Income-Tax regulations in India outline special provisions for certain types of income earned by non-resident Indians (NRIs). As per the law, NRIs have to pay tax on income earned or received in India — including capital gains, rent, salary or NRO (NRI banking account) interest.
When do NRIs have to pay tax in India?
Under the old tax regime, tax is applicable for income of ₹2.5 lakh and above; while under the new tax regime, this limit is ₹4 lakh. Income tax returns (ITR) is to be filed by 31st July 2026.
Not all income earned by NRIs is taxable in India, only the sources that are based in India or fall under purview of Indian tax laws, according to Clear Tax. This includes:
- Capital gains from Indian assets.
- Interest from Indian held bank accounts,
- Salary or income earned for services in India,
- Rent generated from Indian property / real estate, and
- Income generated from a business set-up in India.
Notably, while interest earned from a Non-Resident Ordinary (NRO) account is subject to tax, interest from Non-Resident External (NRE) or Foreign Currency Non-Resident (FCNR) accounts are not taxable.
Which ITR forms should NRIs choose?
| ITR Form | Income type and legal status |
|---|---|
| ITR-2 | Salary, property, capital gains, foreign assets |
| ITR-3 | Business/professional income |
| ITR-5 | For NRI firms |
| ITR-6 | For NRI companies |
| Source: Clear Tax | |
What is eligibility for NRI status?
As per the laws, NRI status is determined by guidelines as follows:
- Not resided in India for 182 days or more in a financial year, or
- Not lived in the country at least 60 days in the current year and a total of 365 days over the past four years.
When is salary considered as ‘earned in India’?
For salary to be considered as earned in India, the NRI must render services in the country for pay. Notably, even if the services are rendered abroad, if the pay originates from India, it is considered as taxable.
If you are employed by the government, but your services are rendered outside the country, income is taxable with few exceptions (i.e. ambassadors, diplomats).
What are rules for income from property?
NRIs are allowed to claim same property related deductions as Indian residents for property in the country. Tax is applied according to tax slab, with TDS deducted under Section 194-IB beyond the income limit. For remittances from tenants, submission of forms 15CA and 15CB (as required) is mandated.
What tax deductions do NRIs get?
- Section 80C: For up to ₹1.5 lakh invested in government savings schemes such as PPF, EPF, NPS, etc.
- House property income deductions: Similar to residents, NRIs can claim 30% standard deduction on rent; deduction on interest for home loan under section 24; and additional deduction under section 80EE and section 80EEA.
- Section 80D: This is for health insurance premium, up to ₹25,000 in the case for insurance of self, spouse, and dependent children; plus ₹25,000 for parents (father or mother or both).
- Section 80E: NRIs can claim a deduction of interest paid on an education loan for self, spouse, children or legal ward. There is no limit, but this can only be claimed for maximum of eight years or till interest is paid (whichever is earlier).
- Section 80G: For donations for social causes.
- Section 80TTA: For income interest on savings bank accounts up to a maximum of ₹10,000.
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