in India. Furthermore, he also transferred Rs 20,000 to his father's bank account in India to pay the insurance premium he had purchased for his parents. What is the taxable income of Aakash in India?
| Rental Income | Rs 420000 (35000x12) |
| Less: Under Section 24, 30% standard deduction | Rs 126000 |
| Income from house property | Rs 294000 |
| Income from savings accounts and FDs in India | Rs 30000 |
| Total Income | Rs 324000 |
| Deduction under Section 80D | Rs 20000 |
| Income taxable in India | Rs 3,04,000 |
Here, the car gifted by Aakash to his parents and the money he transferred to them for their well-being in India are not part of the tax. Discussing the insurance he purchased for his parents, he can claim a deduction of Rs 20,000 under Section 80D. For this, he needs to file an ITR, as his total income exceeds Rs 250,000 in India.
When NRIs return to India, it is assumed they are on a resident non-resident ordinary resident (RNOR) status:
After their returns, the RNORs can enjoy the tax exemption benefits in India for two years. Considering this, similar to the case of NRIs, deposits held in foreign currency that are tax-exempt for two years will also be available to the returned RNORs. Upon completion of two years, the RNORs will be treated as Indian residents.
If you are a resident of India, you are required to pay tax on your global income in India, regardless of whether you received or earned it outside India. In case your earned income is taxable in another country as well, then you can take advantage of the Double Tax Avoidance Agreement (DTAA). Confused? Let's understand this better with an example.
In 2011, after spending more than six years in the UK, Sneha returned to India. The European company she had worked for over the years retained her as a consultant in India and paid her salary in euros. Every month, they credit her salary to her UK bank account, and she pays tax on that in the UK. Now, Sneha is currently living in India, earning a wage in the UK, and paying taxes on that income in the UK. Here, the question is, does she also need to pay on her UK-earned income in India?
Now, Sneha is an Indian resident, and as per the Income Tax law, an Indian resident is required to pay tax on their global income. So, all the income she earned in and outside India, including her UK salary, is taxable in India. To pay the tax, her income will first be converted into Indian currency and added to her total earned income. If it exceeds the exempt tax limit, she will then need to pay tax.
However, as she already pays tax on her income in the UK, under DTAA, she can claim tax benefits. Based on the DTAA provision between India and the UK, Sneha will be saved from paying tax on the same thing twice. So, if you are an Indian resident and earned any income from overseas, to avoid double taxation, do not forget to disclose your ITR.
Foreign nationals in India pay taxes according to their residential status in the country. If a foreign national becomes an Indian resident, they are liable to pay taxes on all income earned in India and abroad. In this, incomes from their own country are also included, whether it is been received or earned outside India. However, if they pay tax on the same income in two countries, they can take advantage of the DTAA and avoid paying double taxation. Additionally, RNORs are also liable to pay taxes in India on all the income they earn or receive in the country.
By claiming tax benefits under DTAA, NRIs can avoid paying double taxation. There are two methods under which they can claim DTAA benefits. These are the exemption and tax credit methods. In the exemption method, NRIs need to pay tax in one country. Whereas in the tax credit method, earned income is taxed in both nations; in this case, an NRI can claim tax relief in the country where they are currently residing.
In the 2021 Budget, Financial Management (FM) introduced a new Section 89A, which outlines the rules to alleviate the difficulties that NRIs face due to double taxation on income accrued in their foreign retirement accounts. The section is applicable when the money from these accounts is not liable to pay tax on an accrual basis but is taxed at the time of redemption or withdrawal of the funds from that account.
Income Tax Slabs for the old tax regime for the accounting year 2023-2024:
| Income Tax Slab | Income Tax Rate |
|---|---|
| Maximum INR 250000 | - |
| INR 250001 to INR 500000 | 5% above INR 250000 |
| INR 500001 to INR 1000000 | 12500 + 20% above INR 500000 |
| Above INR 1000000 | 112500 + 30% above INR 1000000 |
Income tax slabs for the new tax regime for the accounting year 2025-2026
| Income Tax Slab | Income Tax Rate |
|---|---|
| up to INR 400000 | - |
| INR 400000 to INR 800000 | 5% |
| INR 800000 to INR 1200000 | 10% |
| INR 1200000 to INR 1600000 | 15% |
| INR 1600000 to INR 2000000 | 20% |
| INR 2000000 to INR 2400000 | 25% |
| Above 2400000 | 30% |
Income tax slabs for the new tax regime for the accounting year 2024-2025
| Income Tax Slab | Income Tax Rate |
|---|---|
| Up to INR 300000 | - |
| INR 300000 to INR 700000 | 5% |
| INR 700001 to INR 1000000 | 10% |
| INR 1000001 to INR 1200000 | 15% |
| INR 1200000 to INR 1500000 | 20% |
| Above INR 1500000 | 30% |
Here are the following surcharge rates for NRIs in India:
Note: Under the new tax regime, a surcharge of up to 25% applies to the income.
Rebate under Section 87A is not available for NRIs. For this, only Indian residents are eligible. This clearly means NRIs cannot claim the benefits of the rebate.
This is your comprehensive guide to income tax for NRIs in India. I hope it provides you with all the information you were looking for. Furthermore, if you require additional guidance on NRI taxation, please don't hesitate to contact Savetax. We have experts with years of experience in international taxation who can resolve your query promptly.
Speak to our experts and get personalized solutions for your NRI tax needs
View PlanExperts answer questions related to NRI business and entity setup, as well as other related topics.
Yes, Non-Resident of Indians (NRIs) can start a business in India. Not just NRIs, the government of India has also permitted foreign nationals to invest or start a business in India. This is done to attract foreign direct investment (FDI) into the Indian economy. FDIs are necessary for the economic growth of India. In compliance with the Foreign Exchange Management Act, 1999, and FEMA regulations, NRIs can establish their businesses in India.
Yes, Overseas Citizen of India (OCI) can start a business in India as they have the same rights as NRIs have regarding business ownership and operations. However, there are certain exceptions related to certain types of property or agricultural land. In a nutshell, OCIs can participate in partnerships or own a business and register a company in India.
The best bussiness structure entirely depends on what are the goals of the business and what type of domain the Non-Resident of India (NRI) want to deal in. However if you are still not sure about it you can quickly connect with the experts and the legal team of Savetaxs and they will help you with the best structure suitable for your business after understanding the needs, and goals of the business.
Yes, two or more NRIs can jointly register a company in India; however, there are certain companies whose ownership legally requires having a resident of India as well. According to the company type, one must comply with the guidelines set by the Foreign Direct Investment (FDI) policy, as well as those established by the Reserve Bank of India (RBI).
Once the company is registered, there are specific compliance requirements that must be adhered to to operate a legal business in India.
Firstly, you need to have a Permanent Account Number, which is essential for filing returns and conducting financial transactions on behalf of other businesses.
You then need to have GST registered for the company.
If your business plan includes employees and requires salary payments, you must also register for TDS.
Opening of a business bank account, which will be dedicated to managing your company's finances and transactions.
Lastly, you need to adhere to the policies set by FDI, FEMA, and RBI to run a successful business in India.
Our team of CAs and legal experts has over three decades of experience in helping Non-Resident of India (NRI) or foreign nationals set up a business in India.
From a private limited company to a limited liability partnership (LLP), one person company (OPC), partnership form, Liaison, branch, subsidiary offices, and public limited company, we help NRIs set up a business or entity according to their preference.
We also assist NRIs with custom business planning, business accounting services, legal compliance, registrations, taxation services, and obtaining all the necessary permits and licenses.
In brief, we offer a comprehensive package for establishing a successful business or entity in India for NRIs or foreign nationals.
Yes, post-incorporation, Sabetax will help you obtain key tax registrations, such as GST, and more. Apart from this, our experts will also assist you with other necessary compliances, such as opening a business bank account and ensuring everything aligns with FDI, FEMA, and RBI guidelines.
Yes, Savetaxs can help you with FDI and RBI-related compliances for NRIs, and not just that, we also help NRIs with Double Taxation Avoidance Agreements.
We have a team of legal experts with over 30 years of experience in setting up entities and businesses for NRIs and foreign nationals. They have a keen eye on every step to ensure everything happens legally.
Our happy customer base shows our excellence, justifying why NRIs and foreign nationals trust us with their business and entity set-up registrations.
