NRI Taxation in India: Complete Guide (FY 2026-27)

Residency Status: The 182-Day Rule

Your tax liability in India depends primarily on your residential status for the financial year. The key rule:

• If you stay in India for 182 days or more during the financial year, you are generally classified as a Resident
• If you stay for less than 182 days, you are generally classified as a Non-Resident (NRI)

There are additional conditions that may apply:

Status	Stay in India (Current FY)	Additional Conditions
Resident & Ordinarily Resident (ROR)	182 days or more	Resident in at least 2 of 10 preceding FYs AND stayed 730+ days in preceding 7 FYs
Resident but Not Ordinarily Resident (RNOR)	182 days or more	Does not meet additional ROR conditions
Non-Resident (NRI)	Less than 182 days	No additional conditions required

Important (FY 2026-27): Indian citizens earning over Rs 15 lakh from Indian sources who are not liable to tax in any other country may be deemed resident even with less than 182 days of stay.

What Income is Taxable for NRIs in India?

NRIs are taxed only on income that is earned or received in India. Income earned outside India is not taxable.

Income Type	Taxable for NRI?	Details
Salary received in India	Yes	Salary for services rendered in India
Rental income from Indian property	Yes	Standard deduction of 30% available
Capital gains on Indian assets	Yes	Shares, mutual funds, property in India
Interest on NRO account	Yes	TDS deducted by bank
Interest on NRE account	No	Exempt for NRIs
Interest on FCNR deposits	No	Exempt for NRIs
Salary earned abroad	No	Not taxable in India for NRIs
Foreign rental income	No	Not taxable in India for NRIs

DTAA: Double Taxation Avoidance Agreement

India has signed DTAA with over 90 countries to prevent the same income from being taxed twice. Key points:

• Relief methods: Exemption method (income taxed in only one country) or Credit method (tax paid in one country is credited against tax in the other)
• Lower TDS rates: DTAA often provides lower withholding tax rates compared to domestic rates
• Tax Residency Certificate (TRC): Required to claim DTAA benefits — obtain from your country of residence
• Form 10F: Must be filed along with TRC to claim treaty benefits in India

Country	Interest Rate (DTAA)	Dividend Rate (DTAA)	Capital Gains
USA	15%	25%	As per domestic law
UK	15%	15%	As per domestic law
UAE	12.5%	10%	As per domestic law
Singapore	15%	15%	As per domestic law
Canada	15%	25%	As per domestic law
Australia	15%	15%	As per domestic law

Note: DTAA rates shown are indicative. Always verify the latest treaty provisions with your tax advisor.

TDS Rates for NRIs (FY 2026-27)

TDS rates for NRIs are generally higher than for residents. Key rates:

Income Type	TDS Rate	Section
Interest income	30%	§393(2) (formerly §195)
Rental income	30%	§393(2) (formerly §195)
LTCG on property	12.5%	§393(2) (formerly §195)
STCG on equity	20%	§393(2) (formerly §195)
LTCG on equity (above Rs 1.25L)	12.5%	§393(2) (formerly §195)
Professional / technical fees	20%	§393(2) (formerly §195)
Sale of property	12.5% (LTCG) / 30% (STCG)	§393(2) (formerly §195)

Important: Surcharge and cess apply in addition to these rates — the figures above are the base, not the amount withheld. Surcharge is banded and starts once the income paid or likely to be paid exceeds Rs 50 lakh. A lower treaty rate can be claimed with a Tax Residency Certificate and Form 10F, and is available only on the payments the statute allows it for.

These rates are the “rates in force” set by Part II of the First Schedule to the Finance Act, which is re-enacted every year — they are not stated in the withholding section itself. Rates shown are for FY 2025-26 and FY 2026-27, which coincide. From 1 April 2026 the governing provision is §393(2) of the Income-tax Act 2025; §195 of the 1961 Act governs earlier payments. Which one applies is fixed by the earlier of the credit and payment dates.

NRE vs NRO Accounts

Understanding the difference is critical for NRI tax planning:

Feature	NRE Account	NRO Account
Purpose	Foreign earnings deposited in India	Indian income (rent, dividends, etc.)
Interest taxable in India?	No (exempt)	Yes (TDS applies)
Repatriation	Fully repatriable	Up to USD 1 million per FY (with conditions)
Currency risk	Yes (INR conversion)	Held in INR
Joint holding	Only with another NRI	Can hold jointly with resident Indian
On returning to India	Redesignated to resident account	Redesignated to resident account

Key Filing Requirements for NRIs

• Mandatory filing: If Indian income exceeds the basic exemption limit (Rs 2.5 lakh under old regime, Rs 4 lakh under new regime for FY 2026-27)
• ITR forms: NRIs typically use ITR-2 (no business income) or ITR-3 (with business income)
• Due date: July 31 of the assessment year (unless extended)
• PAN is mandatory: Required for all financial transactions and tax filing in India
• TDS refund: File ITR to claim refund if TDS deducted exceeds actual tax liability

Frequently Asked Questions

Do NRIs get the benefit of tax slabs?

Yes, NRIs can opt for either the old or new tax regime and benefit from applicable slab rates. However, certain deductions like 80C may not apply if the NRI has no Indian income qualifying for those deductions.

Is NRE FD interest taxable?

No, interest earned on NRE fixed deposits is tax-free in India as long as you maintain NRI status. Once you return to India and become a resident, the account is redesignated and interest becomes taxable.

Can NRIs invest in mutual funds in India?

Yes, NRIs can invest in Indian mutual funds (subject to certain restrictions for US/Canada-based NRIs due to FATCA compliance). Capital gains tax rules apply as per Indian tax law.

How do I avoid double taxation?

Obtain a Tax Residency Certificate (TRC) from your country of residence, file Form 10F in India, and claim DTAA benefits while filing your Indian ITR. Keep documentation of taxes paid in both countries.

Use Our NRI Tax Calculator

Don't guess your NRI tax liability — use our NRI Tax Calculator to compute your exact tax on Indian income, including DTAA benefits and TDS credits.