NRI Taxation: Things you need to know
What is NRI Taxation?
NRI taxes refers to non-resident Indian taxes refers to the a significant role in the Indian economy through remittances, investments and business activities while they reside outside India. NRI often have financial tiles in the country such as property holdings, bank accounts, stock markets, investments or business.
The Indian government determines NRI Tax liability based on their residential status, income, and international tax treaties..
How NRI taxes work
1. Determining NRI residential status
The taxability of an individual in India depends on the residential status, which determined by the Income tax act.
Any individual is classified as an NRI in terms of Income Tax Act , if they satisfy any of the following :-
- They have spent less than 182 days in India during the financial year.
- They have spent less than 120 days in India during the financial year (for those with Indian income exceeding ₹15 lakh) and have spent 365 days or more in the last four years in India.
If a person stays beyond these thresholds they are treated as resident but not the ordinarily resident for the tax purpose.
2. Taxable Income For NRIs in India
Only the income earned or received in India is taxed from NRIs. Any income accrued outside India does not attract any tax under the Indian tax legislation.
The sources of taxable income for an NRI in India :
A. Salary Income
Any salary credited directly to an Indian bank account from an NRI is taxable in India. The salary received outside India for services rendered outside India is not taxable.
B. Income from House Property
Rental income earned from property in India is taxable, regardless of whether it is received in an NRI’s overseas account.
standard deduction of 30% applies on net rental income. NRIs can claim home loan interest deduction. Capital gains from property sales in India are taxable.
C. Interest Income
Income from bank account is fully taxable an Interest from NRE and FCNR accounts is exempt from the taxes. Interest from NRO accounts is fully taxable.
D. Business Income
Any income from business operations set up or controlled in India is taxable.
E. Income from lotteries, shows & gambling
Any winnings from lotteries, game shows, or gambling in India are taxed at a flat 30%
3. NRI Income Tax slab
NRIs face the same slab rate in the Indian residents, However some have higher TDS rates.
Income Tax Slabs for NRIs for the year 2024-25 is mention below :-
Income type | TDS Rate |
Rental Income | 30% |
Bank FD Interest(NRO accounts) | 30% |
Property sale (LTCG) | 20% |
Mutual fund LTCG(>1) | 10% |
STCG on shares | 15% |
4.Tax Benefits and Deductions for NRIs
NRIs are eligible for certain tax deductions under the Income Tax Act, helping them reduce their taxable income:-
- Eligible Deductions (Up to ₹1.5 lakh deduction):
- Life insurance premiums
- ELSS mutual funds
- Home loan principal repayment
- Tuition fees for children in India
- Section 80D: Health insurance premium deduction (₹25,000 for the self/family, ₹50,000 for senior parents
- Section 24(b): Home loan interest deduction (₹2 lakh on a self-occupied house).
5. NRI Tax Filing Requirements
- NRIs must file an Income Tax Return (ITR) in India if:
- Their total Indian income exceeds ₹2.5 lakh.
- They wish to claim a tax refund (e.g., excess TDS deducted).
6. Benefits for NRIs in Indian Taxation
There are various tax benefits that Non-Resident Indians (NRIs) get under Indian taxation laws:
Income received outside India is totally tax-exempt, and interest on NRE and FCNR accounts is tax-free. NRIs can also enjoy Double Taxation Avoidance Agreements (DTAA), which does not allow the same income to be taxed twice. They are also eligible for tax deductions under Section 80C and 80D on investments and insurance. Long-term capital gains from equity investments are taxed at a lower rate. These benefits help NRIs efficiently manage their finances while ensuring compliance with Indian tax regulations.
7. How NRIs Can Reduce Their Tax Liability
- NRIs can minimize tax payments through legal means such as:
Investment in tax-free and FCNR accounts, it also avails DTAA benefits to avoid double taxation. - They can claim deduction under the sections 80c and 80d, They also structure investments to minimize the capital gain taxes.
- NRI are only taxed on income earned and accrued or received in India.
A Non-Resident Indian(NRI) is an Indian Citizen who resides outside India for a specific time period due to work, business, education or any other reason. Classification on NRI is mainly determined by the Income Tax Act, 1961 and Foreign Exchange Management Act, 1999.
NRIs are taxed only on income earned in India, while foreign income is tax-free unless it is associated with India.
This includes:
- Salary for services performed in India
- Rental income from Indian property
- Capital gains on the sale of Indian assets
- Interest on Indian bank accounts (NRO interest is taxable, NRE interest is tax-free).
Foreign income is not taxable in India unless it arises from a business or profession controlled or established in India.
New Indian Rules for NRIs (2025)
1. NRIs with income ₹15 lakh+ in India who are exempted from foreign taxes can be designated as RNOR (Resident but Not Ordinarily Resident).
2. NRIs can seek advance tax rulings to settle disputes in advance.
3. More stringent regulations on foreign income and treaty benefits under Budget 2025.
4. RBI permits Indian exporters to maintain foreign currency accounts overseas to receive trade payments.
