Income Tax

NRI Income Tax in India: Residential Status, Taxable Income & TDS

By CA Aman Singhal12 July 20267 min read

Moving abroad doesn’t end your relationship with Indian tax law — it changes it. An NRI is taxed only on India-sourced income, but getting the residential status, TDS and treaty relief right takes more care than most people expect.

Are you a resident or non-resident?

Under Section 6, you’re a tax resident of India if you’re present here for 182 days or more in a financial year. Stay under that and you’re a non-resident (NRI) for tax purposes. Two special cases tighten this:

Indian citizens/PIOs visiting India whose India-sourced income exceeds ₹15 lakh face a shorter 120-day threshold instead of 182.
Indian citizens leaving India for employment abroad get the full 182-day threshold in their year of departure.

RNOR status: returning to India after years abroad doesn’t make you a full resident overnight. You may qualify as “Resident but Not Ordinarily Resident” for a transition period, during which your foreign income stays untaxed in India — worth checking before you move back.

What income is actually taxable for an NRI

Salary earned for services rendered in India
Rental income from a house property located in India
Capital gains on Indian shares, mutual funds or property
Interest on NRO (Non-Resident Ordinary) accounts
Business income from an Indian branch or permanent establishment

Interest on NRE and FCNR accounts is fully tax-exempt in India — a common point of confusion, since NRO interest is fully taxable while NRE interest is not.

Why TDS on NRI income runs higher

NRO account interest: TDS at a flat 30% plus cess, by default
Sale of property by an NRI: the buyer must deduct TDS under Section 195, computed on the capital gain — this trips up many buyers who assume normal 1% TDS applies

Form 13: an NRI can apply for a lower or nil TDS deduction certificate from the tax department when the default TDS clearly overshoots their actual tax liability — common before a property sale.

DTAA — avoiding tax twice on the same income

If income is taxed both in India and your country of residence, a Double Taxation Avoidance Agreement (DTAA) lets you claim a credit or a reduced rate. You’ll typically need a Tax Residency Certificate (TRC) from your resident country plus Form 10F filed in India to claim it.

Filing your ITR as an NRI

NRIs generally file ITR-2 (or ITR-3 with business income) by the same 31 July deadline as residents. Get the residential status field right — it changes which income you must even report, not just how it’s taxed.

Selling property in India as an NRI? Estimate the TDS the buyer must deduct with our TDS Calculator, or let a CA handle the Form 13 application and DTAA paperwork for you.

Try the TDS CalculatorFree, CA-verified, runs in your browser.

This article is for general information based on provisions for FY 2025-26 and is not individual tax advice. Rules change and exceptions apply — please confirm with a qualified Chartered Accountant before acting.