income-tax-rules-for-nris-in-india

Income Tax Rules for NRIs Living and Earning in India

Simple guide to NRI Indian income tax rules: residency tests, taxable income, slab rates, TDS, DTAA, and easy ITR steps.

Written by : Knowledge Centre Team

2025-12-22

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11 minutes read

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If you are an NRI living abroad but earning income from India, you pay tax in India on income received in India or arising here, such as rent, interest, or capital gains on Indian assets. Your residential status under Section 6 is checked each year to determine how much of your income in India can be taxed, and whether global income is outside the scope for that year.​

In day‑to‑day terms, most NRI incomes from India face TDS, and many can get relief under a tax treaty if they share a Tax Residency Certificate (TRC) and file Form 10F online with the payer and later when filing their return.

Key Takeaways

  • Check the status first: Residents, NRIs, or NROs decide what India taxes for the year

  • Only Indian‑source income is taxed for NRIs; foreign income stays outside India’s tax net

  • New slab rates apply by default; compare regimes before filing to lower your bill

  • Keep TRC and Form 10F ready to use DTAA and cut TDS where eligible

  • File the right ITR form, match TDS, and e‑verify on time to avoid delays

How Does the Income Tax Act Define an NRI?

The following are the parameters used to decide whether you are a Resident, RNOR, or Non‑Resident (NRI) for a given financial year.

TopicRule / ConditionWhat it means
182‑day ruleSpend at least 182 days in India within the relevant tax yearYou are treated as a Resident; if you are below this, you may be Non‑Resident for that year
60 + 365 ruleStay 60 days in the year and 365 days across the previous 4 yearsYou are treated as a Resident (subject to special relaxations for certain Indian citizens/PIOs)
120‑day condition (exceptional cases)For certain Indian citizens/PIOs with Indian income ≥ ₹15 lakh, 120+ days in India may trigger residency/RNORYou may be classified as RNOR instead of a full Resident in such cases
RNOR status: conceptBecomes applicable when you turn Resident but don’t meet deeper past‑stay criteriaRNORs are taxed mainly on Indian income; global income is generally not taxed in India
RNOR: high‑income visitorsAn Indian income of ≥ ₹15 lakh and a stay of 120+ days in India can lead to RNORActs as a bridge status before full Resident rules apply to worldwide income

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Which Types of Income are Taxable for NRIs in India?

India taxes income received in India or arising from sources within the country; non-resident status does not exempt Indian-source income, although an agreement may cap rates or shift taxing rights. Foreign income received outside India is not taxed for non-residents, and RNOR has a limited scope compared to full residents.​

  • Salary and Professional Income: Salary for work done in India is taxable in India even if paid abroad; services performed outside India are generally not taxed for non‑residents.​ Fees for services performed in India are taxable, and TDS may be applicable under Section 195 at the prevailing rates.​
  • House Property Income: Rent from property in India is taxable, with municipal tax deduction and 30% standard deduction allowed; tenants may need to deduct TDS.​ Home‑loan interest on let‑out property can be claimed within limits, with set‑off rules to review at filing.​
  • Capital Gains on Indian Assets: Selling Indian shares, securities, or property generates taxable gains in India; the holding period determines whether the gain is short-term or long-term, with special tax rates.​ Buyers must deduct TDS on NRI property sales under Section 195, with treaty relief possible in some cases.​
  • Interest and Dividend Income: Interest on NRO accounts and most Indian securities is taxable with TDS; however, some specified bonds are subject to concessional rates.​ Dividends are taxable for the shareholder, with applicable TDS. Treaties may cap the rate on dividends and interest.​

Current NRI Income Tax Slabs and Rates in India

NRIs use the same slab rates as residents, but the default new regime applies unless you validly opt otherwise. Eligibility for some deductions is tighter for NRIs and varies by regime. For FY 2025-26 under the new regime, the slab table is as follows, with surcharge and 4% cess extra where applicable.

FY 2025-26 New Regime SlabRate
Up to ₹4,00,000NIL
₹4,00,001 to ₹8,00,0005%
₹8,00,001 to ₹12,00,00010%
₹12,00,001 to ₹16,00,00015%
₹16,00,001 to ₹20,00,00020%
₹20,00,001 to ₹24,00,00025%
Above ₹24,00,00030%

Notes: Check the e‑filing portal for AY 2026‑27 guidance and form‑specific rules before filing, especially if choosing between regimes​

Tax Benefits, Deductions, and Exemptions Available to NRIs

NRIs can claim certain deductions and exemptions, although some benefits are exclusive to residents; the choice between regimes affects eligibility and net tax. Always confirm whether an instrument is specifically permitted for non‑residents before investing for tax benefits.​

  • Section 80C Investments: Eligible options include life insurance premiums, ELSS, and principal repayment on a housing loan for property in India, subject to conditions and caps.​
  • Section 80D Health Insurance: Premiums for medical insurance for self/spouse/children, and parents are eligible within prescribed limits, with payment mode and documentation requirements.​
  • Section 80TTA/80TTB: NRIs may claim 80TTA (savings account interest up to ₹10,000) but not 80TTB senior citizen deposit benefits, which are reserved for residents, as per typical guidance.​
  • Section 24(b) Home Loan Interest: Interest on housing loan for a let‑out property is deductible, with limits for self‑occupied scenarios and set‑off restrictions to consider.​
  • Capital Gains Exemptions: Exemptions via reinvestment (e.g., Sections 54/54EC/54F) may be available on eligible long‑term gains from specific assets, subject to timelines and caps.​
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Did You Know?

India received a record USD 135.46 billion in NRI remittances in FY 2024-25, a 14% rise year-on-year, retaining its spot as the world’s top recipient.
 

Source: Newsonair

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TDS Applicability and Rules for NRI Taxpayers

Most Indian payers deduct TDS on NRI income, such as rent, property sale proceeds, interest, dividends, and fees, under Section 195 and related sections, using the rates in force or treaty rates if the necessary documents are in place. Keep your PAN updated and track Form 26AS so that the TDS credit matches your return and refunds, if any, are processed smoothly.​

  • Section 195 on Payments to Non‑Residents: Anyone paying sums chargeable to tax in India to a non‑resident must deduct TDS; lower or treaty rates can apply if you share TRC and Form 10F or obtain a certificate.​ Typical items include property sale consideration, professional fees, interest, dividends, royalty, and FTS; each has specific rates and treaty caps.​
  • Tenant and Buyer Obligations: Tenants paying rent to NRIs and buyers of NRI property must deduct and deposit TDS on time, issue certificates, and quote correct PAN details.​ Sharing TRC, Form 10F, and PAN with the payer helps apply treaty‑capped rates at source where eligible. 

Understanding DTAA: Avoiding Double Taxation on NRI Income

A DTAA splits taxing rights between India and your country of residence, often capping rates on dividends and interest or taxing salary where work is done, so the same income is not taxed twice at full rates. To utilise treaty benefits, obtain a TRC from your country and file Form 10F online. Most payers require these before applying for a lower TDS rate.

Documents Needed for DTAA Relief:

These documents are crucial for ensuring a smooth process when applying treaty rates at TDS and when claiming relief on your return.​

  • Tax Residency Certificate (TRC) with name, address, TIN, nationality, and the period of residency as required.

  • Form 10F submitted electronically on the Indian portal. It is used when TRC lacks any required detail and is commonly requested by payers.

  • PAN in India and any payer‑specific self‑declarations to apply treaty rates at TDS correctly

Steps to File/Claim DTAA Benefits:

Follow the steps below to ensure a seamless, accurate, and timely filing or claim process:

  1. Get the TRC for the correct period from your resident country’s tax authority before payments start.​

  2. Log in to the Indian e‑filing portal and submit Form 10F online. 

  3. Keep the acknowledgement and share it with the payer.​

  4. Give TRC, Form 10F, and PAN to your payer so they can deduct TDS at treaty rates.

  5. Then, file your ITR and claim relief or credit as needed after checking 26AS

Step‑by‑Step Guide to Filing ITR as an NRI

To file ITR as an NRI, follow the steps given below, and use the AY 2026-27 portal pages to see which form you should use and the timelines for salaried and non‑resident taxpayers.

  1. Determine your residential status: Count your days and decide whether you are an NRI, RNOR, or Resident for the year; this determines your tax scope.​

  2. Identify income heads and regime: List Indian salary, rent, interest, dividends, and gains; compare old vs new regime to see which gives a lower tax for you.​

  3. Gather documents: Collect Form 16/16A, rent receipts, loan interest certificates, broker contract notes, bank interest certificates, and download 26AS/TIS/AIS.​

  4. Secure DTAA papers: Get your TRC and submit Form 10F electronically; share both with payers and keep for filing.​

  5. Choose the correct ITR form: Use ITR‑2 for most cases without business income; use ITR‑3 if you have business/professional income in India.​

  6. Compute tax and surcharge: Apply the slab or special capital gains rates, then add surcharge and 4% cess as required.​

  7. Reconcile TDS and pay balance: Match your TDS with Form 26AS; pay any balance tax before submitting the return.​

  8. File and e-verify: File by the due date and e-verify via Aadhaar OTP, net-banking, or DSC to ensure the return is valid.

Final Thoughts

Keep it simple: confirm status, list Indian income, collect TDS proofs, and share TRC and Form 10F early so payers can deduct at the right rate and your return matches 26AS without delays. Run a quick comparison of regimes before filing. NRIs often benefit from focusing on eligible 80C/80D items, housing loan interest rules, and capital gains reinvestment where allowed.​

For peace of mind, check the e‑filing help pages before submission, watch slab and form updates for AY 2026‑27, and e‑verify on time; these basics reduce notices and speed refunds for NRIs working with income from India.​ 

For personalised protection and tax‑efficient planning aligned to NRI needs, consider exploring life insurance solutions from Canara HSBC Life Insurance as part of your overall financial strategy.

Glossary

  1. TDS: Tax cut by the payer before paying you; later adjusted in your final tax return
  2. RNOR: In‑between status; India taxes mainly Indian income, not your full worldwide income
  3. DTAA: A Tax treaty between countries to avoid double tax and allow lower or single‑country tax
  4. TRC: Official proof from your resident country confirming you live there for tax purposes
  5. Form 10F: Short online form that adds missing TRC details so treaty rates can be applied
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Uncertain About Insurance

FAQs

An individual who doesn’t meet the resident day‑count tests for that financial year.

No. NRIs are taxed in India only on Indian‑source income.

Usually, use ITR-2; if you have business/professional income in India, use ITR-3.

Provide TRC and Form 10F to apply DTAA rates where eligible.

Yes, on permitted items (for example, life, health premiums), subject to conditions.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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