NRIs have different tax obligations based on residential status, income type, and DTAA provisions. This guide covers everything from residential status determination to ITR filing for NRIs.
Who is an NRI for Tax Purposes?
Under Section 6 of the Income Tax Act, you are a Resident in India if you are in India for 182 days or more in a financial year, OR for 60 days or more in a year AND 365 days or more in the preceding 4 years. If you do not meet these criteria, you are a Non-Resident Indian (NRI). Note: Indian citizens who leave India for employment or business are subject to the 182-day rule only.
What Income is Taxable for NRIs in India?
NRIs are taxed ONLY on income received or accrued in India. This includes: salary for work done in India, income from property located in India, capital gains on Indian assets (shares, property, mutual funds), interest from NRO accounts, FDs in Indian banks, dividends from Indian companies, and business income from operations in India. Income earned outside India is NOT taxable in India for NRIs.
TDS Rates for NRIs (Higher Than Residents)
| Income Type | TDS Rate for NRI |
| NRO account interest | 30% + surcharge + cess |
| STCG on equity (Section 111A) | 20% + surcharge + cess |
| LTCG on equity | 12.5% + surcharge + cess |
| Rental income | 30% + surcharge + cess |
| Property sale (STCG) | 30% + surcharge + cess |
| Property sale (LTCG) | 12.5% + surcharge + cess |
NRE vs NRO vs FCNR Account — Tax Treatment
NRE (Non-Resident External) account: interest fully exempt from Indian tax. NRO (Non-Resident Ordinary) account: interest taxable in India at 30% TDS. FCNR (Foreign Currency Non-Resident) account: interest exempt from Indian tax. When you return to India permanently (become Resident), NRE and FCNR accounts continue to be tax-free for 2 years under RNOR (Resident but Not Ordinarily Resident) status.
Double Taxation Avoidance Agreement (DTAA)
India has DTAA treaties with 90+ countries. DTAA helps avoid paying tax twice — once in India and once in your country of residence. To claim DTAA benefit, submit Tax Residency Certificate (TRC) from your country to the Indian payer, and Form 10F. Common DTAA countries: USA (30% reduced to 15% on dividends), UK (standard India-UK DTAA rates), UAE (no income tax in UAE, claim DTAA to reduce TDS in India), Singapore, Canada, Australia.
Should NRIs File ITR in India?
ITR filing is mandatory for NRIs if: taxable Indian income exceeds ₹2.5 lakh, you want a refund of excess TDS deducted, you have assets in India, you have a directorship or signatory authority in an Indian company, or you want to carry forward capital losses. Even if tax liability is zero (due to DTAA or exemptions), filing is recommended to maintain a clean compliance record.
ITR Form for NRIs and Process
NRIs must use ITR-2 (if no business income) or ITR-3 (if business income). ITR-1 (Sahaj) is not available for NRIs. Steps: login to incometax.gov.in with PAN, check Form 26AS and AIS for TDS, gather income documents, compute DTAA benefits, file ITR-2/ITR-3 online, e-verify using Aadhaar OTP or Net Banking. Deadline: 31 July 2026.
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