NRI Taxation

Section 6 of the Income-tax Act, 2025 now governs this. It applies to tax years beginning on or after 1 April 2026. Resident, non-resident, deemed resident and not ordinarily resident are all set by the new Act.

How do I know if I am an NRI for tax purposes?

Count the days you were physically in India during the tax year. The basic test is 182 days or more. Fail that and a second test applies. It needs 60 days or more in the year. It also needs 365 days or more across the four preceding years.

Two relaxations matter to most people reading this.

The first covers visitors. Say you are an Indian citizen or a person of Indian origin, visiting India. The Income Tax Department states you are resident only if you spend more than 182 days here in that tax year. The 60-day test does not catch you.

That relaxation narrows if your Indian income is large. Take someone earning more than ₹15 lakh in the tax year, other than from foreign sources. For them the alternate condition under Section 6(2)(b) applies. The 60 days is read as 120 days. The 365 days across four preceding years still applies.

What is a deemed resident, and could it apply to me?

It is the rule that catches Indian citizens who are tax resident nowhere at all.

Three conditions have to hold together. You are a citizen of India. Your total income other than from foreign sources exceeds ₹15 lakh. And you are not liable to tax in any other country by reason of domicile, residence or a similar criterion. Meet all three and you are a deemed resident.

The target is a narrow group. People with substantial Indian income who have arranged their affairs so no country claims them. Pay tax somewhere on the basis of residence and the rule does not reach you. Pay tax nowhere, and earn above ₹15 lakh in India, and it does.

What does not ordinarily resident actually get you?

It is the transition status, and it is worth a great deal in the year you return to India.

You qualify on either of two counts. You were non-resident in nine of the ten preceding years. Or you were in India for 729 days or less in the preceding seven years.

The benefit is scope. A not ordinarily resident is taxed on Indian income. Foreign income is largely outside the net. The exception is income from a business controlled from India. A full resident is taxed on worldwide income from the first day.

So the year you move back matters enormously. Arriving in October rather than August can change which status you fall into. That in turn decides whether your overseas salary and investments enter the Indian tax base. Plan the date.

Are my NRE and NRO accounts taxed differently?

Yes, and this is where most of the practical money sits.

Interest on a Non-Resident External account is exempt. The exemption previously sat in Section 10(4)(ii) of the Income-tax Act, 1961. The Income Tax Department confirms it has been carried into Schedule IV of the new Act.

Interest on a Non-Resident Ordinary account is not exempt. It is taxable in India and tax is withheld at source when it is credited.

The distinction is about the source of the money. NRE holds foreign earnings, is fully repatriable, and is exempt. NRO holds Indian-source income such as rent, dividends and pension. It is taxable. Using the wrong account for the wrong money is the most expensive NRI banking mistake. See NRE and NRO accounts and NRE and NRO FD rates.

The exemption also depends on your status. Once you become resident, the NRE exemption stops applying. Convert the account when your status changes rather than after the department notices.

What else can India tax when I am a non-resident?

Income that arises or accrues in India. And income received in India. In practice that means four things for most NRIs.

Rent from Indian property, taxed after the standard deduction and municipal taxes. Capital gains on Indian assets. Interest on NRO deposits and on most Indian bonds. And any salary for work performed in India, wherever it is paid.

On capital gains, this is the position we track as of 17 August 2026. Listed equity and equity mutual funds become long term after 12 months. Long-term gains are taxed at 12.5% above ₹1,25,000 a year. Short-term gains are taxed at 20%. Immovable property becomes long term after 24 months, taxed at 12.5% without indexation.

Tax is withheld at source on payments to non-residents. The withholding is often higher than the final liability. That is not a penalty. It is a collection mechanism. You claim the excess back by filing a return. Many NRIs never file and simply forfeit it.

Our NRI property rules page covers property specifically, and capital gains tax has the full table.

How does DTAA relief work?

A double taxation avoidance agreement stops the same income being fully taxed twice. It does not mean the income is untaxed.

Treaties work in one of two ways. The exemption method leaves the income taxable in only one country. The credit method taxes it in both. Your country of residence then gives credit for the tax paid in the other. India’s treaties mostly use the credit method.

Treaties can also cap the rate. A treaty may set a lower withholding rate on interest, dividends or royalties than domestic law does. You can then claim the lower rate.

To claim it you need to prove where you are resident. You need two documents. A tax residency certificate from the tax authority where you live. And the prescribed Form 10F declaration, filed on the Indian portal. No certificate, no treaty rate. Banks and payers will apply the domestic rate without it.

Get the certificate for each financial year, in advance. A retrospective claim through a return is possible. It is also slower and more often contested.