India has over 32 million Non-Resident Indians (NRIs) spread across the UAE, USA, UK, Canada, Australia, and beyond. Many of them own property in India, hold NRO/NRE accounts, invest in stocks and mutual funds, or receive rental income — all of which can trigger Indian tax obligations. Yet a large number of NRIs either miss filing altogether or overpay tax because they are unaware of the exemptions and treaty benefits available to them.
This guide breaks down every aspect of NRI taxation in India for FY 2025-26 (AY 2026-27) in plain language.
1. Who Qualifies as an NRI?
Your residential status under the Income Tax Act determines how you are taxed — not your passport or visa. For FY 2025-26, you are a Resident Indian if you were present in India for:
- 182 days or more during the financial year, OR
- 60 days or more during the year AND 365 days or more in the preceding 4 years
If you do not meet either condition, you are an NRI for that year. There is also a third status — Not Ordinarily Resident (NOR) — for those who have been NRI for 9 out of the last 10 years or have been in India for less than 729 days in the last 7 years.
Important Note for Indian Citizens Working Abroad
The 60-day rule does not apply to Indian citizens who leave India for employment or as a crew member of an Indian ship. For them, only the 182-day rule applies — making it easier to qualify as NRI.
2. Which NRI Income is Taxable in India?
As an NRI, only income that accrues or arises in India is taxable here. Your foreign income is completely exempt from Indian tax.
- Rental income from Indian property
- Interest on NRO accounts
- Capital gains on Indian stocks/MF
- Salary for services rendered in India
- Business income from India
- Dividends from Indian companies
- Salary earned abroad
- Interest on NRE accounts (fully exempt)
- Interest on FCNR deposits (fully exempt)
- Foreign business income
- Rental income from foreign property
- Capital gains on foreign assets
3. DTAA — How to Avoid Being Taxed Twice
India has signed Double Taxation Avoidance Agreements (DTAA) with 90+ countries. DTAA ensures that if you pay tax on the same income in both India and your country of residence, you get relief — either through exemption or a tax credit.
For example, if you are an NRI in the UAE (which has no income tax), DTAA may still help reduce TDS rates on certain Indian income. For NRIs in the USA or UK, DTAA allows you to claim a credit for Indian taxes paid against your US/UK tax liability.
India has DTAA with these countries (among others):
To Claim DTAA Benefits
You must submit a Tax Residency Certificate (TRC) from your country of residence and Form 10F to the Indian payer (bank, tenant, company) before TDS is deducted. Without these, TDS is deducted at the higher default rate.
4. TDS on NRI Income & How to Claim a Refund
TDS is deducted at higher rates on NRI income compared to residents. Here are the standard rates:
| Income Type | TDS Rate |
|---|---|
| Short-term capital gains (equity) | 15% |
| Long-term capital gains (equity > ₹1.25L) | 12.5% |
| Interest on NRO accounts | 30% |
| Rental income | 30% |
| Dividends | 20% |
| Property sale proceeds | 20% / 30% |
If your actual tax liability is lower than the TDS deducted — which is very common — you can claim a refund by filing your ITR. The refund is credited directly to your NRO bank account. Many NRIs leave significant refunds unclaimed simply because they don't file.
Lower TDS Certificate (Section 197)
If you expect regular income from India, you can apply for a Lower TDS Certificate from the Income Tax Department. This allows the payer to deduct TDS at a reduced rate upfront, improving your cash flow.
5. How to File ITR as an NRI
NRIs typically file ITR-2 (for income from salary, house property, capital gains, and other sources) or ITR-3 (if you have business income in India). The process:
6. Documents Required for NRI ITR Filing
Use our interactive NRI Document Checklist to track exactly what you have gathered before filing.
7. FEMA Compliance for NRIs
Beyond income tax, NRIs must comply with the Foreign Exchange Management Act (FEMA), which governs how money flows in and out of India. Key points:
8. Key Deadlines for FY 2025-26
| Deadline | What It's For |
|---|---|
| July 31, 2025 | ITR filing due date (non-audit cases) |
| October 31, 2025 | ITR filing for audit cases |
| December 31, 2025 | Belated ITR filing deadline |
| March 31, 2026 | Updated ITR (ITR-U) for AY 2024-25 |
| March 15, 2026 | Advance tax — 4th instalment (if applicable) |
9. Common Mistakes NRIs Make
10. Why Use a Tax Expert for NRI Filing?
NRI tax returns are significantly more complex than resident returns. Between DTAA analysis, FEMA compliance, multiple income sources, and foreign asset reporting, the scope for errors — and penalties — is high. A qualified tax consultant ensures:
File Your NRI ITR with Confidence
13+ years of experience. 500+ clients. We handle NRI returns from start to finish — DTAA analysis, TDS refund, FEMA compliance, and on-time filing. All remotely.