NRI Income Tax in India (2026): Residential Status, What Is Taxable, DTAA Relief, TDS and the Return You Must File
- Residential status is decided every year by days in India — 182, or 60 with 365 in the prior four years, relaxed to 120 days for Indian citizens and PIOs with Indian income above ₹15 lakh — and it decides whether only Indian income or worldwide income is taxed.
- An NRI is taxed in India on income that arises here: rent, Indian salary, interest on NRO deposits, capital gains on Indian assets. NRE and FCNR interest is exempt while the person is non-resident under FEMA.
- DTAA relief needs a Tax Residency Certificate from the other country plus Form 10F filed online; without them the payer deducts TDS at the full domestic rate.
Around 35 million Indians live abroad, and most of them still have an Indian tax footprint — a rented flat, an NRO account, shares, a plot inherited from parents, or an employer that kept paying into an Indian account. Indian tax law treats them differently from residents in three ways: which income is taxed, the rate at which tax is withheld, and whether treaty relief is available. Getting the residential status wrong is the root of almost every NRI tax problem, so this guide starts there and then works through income, TDS, DTAA and filing.
Step 1 — residential status, decided each year
| Status | Test (for the financial year) | Scope of Indian tax |
|---|---|---|
| Resident (ordinarily resident) | 182 days or more in India; OR 60 days or more in the year and 365 days or more in the preceding 4 years — and ordinarily resident under the 2-of-10-years and 730-days tests | Worldwide income |
| Resident but not ordinarily resident (RNOR) | Resident by the above, but non-resident in 9 of the preceding 10 years, or in India 729 days or fewer in the preceding 7 years; also deemed residents and the 120–181-day category below | Indian income plus foreign income from a business controlled or profession set up in India |
| Non-resident (NRI) | Neither of the above | Only income received or accruing in India |
Two modifications apply to Indian citizens and persons of Indian origin visiting India: the 60-day limb is relaxed to 182 days in general, but to 120 days where their Indian-sourced income (other than foreign-sourced income) exceeds ₹15 lakh — and a person caught by the 120-day rule is RNOR, not ordinarily resident. Separately, an Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country is a deemed resident (RNOR). Count days from passport stamps; the day of arrival and departure both count.
Step 2 — what an NRI pays tax on in India
- Salary for services rendered in India, even if paid abroad; salary for work done abroad is not taxable merely because it is credited to an Indian account (subject to the deemed-residency rule).
- House property in India: rent less 30% standard deduction and interest; a self-occupied or vacant house is treated the same as for residents.
- Interest: NRO account and Indian deposits are taxable; NRE and FCNR(B) interest is exempt as long as the holder is non-resident under FEMA.
- Capital gains on Indian shares, mutual funds and property at the same rates as residents — equity LTCG 12.5% above ₹1.25 lakh, STCG 20%, property LTCG 12.5% without indexation — but the buyer must deduct TDS on the full sale price.
- Dividends from Indian companies at slab rates, with 20% TDS unless reduced by treaty.
- Not taxable: foreign salary, foreign interest, foreign capital gains — for a non-resident. The basic exemption limit and slabs are the same as for residents; the 87A rebate is not available to non-residents.
Step 3 — TDS rates NRIs actually face
| Payment to an NRI | Section | TDS rate (plus surcharge and cess) | Note |
|---|---|---|---|
| Rent | 195 | 30% | Tenant must obtain a TAN and file 27Q; the NRI can apply for a lower-deduction certificate under 197 |
| NRO interest | 195 | 30% | Reduced to 10–15% under most treaties with TRC and Form 10F |
| Sale of property — long-term | 195 | 12.5% on the full consideration unless a 197 certificate limits it to the gain | Buyer deducts and files 27Q; NRI needs a 197 certificate to avoid over-deduction |
| Sale of property — short-term | 195 | 30% on consideration | Same |
| Dividends | 195 | 20% | Treaty rate 10–15% with TRC and Form 10F |
| Equity LTCG / STCG through a broker | 195 | 12.5% / 20% on the gain | Deducted by the broker or fund on redemption |
Step 4 — DTAA relief and how to claim it
India has tax treaties with more than 90 countries. Relief takes two forms: a lower withholding rate on interest, dividends and royalties, and a credit in the country of residence for tax paid in India (or exemption, depending on the treaty). To claim treaty benefits from an Indian payer you need a Tax Residency Certificate from your country of residence, Form 10F filed electronically on the Indian portal (which now requires a PAN), and a no-permanent-establishment declaration where relevant. Without these, the payer must deduct at the domestic rate and you claim the excess as a refund by filing a return.
Step 5 — filing the return
- An NRI must file if Indian income before deductions exceeds the basic exemption limit, or to claim a refund of TDS, or if there were capital gains on which TDS was deducted at a higher rate.
- The form is ITR-2 (ITR-3 if there is Indian business income); ITR-1 is not available to non-residents.
- Deductions under 80C, 80D and 80G are available in the old regime; 80TTA on savings interest applies, 80TTB does not.
- Refunds are credited only to an Indian bank account (NRO is fine) that is pre-validated.
- Returns can be e-verified with net banking of an Indian bank or by sending the signed ITR-V; Aadhaar OTP works only if Aadhaar is linked to a currently active Indian mobile number.
NRI returns are expert-assisted on the ITR filing (expert-assisted) track — ITR-2 with capital gains, DTAA relief and 197 certificate applications are outside the self-file wizard's scope by design.
Common mistakes
- Counting days wrongly — forgetting that arrival and departure days both count, or ignoring the 120-day rule above ₹15 lakh.
- Keeping a resident savings account after leaving India. FEMA requires conversion to NRO; interest is also mis-reported.
- Claiming NRE interest exemption after becoming resident under FEMA (for example, after returning to India).
- Letting a buyer deduct TDS on the full property price without applying for a 197 certificate first — the refund can take a year.
- Not filing Form 10F and losing treaty rates on dividends and interest.
- Filing ITR-1 as a non-resident; the return is defective.
This is general information on Indian tax rules for non-residents as of FY 2025-26; treaty provisions differ by country and should be checked against the specific agreement and your residence-country rules.
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Open ITR filing (expert-assisted) →Frequently asked questions
How many days can an NRI stay in India without becoming resident?
Up to 181 days in the financial year in the general case. For an Indian citizen or person of Indian origin visiting India whose Indian-sourced income exceeds ₹15 lakh, staying 120 days or more (with 365 days or more in the preceding four years) makes them resident but not ordinarily resident. Arrival and departure days both count.
Is NRE account interest taxable in India?
No, as long as the account holder is a non-resident under FEMA. NRO account interest is fully taxable with 30% TDS, which treaty relief can reduce. Once you return to India and become resident under FEMA, NRE interest becomes taxable even if you are RNOR for income-tax purposes.
How much TDS applies when an NRI sells property in India?
The buyer must deduct tax under section 195 on the entire sale consideration — 12.5% plus surcharge and cess for a long-term asset, 30% for short-term — unless the NRI obtains a lower-deduction certificate under section 197 from the assessing officer limiting TDS to the actual gain. Apply for the certificate before the sale agreement is signed.
What documents does an NRI need to claim DTAA benefits?
A Tax Residency Certificate issued by the tax authority of the country of residence, Form 10F filed electronically on the Indian income-tax portal (which requires a PAN), and, for business income, a declaration of no permanent establishment in India. Payers deduct at domestic rates without these.
General information for FY 2026-27, not professional advice for your specific case. Rules change — verify against the latest notification or ask a KyaTax expert.
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