NRI Taxation in India: What You Need to Know in 2026

Category: NRI & International Tax

Published by: Atul Kapur & Associates

Whether you are an Indian professional working abroad, a returning NRI, or a foreign national with income sources in India, understanding your tax obligations is critical to staying compliant and avoiding double taxation.

India's tax rules for Non-Resident Indians (NRIs) are nuanced and have seen significant updates in recent years. Here is a plain-English guide to help you understand where you stand.

Step 1: Determine Your Residential Status

Everything in NRI taxation starts with residential status under the Income Tax Act, not your passport or visa. For FY 2025-26, you are a Resident if:

•       You were in India for 182 days or more during the financial year, OR

•       You were in India for 60 days or more during the financial year AND 365 days or more in the preceding four financial years

If neither condition is met, you are a Non-Resident Indian (NRI) for tax purposes. There is also a third category, Resident but Not Ordinarily Resident (RNOR), which applies to returning NRIs in their first two years and carries significant tax benefits.

What Income Is Taxable for NRIs in India?

As an NRI, you are only taxed on income that accrues or arises in India. This includes:

•       Salary received in India or for services rendered in India

•       Rental income from property located in India

•       Capital gains on sale of property, shares, or mutual funds based in India

•       Interest on Non-Resident Ordinary (NRO) accounts

•       Dividends from Indian companies

Importantly, income earned and received outside India is not taxable in India for NRIs. Interest on NRE and FCNR accounts is completely tax-free.

TDS Rates That Apply to NRIs

Tenants, buyers, and financial institutions deduct TDS at higher rates for NRIs:

•       Property sale: Buyer must deduct TDS at 20% (plus surcharge and cess) on long-term capital gains

•       NRO account interest: TDS at 30% plus applicable surcharge and cess

•       Rent: TDS at 30% if paid to NRI landlord

•       Mutual fund redemptions: TDS at 20% for equity funds held over 1 year

NRIs can apply for a Lower Deduction Certificate under Section 197 from the Income Tax department if the actual tax liability is lower than the TDS rate.

Double Taxation Avoidance Agreements (DTAA)

India has signed Double Taxation Avoidance Agreements (DTAA) with over 90 countries including the USA, UK, UAE, Canada, Australia, and Singapore. These treaties allow you to either exempt certain incomes or claim credit for tax paid in the other country against your Indian tax liability.

This is a complex area and requires careful treaty analysis. For example, the India-UAE DTAA has specific provisions for salary income and capital gains that many NRIs are unaware of, often leading to either double taxation or missed exemption claims.

Returning NRIs: The RNOR Benefit

If you are returning to India after being an NRI for 9 out of the last 10 years, you qualify as RNOR for up to 2 years. During this period, your foreign income is not taxable in India, giving you a valuable window to repatriate funds and restructure your finances.

Our team has extensive experience handling NRI taxation, DTAA applications, property sale TDS management, and repatriation planning for both Indian nationals abroad and foreign nationals with Indian income.

For NRI tax filing, DTAA advisory, or repatriation planning, contact Atul Kapur & Associates at office@akaca.org or call 011-4134-5501. We serve NRI clients across the USA, UK, UAE, Canada, and Australia.