In short: NRIs are taxed in India only on income that arises or is received in India — salary earned abroad stays out. But residential status must be tested every year against day-count rules, property sales attract TDS on the entire sale value unless you act in advance, and DTAA relief plus Form 10F can significantly cut withholding. Get the sequence right and most NRI tax pain is avoidable.
How is residential status decided?
You are a resident for a financial year if you spend 182 days or more in India, or 60+ days in that year and 365+ days across the preceding four years. The 60-day test relaxes to 182 days for Indian citizens leaving for employment and for visiting NRIs (120 days where India-sourced income exceeds ₹15 lakh). Between non-resident and resident sits RNOR — a transitional status that keeps foreign income out of Indian tax, valuable for returning NRIs. Count your days carefully; immigration stamps decide more tax than any other single fact.
What income do NRIs pay Indian tax on?
Indian-source income: rent from Indian property, capital gains on Indian shares and property, interest on NRO deposits, business income connected to India, and salary for services rendered in India. Interest on NRE and FCNR deposits remains exempt for non-residents. Foreign salary and foreign investment income stay outside Indian tax while you remain non-resident.
The property-sale TDS trap
When an NRI sells Indian property, the buyer must deduct TDS under Section 195 on the gross sale consideration — not the gain — at rates materially higher than the 1% residents face. On a ₹2 crore flat with a modest gain, that locks up a large sum for months. The fix: apply for a lower/nil deduction certificate (Form 13) from the tax department before the sale, so TDS reflects actual gains. We routinely arrange these for NRI clients ahead of transactions.
How DTAA relief works
India’s tax treaties cap tax on interest, dividends and royalties, and prevent double taxation through credits. To claim treaty rates you need a Tax Residency Certificate from your country of residence plus Form 10F filed electronically. Without these, payers withhold at full domestic rates — money you then chase as refunds.
Repatriating money out of India
Funds in NRE accounts move freely. From NRO accounts, you can repatriate up to USD 1 million per financial year with a chartered accountant’s certificate in Form 15CB and your Form 15CA filing, confirming taxes are settled. Done in the right order, repatriation is routine; done backwards, banks freeze the transfer.
Our NRI taxation team handles residency assessment, property TDS certificates, treaty relief and 15CA/CB certification — with partners in Mumbai, Bangalore and Delhi.
FAQs
Do I need to file an Indian return as an NRI? Yes, if Indian taxable income exceeds the basic exemption, or to claim refunds of excess TDS — common with NRO interest and rent.
Are gifts from relatives taxable for NRIs? Gifts from specified relatives remain exempt; gifts above ₹50,000 from non-relatives are taxable, and cross-border gifts have additional wrinkles worth checking.
I returned to India permanently. When does foreign income become taxable? Usually after your RNOR window ends — often two to three years post-return. Plan asset sales and foreign payouts inside that window where possible.
This article is for general information only and is not professional advice. Treaty positions and rates depend on your country and facts — verify before acting.