an nri’s tax liability in india is not decided by citizenship or passport. it is decided by residential status. that status is calculated every financial year based on the number of days spent in india .
once the status is confirmed, the rules for what income is taxable become clear. an nri is taxed only on income that is received in india, accrues in india, or is deemed to accrue in india .
how residential status is determined
section 6 of the income tax act, 2025 sets the tests .
an individual is a resident in india for a tax year if either condition is met:
condition 1. stay in india is 182 days or more in the tax year.
condition 2. stay in india is 60 days or more in the tax year, and 365 days or more in the four years before that.
if neither condition is met, the individual is a non-resident .
there are exceptions for indian citizens and persons of indian origin. for those leaving india for employment or as crew on an indian ship, only the 182-day test applies. the 60-day rule is not used .
for indian citizens or persons of indian origin visiting india, the 60-day rule becomes 120 days if total income from indian sources exceeds ₹15 lakh. if income is below that, the 60-day rule becomes 182 days .
a person can also be a deemed resident. this applies to indian citizens with income above ₹15 lakh who are not liable to tax in any other country due to residence or domicile. such individuals are always classified as resident but not ordinarily resident (rnor) .
what income is taxable for an nri
an nri is taxed on income that is received or deemed to be received in india, and income that accrues or is deemed to accrue in india .
this includes:
salary. taxable in india if services are rendered in india. this applies even if the salary is paid abroad or by a foreign employer .
house property income. rental income from property in india is fully taxable. nris can claim a 30% standard deduction and deduct municipal taxes and home loan interest .
capital gains. gains from selling indian property, shares of indian companies, or other assets situated in india are taxable. the rate depends on the asset and holding period .
interest income. interest from an nro account is fully taxable. interest from an nre or fcnr account is tax-free in india .
dividends. dividends from indian companies are taxable and added to total income .
foreign income. salary earned abroad, foreign business income, rent from foreign property, and interest on foreign assets are not taxable in india for an nri .
how capital gains are taxed
equity-oriented funds and listed shares are taxed at the same rates as for residents :
- short-term capital gains (held 12 months or less): 20%.
- long-term capital gains (held more than 12 months): 12.5% on gains above ₹1.25 lakh.
for unlisted shares, debt funds, and other capital assets, the rules changed from july 23, 2024 :
- long-term capital gains are taxed at 12.5% without indexation.
- the option to choose 20% with indexation is not available to nris.
tds rules for nris
tds rates are higher for nris than for residents.
| income type | tds rate |
|---|---|
| nro fixed deposit interest | 30% |
| rental income | 30% |
| property sale | 30% for short-term, 20% for long-term with indexation for old assets |
| dividend income | 20% |
an nri can apply for a lower or nil tds certificate under section 197. this is useful when actual tax liability is lower than the proposed deduction. without this, excess tds is claimed as a refund through the itr .
which itr form to file
nris cannot file itr-1 or itr-4.
itr-2. for individuals with salary, capital gains, or foreign assets. no business income .
itr-3. for individuals with business or professional income. also required for freelancers and consultants.
the due date for itr-2 is july 31, 2026. for itr-3, it is august 31, 2026. a belated return can be filed until december 31 .
double taxation relief
india has double taxation avoidance agreements (dtaa) with more than 94 countries .
these treaties prevent the same income from being taxed twice. india follows the credit method for most treaties. tax paid in a foreign country is allowed as a credit against indian tax liability .
to claim treaty benefits, the nri needs:
- a tax residency certificate from the home country.
- form 41 (which replaced form 10f from april 1, 2026).
- proof of beneficial ownership .
form 67 must be filed electronically to claim foreign tax credit. it must be submitted before the itr due date .
what happens if an nri does not file
if taxable indian income exceeds the basic exemption limit, filing is mandatory. filing is also required to claim a tds refund or carry forward capital losses .
failure to file attracts a penalty of up to ₹5,000 under section 234f. interest under sections 234a, 234b, and 234c may also apply .
the income tax department increasingly uses data from banks, property registrars, and capital markets to identify non-compliant taxpayers. notices and scrutiny assessments are real risks .
frequently asked questions
1. is nri tax based on citizenship or residential status?
residential status. citizenship and passport do not matter. the number of days spent in india during the financial year decides the tax status .
2. is foreign salary taxable in india for an nri?
no. foreign salary earned and received abroad is not taxable in india for an nri. only indian-sourced income is taxed .
3. is nre account interest taxable?
no. interest on nre and fcnr accounts is tax-free in india. interest on nro accounts is fully taxable at 30% tds .
4. can an nri claim a refund of tds deducted on nro interest?
yes. if total indian income is below the taxable limit, the nri can file an itr to claim the entire tds as a refund .
5. what is the deadline for nris to file itr?
july 31, 2026 for itr-2. august 31, 2026 for itr-3. a belated return can be filed until december 31, 2026 .
