Income Tax for NRIs in India 2026 — Residential Status, DTAA, TDS, ITR Filing
Non-Resident Indians (NRIs) have specific tax obligations in India that depend on their residential status, the source of income, and applicable Double Taxation Avoidance Agreements (DTAA). Here is the complete guide for FY 2025-26.
Determining Residential Status
Your tax liability in India depends on your residential status for the financial year:
Resident (R): Present in India for 182+ days in the financial year, OR present for 60+ days in the financial year AND 365+ days in the preceding 4 years.
Non-Resident (NR): Does not meet the above conditions.
Resident but Not Ordinarily Resident (RNOR): Has been NR in 9 out of 10 preceding years, OR has been in India for 729 days or less in the preceding 7 years.
Special rule for Indian citizens working abroad: If an Indian citizen leaves India for employment abroad, the 60-day rule does not apply — only the 182-day rule applies.
What Income Is Taxable for NRIs?
| Income Type | Taxable in India? |
|---|---|
| Salary earned in India | Yes |
| Salary earned abroad (for work done abroad) | No |
| Rental income from Indian property | Yes |
| Interest on NRE account | No (exempt) |
| Interest on NRO account | Yes |
| Interest on FCNR account | No (exempt) |
| Capital gains from Indian property | Yes |
| Capital gains from Indian stocks/MFs | Yes |
| Dividend from Indian companies | Yes |
| Income from Indian business | Yes |
NRE vs NRO vs FCNR Accounts
| Account | Currency | Interest Taxability | Repatriation |
|---|---|---|---|
| NRE (Non-Resident External) | INR | Exempt | Freely repatriable |
| NRO (Non-Resident Ordinary) | INR | Taxable | Restricted (up to $1M/year) |
| FCNR (Foreign Currency Non-Resident) | Foreign currency | Exempt | Freely repatriable |
TDS on NRI Income
Higher TDS rates apply to NRI income:
| Income Type | TDS Rate |
|---|---|
| Rental income | 30% |
| Capital gains (LTCG) | 12.5% |
| Capital gains (STCG) | 20% |
| Interest on NRO account | 30% |
| Dividend | 20% |
| Professional fees | 30% |
DTAA benefit: If India has a DTAA with your country of residence, TDS may be deducted at the lower DTAA rate. Submit Form 10F and a Tax Residency Certificate (TRC) from your country to claim the lower rate.
Double Taxation Avoidance Agreement (DTAA)
India has DTAAs with 90+ countries. Key provisions:
- Lower TDS rates: DTAA may specify lower TDS rates than domestic law
- Exemption: Some income may be exempt in India if taxed in the other country
- Tax credit: Tax paid in India can be credited against tax in your country of residence
How to claim DTAA benefit:
- Obtain a Tax Residency Certificate (TRC) from your country of residence
- Fill Form 10F (self-declaration)
- Submit to the payer (bank, company) before TDS is deducted
- The payer deducts TDS at the DTAA rate
Capital Gains for NRIs
Property sale:
- LTCG (held > 2 years): 12.5% (without indexation from FY 2024-25)
- STCG (held ≤ 2 years): Slab rate (30% for NRIs)
- TDS: 20% on LTCG, 30% on STCG (buyer must deduct)
Stock and mutual fund sale:
- LTCG from listed equity (held > 12 months): 12.5% above ₹1.25L
- STCG from listed equity (held ≤ 12 months): 20%
- TDS: Deducted by broker/AMC
Section 54 and 54EC for NRIs
NRIs can claim capital gains exemptions:
- Section 54: Reinvest LTCG from property in another residential property in India
- Section 54EC: Invest LTCG in NHAI/REC bonds (up to ₹50L)
- Section 54F: Invest LTCG from any asset in residential property
ITR Filing for NRIs
When to file:
- If total income from Indian sources exceeds ₹2.5L (old regime) or ₹4L (new regime)
- If you want to claim a refund of excess TDS
- If you have capital gains (even if below exemption limit)
Which ITR form:
- ITR-2: For NRIs with salary, capital gains, rental income
- ITR-3: For NRIs with business income in India
Filing deadline: July 31 (same as residents)
E-verification: NRIs can e-verify using Aadhaar OTP (if Aadhaar is linked to Indian mobile), net banking, or by sending physical ITR-V to CPC Bengaluru.
FEMA Compliance for NRIs
NRIs must comply with FEMA (Foreign Exchange Management Act):
- Maintain NRE/NRO/FCNR accounts for Indian income
- Repatriation of funds from NRO account: Up to $1M per year (with CA certificate)
- Property purchase: NRIs can buy residential and commercial property in India (not agricultural land)
Frequently Asked Questions
Is an NRI required to file ITR in India?
Yes, if total income from Indian sources exceeds the basic exemption limit (₹2.5L old regime, ₹4L new regime). Even if income is below the limit, filing is recommended to claim TDS refunds.
Can an NRI claim Section 80C deductions?
Yes, in the old regime. NRIs can claim Section 80C deductions (PPF, ELSS, life insurance, home loan principal) up to ₹1.5L.
Is NRI income from foreign sources taxable in India?
No. NRIs are taxed only on income earned or received in India. Foreign income is not taxable in India for NRIs.
Can an NRI invest in PPF?
Existing PPF accounts can be continued by NRIs until maturity. New PPF accounts cannot be opened by NRIs.
NRI with income from India? I handle NRI ITR filing, TDS refund claims, DTAA benefit applications, and capital gains reporting. WhatsApp for a consultation.
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