If you live abroad but still earn money from India — rent from a flat, interest from an Indian bank account, dividends, or a property sale — India will tax that income. Your foreign salary, on the other hand, stays outside India’s tax net. This guide explains, in plain language, how NRI income tax works in 2026: who counts as an NRI, which income India taxes, the slab rates, the TDS traps on rent and property sales, DTAA relief, and which ITR form to file.
Quick answer: NRI income tax works like this: an NRI pays tax in India only on income earned or received in India: rent, Indian dividends, NRO-account interest, and gains from Indian shares and property. Foreign salary and foreign bank interest stay outside India’s tax net. Rates vary by income type — slab rates for rent, 12.5% for long-term gains, and 30% TDS on rent and NRO interest.
Who counts as an NRI for tax purposes?
Tax residency in India depends on how many days you spend in India, not on your passport or citizenship. Under the residency test, you are a resident if you spend 182 days or more in India during the financial year, or if you spend 60 days or more in the year and 365 days or more in the four preceding years. If neither test is met, you are a non-resident (NRI) for that year.
Two special rules catch many people by surprise. First, for an Indian citizen or a Person of Indian Origin with Indian income above Rs 15 lakh, the 60-day leg becomes 120 days. Second, an Indian citizen with Indian income above Rs 15 lakh who is not liable to tax anywhere else in the world is treated as a deemed resident, taxed in India as a Resident but Not Ordinarily Resident (RNOR).
RNOR is a halfway status. You become RNOR if you are a resident for the year but were a non-resident in 9 out of the 10 preceding years, or if you spent 729 days or less in India during the 7 preceding years. An RNOR, like an NRI, is taxed only on Indian income, which is why returning NRIs often get a few low-tax years after moving back.
What income is taxable for an NRI in India?
The rule is simple: India taxes income that is received in India or that accrues or arises in India. Everything else is out of scope.
| Income type | Taxable in India? | How it is taxed |
|---|---|---|
| Rent from Indian property | Yes | Slab rate, after 30% standard deduction |
| Interest on NRO account | Yes | Slab rate, 30% TDS |
| Interest on NRE / FCNR account | No | Fully exempt, no TDS |
| Dividends from Indian companies | Yes | Slab rate, 20% TDS |
| Listed shares, long-term gain (over 12 months) | Yes | 12.5% above Rs 1.25 lakh a year |
| Listed shares, short-term gain | Yes | 20% flat |
| Indian property, long-term gain (over 24 months) | Yes | 12.5%, no indexation |
| Indian property, short-term gain | Yes | Slab rate |
| Crypto / virtual digital assets | Yes | 30% flat, no loss set-off |
| Foreign salary | No | Outside India’s tax net |
| Foreign bank interest | No | Outside India’s tax net |
Note the crypto row: the same 30% VDA rule that applies to residents applies to NRIs too, with no set-off of losses. Our crypto tax guide covers it in detail.
NRI income tax slabs in India (2026)
NRIs can choose between the old regime and the new regime, just like residents. The new regime slabs for tax year 2026-27 are:
| Income | Tax rate |
|---|---|
| Up to Rs 4 lakh | Nil |
| Rs 4 lakh – Rs 8 lakh | 5% |
| Rs 8 lakh – Rs 12 lakh | 10% |
| Rs 12 lakh – Rs 16 lakh | 15% |
| Rs 16 lakh – Rs 20 lakh | 20% |
| Rs 20 lakh – Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
Under the old regime, the basic exemption for an NRI is Rs 2.5 lakh, followed by 5% up to Rs 5 lakh, 20% up to Rs 10 lakh, and 30% above that. Two resident-only benefits do not apply to NRIs. First, the higher basic exemption limits for senior citizens under the old regime apply to residents only, so a non-resident gets the standard Rs 2.5 lakh limit regardless of age. Second, the Section 87A rebate — up to Rs 60,000 in the new regime for taxable income up to Rs 12 lakh — is available only to resident individuals. An NRI with taxable income of Rs 6 lakh in the new regime still pays slab tax on it, while a resident would pay nothing after the rebate.
Add 4% health and education cess on the tax, plus surcharge where it applies: 10% on tax when total income crosses Rs 50 lakh, and 15% above Rs 1 crore.
How much TDS applies when an NRI sells property?
This is where NRIs lose the most money. When a resident sells property above Rs 50 lakh, the buyer deducts only 1% TDS. When an NRI sells, the buyer must deduct TDS under Section 195 of the 1961 Act (Section 393(2) of the Income-tax Act, 2025) at the rate that applies to the gain — and on the full sale price, not on the profit.
For a property held more than 24 months, the gain is long-term and taxed at 12.5% with no indexation benefit (indexation was removed for sales on or after 23 July 2024). With 4% cess, the TDS comes to 13% of the sale price if total income is up to Rs 50 lakh, 14.30% between Rs 50 lakh and Rs 1 crore, and 14.95% above Rs 1 crore. For a property held 24 months or less, the gain is short-term, taxed at slab rates, and TDS is 30% plus cess and surcharge.
Worked example. You bought a flat in 2012 for Rs 50 lakh and sell it in 2026 for Rs 1.2 crore. The gain is Rs 70 lakh. Tax on it is 12.5% of Rs 70 lakh, which is Rs 8.75 lakh, plus 4% cess, giving Rs 9.10 lakh. But the buyer must deduct 13% of the full Rs 1.2 crore sale price, which is Rs 15.60 lakh. You get Rs 6.50 lakh back only when you file your ITR and claim the refund.
Two fixes exist. First, apply for a lower deduction certificate in Form 13 before the sale, so the buyer deducts tax on the estimated gain instead of the full price. Second, from 1 October 2026, a resident individual or HUF buying property from an NRI no longer needs to obtain a TAN for the transaction. The buyer uses PAN instead and reports the TDS through Schedule E of Form 141, with the TDS certificate issued in Form 132. Companies and firms still need a TAN. The TDS itself has not changed — only the paperwork got simpler.
Also note: NRIs can buy residential or commercial property in India, but not agricultural land, plantation property, or a farmhouse, except property received by inheritance or gift.
What TDS applies to other NRI income?
Rent is the second trap. A tenant paying rent to an NRI must deduct 30% TDS plus 4% cess, which is 31.2%, on every payment, with no minimum threshold. Compare that with a resident landlord, where TDS applies only above Rs 50,000 a month. The tenant’s TDS is only a prepayment: your final tax is at slab rates after the 30% standard deduction, so a refund is common.
Worked example. Rent of Rs 40,000 a month is Rs 4.80 lakh a year. TDS at 31.2% is Rs 1,49,760. After the 30% standard deduction, taxable rent is Rs 3.36 lakh, which falls below the Rs 4 lakh basic exemption in the new regime. Final tax is nil, so the full Rs 1,49,760 comes back as a refund — but only if you file an ITR.
Other TDS rates to know: NRO account interest suffers 30% TDS plus cess, while NRE and FCNR interest is fully exempt. Dividends from Indian companies suffer 20% TDS plus cess and surcharge. If a treaty rate is lower, you can ask the payer to apply the DTAA rate instead, by giving a Tax Residency Certificate and Form 10F.
How does DTAA prevent double taxation?
India has double taxation avoidance agreements with more than 90 countries, including the USA, UK, UAE, and Canada. A DTAA decides which country gets to tax each type of income, and it usually lets you claim a credit in your country of residence for tax already paid in India.
To use a treaty benefit, you need two documents: a Tax Residency Certificate from the tax authority of your country of residence, and Form 10F filed electronically on the Indian e-filing portal. In your ITR, treaty relief is claimed through Schedule FSI (foreign source income) and Schedule TR (tax relief). Keep both documents ready before you file, because a missing TRC is one of the most common reasons DTAA claims get questioned.
A DTAA does not make Indian income tax-free. Rent from Indian property, NRO interest, Indian dividends, and gains from Indian assets stay taxable in India under most treaties. What the treaty stops is India taxing your foreign income — and it stops your home country from taxing the same Indian income twice.
NRE vs NRO vs FCNR accounts: which one should you use?
| Feature | NRE account | NRO account | FCNR account |
|---|---|---|---|
| Money source | Foreign earnings only | Indian income (rent, dividends) | Foreign earnings only |
| Currency | Rupees | Rupees | Foreign currency |
| Interest tax | Tax-free | Taxable, 30% TDS | Tax-free |
| Repatriation | Freely repatriable | Up to USD 1 million a year | Freely repatriable |
| Joint account with a resident | No | Yes | No |
The practical rule: foreign earnings go into NRE or FCNR, Indian earnings go into NRO. Parking foreign earnings in an NRO account wastes money — on a Rs 20 lakh deposit at 7%, the NRO route loses Rs 42,000 a year to TDS that the NRE route would not pay at all.
Repatriation from an NRO account is capped at USD 1 million per financial year and needs Form 15CA (a declaration) and, in most cases, Form 15CB (a chartered accountant’s certificate). NRE and FCNR balances can be sent abroad freely.
Can NRIs claim deductions in India?
Yes, but the menu is shorter than for residents. Under the old regime, NRIs can claim Section 80C deductions up to Rs 1.5 lakh on eligible items such as ELSS funds, life insurance premiums, tuition fees for children, and principal repayment of a housing loan. Section 80D health insurance deductions and Section 80G donation deductions are also available. NPS contributions can qualify under Section 80CCD, including the extra Rs 50,000 under Section 80CCD(1B), subject to the usual conditions.
Three things NRIs cannot claim: the Section 87A rebate (residents only), Section 80TTA savings-account interest relief (residents only), and a new PPF account (NRIs cannot open one, though an existing PPF account can run to maturity with tax-free interest). If you use the new regime, most of these deductions are not available anyway, so compare both regimes before you file.
Which ITR form should an NRI file?
NRIs cannot file ITR-1 (Sahaj) or ITR-4 (Sugam) — both are restricted to residents. The forms that apply are:
- ITR-2: salary or pension, house property, capital gains, and foreign assets or income. Most NRIs with rent, shares, or property income file ITR-2.
- ITR-3: business or professional income, including partnership firm income.
File on the e-filing portal, pre-validate your Indian bank account for any refund, and e-verify within 30 days of filing, or the return is treated as not filed. Our step-by-step e-filing guide and e-verification guide walk through the portal screens.
By the numbers
- 182 days in India makes you a resident for the year; 120 days is the test for Indian citizens and PIOs with Indian income above Rs 15 lakh.
- 90+ countries have a DTAA with India, per the Income Tax Department’s treaty network.
- 13% is the effective TDS on an NRI property sale (12.5% plus 4% cess) at total income up to Rs 50 lakh — on the full sale price, not the gain.
- 31.2% TDS applies to NRI rent and NRO interest (30% plus 4% cess).
- USD 1 million per financial year is the NRO repatriation cap, with Form 15CA and 15CB compliance.
- Rs 1.25 lakh a year of listed-equity long-term gains is exempt; gains above that are taxed at 12.5%.
Frequently asked questions
Do NRIs have to pay tax in India?
Yes, but only on income earned or received in India — rent, Indian dividends, NRO interest, and gains from Indian shares and property. Your foreign salary, foreign business income, and foreign bank interest are not taxed in India while you are a non-resident.
What is the tax slab for an NRI in India?
In the new regime for tax year 2026-27, income up to Rs 4 lakh is exempt, then 5% up to Rs 8 lakh, 10% up to Rs 12 lakh, 15% up to Rs 16 lakh, 20% up to Rs 20 lakh, 25% up to Rs 24 lakh, and 30% above that. The old regime starts with a Rs 2.5 lakh exemption. NRIs cannot claim the Section 87A rebate in either regime.
Can NRIs claim the Section 87A rebate?
No. Section 87A is available only to resident individuals. An NRI with taxable income of Rs 12 lakh in the new regime pays the full slab tax of Rs 60,000 plus cess, while a resident with the same income pays nothing after the rebate.
What is the TDS on property sale by an NRI?
For a property held over 24 months, the buyer deducts 12.5% plus cess and surcharge on the full sale price — 13% at total income up to Rs 50 lakh. For a property held 24 months or less, TDS is 30% plus cess and surcharge. Apply for a Form 13 lower deduction certificate before the sale if the actual gain is much smaller than the sale price.
Is NRE account interest taxable in India?
No. Interest on NRE and FCNR accounts is fully exempt from Indian tax and suffers no TDS, as long as you qualify as a non-resident under FEMA. Interest on NRO accounts is fully taxable, with 30% TDS plus cess deducted by the bank.
Do NRIs need to file an ITR in India?
File an ITR if your Indian income exceeds the basic exemption limit, if TDS was deducted and you want a refund, or if you sold property or shares in India. Even when no tax is due, filing is the only way to recover excess TDS — as the rent example above shows, that refund can be over Rs 1 lakh.
How do I claim DTAA benefits?
Get a Tax Residency Certificate from your country of residence and file Form 10F electronically on the Indian e-filing portal. Give both to the Indian payer if you want lower TDS at source, and claim the relief in your ITR through Schedule FSI and Schedule TR.
What is RNOR status and why does it matter?
RNOR (Resident but Not Ordinarily Resident) applies to someone who is resident for the year but was a non-resident in 9 of the 10 preceding years, or spent 729 days or less in India in the 7 preceding years. An RNOR is taxed only on Indian income, like an NRI, which makes the first few years after returning to India much lighter on tax.
Official sources
- Income Tax Department e-filing portal: https://www.incometax.gov.in
- Income Tax Department (treaties, forms, and circulars): https://incometaxindia.gov.in
Reviewed by Asuthod Rathod, CA. Last updated: 26 October 2026.
Disclaimer: This article is general information, not tax advice. Tax residency and treaty positions depend on your exact facts, days of stay, and country of residence. Check the current rules on the Income Tax Department portal or speak to a chartered accountant before acting on a large transaction such as a property sale.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.