NRI Income Tax in India (2025): Slabs, Rules, ITR Forms & Capital Gains

NRI taxation in India is regulated under the Income Tax Act, 1961, with clear rules governing residential status, taxable income, and compliance requirements. NRIs are liable to pay tax only on income earned or received in India, including salary, rent, capital gains, or NRO interest. Adhering to TDS provisions, filing deadlines, and reporting norms is essential to avoid penalties.

Key Highlights

• Taxable Income: Foreign country income of NRIs is not taxable in India. Only Indian income is taxable.
• Deductions: Certain deductions can be claimed even by NRIs. Eg., long term capital gains exemption up to Rs.1.25 lakh, section 80C deductions.
• ITR Form: Except ITR-1 and ITR-4, NRIs can file in any other ITR form depending on the income structure and legal status.

What is NRI Income Tax in India?

For NRIs, not all income is taxable in India. Only the income that arises in India or is received in India falls under Indian tax laws. This includes salaries for services rendered in India, rent from Indian properties, capital gains from Indian assets, and interest from Indian bank accounts.

Key points:

• Salary earned in India or for work performed in India → taxable.
• Rent from property located in India → taxable.
• Capital gains from sale of Indian shares or property → taxable.
• Interest from NRO accounts is taxable, while NRE and FCNR interest is tax-free.

How to Determine Residential Status of an NRI?

Before knowing your tax liability, you must check your residential status. The law sets clear criteria, and this status decides whether your global income is taxed in India or not.

You are considered an Indian resident for a financial year if you satisfy any of the conditions below:

1. You stayed in India for 182 days or more in a financial year, OR
2. You stayed for 60 days in the current year + 365 days in the past 4 years.

For individuals, residential status is further classified into: 

1. Resident-Ordinarily Resident
2. Resident but not Ordinarily Resident

Learn residential status in detail for further clarity.

Is Foreign Income of NRIs Taxable in India?

An NRI’s income tax in India will depend upon his residential status for the year as per the income tax rules mentioned above.

• If you are a ‘resident’, your global income is taxable in India. If your status is ‘NRI,’ your income earned in India only is taxable in India.
• Income which is earned outside India is not taxable in India.
• Examples for income earned in India:
  • Salary received in India (salary for service provided in India).
  • Income from a house property in India.
  • Capital gains on transfer of asset situated in India.
  • Income from fixed deposits or savings bank account.

Let us understand the tax treatment for different types of income in detail:

Salary Income

1. Income from salary will be considered to arise in India if your services are rendered in India.
2. If your salary is for services provided in India, it shall be taxed in India immaterial of where you are receiving the income, even if you are a non-resident,
3. Salary received in India is taxable, even if the concerned service is rendered outside India.
4. Suppose your employer is the Government of India and you are a citizen of India. In that case, if your service is rendered outside India, your income from salary shall be taxable in India.
5. Exception to (4): Income of Diplomats and Ambassadors are exempt from tax. 

Illustration: Ajay was working in China on a project from an Indian company for 3 years. Ajay needed the salary in India to take care of his family’s needs and make payments towards a housing loan. However, since the salary received by Ajay in India would have been taxed as per Indian laws, Ajay decided to receive it in China. 

Income from House Property

• Income from a property that is situated in India is taxable in the hands of an NRI.
• The tax calculation and deductions available against house property income is similar for both residents and non-residents.
• Income from house property is taxed at slab rates as applicable.
• The tenant sholud deduct TDS on all rent payments even if it does not cross the threshold limits mentioned under section 194-IB.
• The tenant should also submit form 15CA and 15CB (as required) when remitting the payment to the non-resident landlord.

Illustration: Nandini owns a house property in Goa and has rented it out while she lives in Bangkok. She has set up the rent payments to be received directly in her bank account in Bangkok. Nandini’s income from this house which is located in India, shall be taxable in India.

Income from Other Sources

Interest income from fixed deposits and savings accounts held in Indian bank accounts is taxable in India. Interest on NRE and FCNR accounts is tax-free. Interest on NRO accounts is fully taxable. 

Income from Business and Profession

Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI. 

Income from Capital Gains 

• Any capital gain on transfer of capital asset (property) which is situated in India shall be taxable in India.
• The buyer shall deduct TDS at 12.5% when he purchases a property from non-resident.
• However, you can claim capital gains exemption by investing in a house property as per Section 54 or investing in capital gain bonds as per Section 54EC. 
• Capital gains on investments in Indian shares, securities shall also be taxable in India.

Special provision related to Investment Income

When NRIs invest in certain Indian assets, they are taxed at 20% on the income earned. If the special investment income is the only income the NRI has during the financial year and TDS has been deducted, then such an NRI is not required to file an income tax return.

What are the investments that qualify for special treatment?

Income derived from the following Indian assets acquired in foreign currency:

1. Shares in a public or private Indian company
2. Debentures issued by a publicly-listed Indian company (not private)
3. Deposits with banks and public companies
4. Any security of the Central Government
5. Other assets of the central government as specified for this purpose in the official gazette.

No deduction under Section 80 is allowed while calculating investment income.

Interest earned on an NRE account and FCNR account is tax-free. Interest on NRO accounts is taxable in the hands of an NRI.

Deductions and Exemptions for NRIs

Similar to residents, NRIs are also entitled to claim various deductions and exemptions from their total income. These have been discussed here: 

Deductions under Section 80C

Most of the deductions under Section 80 are also available to NRIs. For FY 2023-24, a maximum deduction of up to Rs 1.5 lakh is allowed under Section 80C from gross total income for an individual.

Deduction from house property income for NRIs

NRIs can claim all the deductions available to a resident: 

• Standard deduction of 30% on rent.
• Interest deduction on home loan under section 24.
• Principal repayment deduction under section 80C.
• Additional deduction under section 80EE and section 80EEA.

Deduction under Section 80D

• NRIs are allowed to claim a deduction for the premium paid for health insurance. 
• This deduction is available up to Rs 25,000 in the case for insurance of self, spouse, and dependent children. 
• In addition, an NRI can also claim a deduction for parents’ insurance (father or mother or both) up to Rs 25,000.
• However, the deduction limit is set up to Rs 50,000 if the insurance premium is paid for resident senior citizens.

Deduction under Section 80E

• Under this section, NRIs can claim a deduction of interest paid on an education loan.
• This loan may have been taken for higher education for the NRI herself, NRI’s spouse, children, or a student for whom the NRI is a legal guardian.
• There is no limit on the amount which can be claimed as a deduction under this section. 
• The deduction is available for a maximum of eight years or till the interest is paid, whichever is earlier.
• The deduction is not available on the principal repayment of the loan.

Deduction under Section 80G

NRIs are allowed to claim a deduction for donations for social causes under Section 80G.

Deduction under Section 80TTA

• Non-resident Indians can claim a deduction on income from interest on savings bank accounts up to a maximum of Rs 10,000 under section 80TTA, like resident Indians.
• This is allowed on deposits in savings accounts (not time deposits) with a bank, co-operative society or post office and is available starting FY 2012-13.

Exemption on sale of property for an NRI

• Long-term capital gains are taxed at 12.5%, subject to TDS at the same rate.
• NRIs can claim exemptions under Section 54, Section 54EC, and Section 54F on long-term capital gains.

Deductions not Allowed to NRIs

Investments under Section 80C

• Investment in PPF is not allowed (NRIs are not allowed to open new PPF accounts. However, PPF accounts that are opened while they are a resident are allowed to be maintained)
• Investments in National Savings Certificates (NSCs)
• Post office 5-year deposit scheme
• Senior Citizen Savings Scheme (SCSS)

Deduction for the Differently-Abled under Section 80DD

Deduction under this section is for maintenance, including medical treatment, of a handicapped dependent (a person with a disability as defined in this section). Such deduction is not available to NRIs.

Deduction for the Differently-Abled under Section 80DDB

Deduction under this section towards medical treatment of a dependent who is disabled (as certified by a prescribed specialist) is available only to residents.

Deduction for the Differently-Abled under Section 80U

Deduction for disability where the taxpayer himself has a disability as defined in the section is allowed only to resident Indians.

When Should NRIs File Income Tax Return in India?

As an NRI, filing an ITR is mandatory if your Indian income crosses the basic exemption limit. Even if your income is below this limit, filing can help you claim refunds for TDS deducted on interest or rent.

• Exemption limit (old regime): Rs.2.5 lakh (Age less than 60 years)
• Exemption limit (new regime FY 2025-26): Rs.4 lakh
• Due date: 31st July 2026 (unless extended for FY 2025-26)

Case Study:

Srishti, an Indian citizen left India on 3rd July 2025 and for a job in USA, and have lived there since then. She checked her Form 26AS online and found that a TDS entry of Rs 21,000. This TDS had been deducted at 30% on interest earned by her in her NRO account. Srishti has no other income in India. Does Srishti have to pay any tax in India, and must she file an income tax return? 

Whether your income will be taxed in India or not depends upon your residential status. First, let’s find out about Srishti’s residential status.

Srishti's Residential Status:

• She is an Indian citizen and has gone to the US for her job – she will be a resident if she spends 182 days or more in India.
• She left India on 3rd July 2025. In the financial year FY 2025-26 (1st April 2025 to 31st March 2026), Srishti has spent less than 182 days in India. 
• Therefore, Srishti is an NRI for income tax in India.

Srishti's Taxable income:

Srishti's income in the USA is not taxable in India since she is an NRI. Only her interest income from NRO account (Indian income) is taxable in India.

Srishti's ITR filing requirements:

• For FY 2025-26, the maximum income exempt from tax is Rs. 2.5 lakh under the old regime and Rs. 4 lakh under the new regime. 
• If the income earned during the financial year is within this basic exemption limit, there is no need to file return of income.
• Srishti’s total income in India is less than these limits. Therefore, she is not required to file ITR.
• But, since TDS has alreasy been deducted, she can file ITR and claim refund of TDS.

Income Tax Slab for NRI 

Income Tax Slabs for old Tax Regime FY 2025-26

Income Tax Slabs for the New Tax Regime (default) FY 2025–26

• Surcharge Rate is 10% of income tax payable on total income exceeding Rs 50 lakhs but up to Rs 1crore.
• The surcharge Rate is 15% of income tax payable on total income exceeding Rs 1crore but up to Rs 2crore.
• The surcharge Rate is 25% of income tax payable on total income exceeding Rs 2crore but up to Rs 5crore.
• The surcharge Rate is 37% of income tax payable on total income exceeding Rs 5crore.
• The surcharge is subject to marginal relief and is applicable to the income of an NRI as well.

Note: The maximum surcharge shall be 25% under the new tax regime.

Rebate u/s 87A

The rebate under section 87A is not allowed to a Non-resident under both the regimes 

TDS on NRI Income

For NRIs, Tax Deducted at Source (TDS) is unavoidable in many cases. The payer is responsible for deducting it before making the payment.

Do NRIs have to Pay Advance Tax?

NRIs must pay advance tax if their tax liability exceeds Rs 10,000 in a financial year. Interest under Section 234B and Section 234C is applicable if advance tax is not paid. 

ITR Forms for NRIs

Choosing the correct ITR form is critical for compliance. An NRI cannot file ITR-1 and ITR-4. Otherwise she can choose her most appropriate ITR form depending on her income structure.

NRI Tax Implication - Specific Cases

Resident individual on a temporary foreign assignment

Rahul worked out of Singapore on a temporary assignment for 4 months and earned in Singaporean Dollars during that time. He got this income credited to a bank account here in India. He has returned home now. How should he file his income tax return?

Rahul’s taxes for this year will depend on his residential status. Since Rahul has not been outside  India for more than 182 days, he will be considered a resident. He will be required to file his income taxes in India this year.

This will also include his salary earned during the foreign assignment in Singapore. If the assignment extends to more than 182 days, Rahul’s residential status will change, and he will be required to pay taxes only on the Indian income earned so far. Here, note that Rahul’s foreign income credited to an Indian bank account is taxable in India.

Resident individual recently moved abroad

Prashant moves to the US on a new assignment. He gets his US income credited to an NRE account in India. He continues with his FD investments and has some money put away in a savings account in India. He just received Form 16 from his Indian employer. Should he file his returns this year in India?

NRI or not, every individual must file a tax return if their income exceeds basic exemption limit. But note that NRIs are only taxed for income earned/collected in India. So, Rahul will pay taxes on India’s income and accrued from FDs and savings accounts.

Resident with global income

If you are a resident Indian, your global income is taxable in India. This income may have been earned or received outside India – but it shall be taxed in India. If this income is also taxable in another country, you can take benefit of DTAA (Double Tax Avoidance Agreement).

Case study:

Shreya returned to India in 2010 after living in London for more than 5 years. The French company she worked for has retained her as a consultant and sends her fees in pounds. Her salary is credited to a bank account there, and Shreya pays tax in the UK. Does Shreya need to pay tax on this income or include it in her income tax return in India?
Shreya is a resident of India. The taxability of income in India depends upon residential status. A resident has to pay tax on their global income. The resident must disclose all the income earned from all sources and all countries in their income tax return and pay tax on it in India. (An NRI pays tax only on income earned or accrued in India).

Therefore, all of Shreya’s income, including the fee that she earns in a foreign currency, will be taxable in India.

Her income in pounds shall be converted to Indian rupees for income tax calculation and added to her total income, taxing at slab rates prescribed by the tax department.

If Shreya has already paid tax on the foreign income in the UK, she can claim the benefit under DTAA. Based on the relevant provisions of the DTAA between the two countries, Shreya will be saved from getting taxed twice.

If you are a resident and have earned any income from abroad, remember to disclose it in your income tax return.

Income Tax Filing for Foreign Nationals

An expatriate in India comes to live in India but is not a citizen of India.

Read more about income tax filing for foreign nationals here

How can NRIs Avoid Double Taxation?

NRIs can avoid double taxation (getting taxed on the same income twice in the foreign country and India) by seeking relief from the Double Taxation Avoidance Agreement (DTAA) between the two countries.

Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method. By exemption method, NRIs are taxed in only one country and exempted in another. In the tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence. 

In Budget 2021, FM proposes a new Section 89A where it notifies rules for removing hardship for NRI (specified persons) due to double taxation on money accrued in foreign retirement accounts. The provision is applicable when the income from such accounts are not taxed on accrual basis but the notified foreign countries tax it at the time of withdrawal or redemption of funds from the said account.

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