NRI Taxation in India: Tax Rules, ITR Filing & DTAA Benefits Explained

1. NRI Taxation in India: Which Law Applies in 2026

NRI taxation in India is easier to follow once the two statutes are separated. The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961 from that date. The Central Board of Direct Taxes has said the new Act simplifies the language and the structure without altering the underlying tax policy. There is no missing year. Income of the period 1 April 2025 to 31 March 2026 is governed by the 1961 Act and is assessed as Assessment Year 2026-27. Income from 1 April 2026 is governed by the 2025 Act and is referred to as Tax Year 2026-27.

That split matters for anyone filing now. A return, a refund claim or a belated return for income up to 31 March 2026 still uses the 1961 Act forms and section numbers. Advance tax and the return for income arising after 1 April 2026 follow the 2025 Act. The e-filing portal runs both. Section numbers below are to the Income-tax Act, 2025 unless the sentence says the filing is for Assessment Year 2026-27.

An NRI, in ordinary speech, is an Indian citizen or a person of Indian origin living abroad. The Act does not tax that label. It taxes a person who is a non-resident, or a resident but not ordinarily resident, under section 6. FEMA uses its own test of residence for bank accounts and remittances. A person can be a non-resident under the tax law and need a different classification for the bank. Both have to be checked. The older note on NRE and NRO accounts and Form 15CA covers the remittance paperwork. This article is the tax computation.

2. Resident, RNOR or Non-Resident: The Day-Count Rules

Section 6 decides residence for the tax year. An individual is resident in India if he is in India for 182 days or more in that year, or if he is in India for 60 days or more in that year and for 365 days or more in the four preceding years. The 60-day limb does not apply to an Indian citizen who leaves India for employment outside India, or as a member of the crew of an Indian ship. It also does not apply, subject to the next sentence, to an Indian citizen or a person of Indian origin who comes on a visit to India.

The visit exception narrows when Indian income is high. If that citizen or person of Indian origin has total income, other than income from foreign sources, exceeding ₹15 lakh in the year, the 60-day test is read as a 120-day test. A stay of 120 days or more, but less than 182 days, makes the person resident but not ordinarily resident under section 6(13). Separately, an Indian citizen is deemed resident under section 6(7) if he is not liable to tax in any other country by reason of domicile or residence and his Indian income, other than foreign-source income, exceeds ₹15 lakh. A person deemed resident under that provision is also not ordinarily resident. The provision does not apply if he is already resident under the day-count tests.

Not ordinarily resident also covers an individual who has been a non-resident in nine out of the ten preceding tax years, or who has been in India for 729 days or less in the seven preceding tax years. The category is the usual landing status in the first years after a return to India, and it is the status of a high-income visitor who crosses 120 days without crossing 182.

The scope of the charge follows the status, under section 5. A resident is taxed on worldwide income. A person who is not ordinarily resident is taxed on Indian income and on income from a business controlled in India or a profession set up in India, and not on other foreign income. A non-resident is taxed on income received or deemed received in India, and on income that accrues or arises, or is deemed to accrue or arise, in India. Days of presence are counted from the passport, the boarding passes and, for a ship’s crew, the manner the rules prescribe. A day of arrival and a day of departure are both commonly counted. Keep a simple log. Reconstructing a year from memory is how residential status gets argued.

3. Income That Is Taxable, and Income That Is Not

Salary is taxable in India if the services are rendered in India, even if the salary is paid into a foreign account. Salary for services rendered wholly outside India, and received outside India, is not Indian income of a non-resident. A split contract, with some days worked from India, has to be apportioned. Guessing a round percentage is the detail that later fails to match the employer’s withholding.

Rent from a house in India is taxable even if it is credited abroad. Section 22 allows a deduction of 30% of the annual value, and a deduction for interest on money borrowed to buy, build, repair or renew the property. Municipal taxes are deducted when computing the annual value, and only if they are borne by the owner and actually paid. Under the default regime in section 202, a loss under the head house property cannot be set off against any other head. A rented flat that runs at a loss after interest does not automatically shelter a capital gain.

Interest on an NRO account is taxable in India. Banks deduct tax at source on it. Interest on an NRE account is exempt while the holder is a person resident outside India under FEMA, and interest on an FCNR deposit is exempt for a non-resident. The exemption is a FEMA condition as much as a tax condition. Once the holder becomes resident under FEMA, the NRE account has to be redesignated and the exemption stops. Dividends from an Indian company are taxable in the hands of a non-resident. Section 207 taxes such dividends at 20% on a gross basis, or at 10% where the dividend is from a unit in an International Financial Services Centre, before the treaty is applied. Royalty and fees for technical services from an Indian payer are taxed at 20% on a gross basis under the same section, again subject to the treaty.

Capital gains on assets in India, including shares, mutual funds and immovable property, are taxable. So is a gain that the Act deems to arise in India because the foreign share derives its value substantially from assets located in India. Foreign salary, foreign bank interest and gains on foreign securities are outside a non-resident’s Indian return. They come back into the return in the year the person becomes resident and ordinarily resident, and in that year the foreign assets themselves have to be disclosed. A non-resident does not file that foreign-asset schedule.

4. Slabs, the Rebate an NRI Does Not Get, and Surcharge

Section 202 is the default regime for an individual, including a non-resident. Tax on total income other than the special-rate incomes is computed on this table unless the person opts out in the manner section 202 prescribes. A non-resident who has no business income makes that choice in the return. A person with business or professional income has to follow the form and the once-in-a-lifetime restriction that the section lays down for leaving the default regime and for returning to it.

The rebate under section 156 is the provision that can reduce tax to nil for a resident whose income is within the stated limits: ₹12,500 where total income does not exceed ₹5,00,000, and, under the default regime, up to ₹60,000 where total income does not exceed ₹12,00,000, with marginal relief above that. The section grants the rebate to an individual resident in India. A non-resident does not get it. Computing an NRI’s salary or rent as if the ₹12 lakh rebate applied is the error that produces a demand when the return is processed. The basic exemption in the slab is available. What is not available, except to a resident individual or HUF, is the further relief of setting an unused basic exemption against the special-rate short-term and long-term capital gains in sections 196, 197 and 198.

• Surcharge is levied on the income-tax once total income crosses ₹50 lakh. On the rate chart published by the Income Tax Department, the steps are 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore. A rate above that, for income above ₹5 crore, applies where the person is taxed under the old regime and not under section 202.
• Surcharge on tax payable on dividends, and on capital gains taxed under the special equity and long-term provisions, is capped at 15% on that chart.
• Health and education cess is 4% of the income-tax and the surcharge.
• Confirm the Finance Act surcharge for the particular year on the Income Tax India rate page before the return is filed. Surcharge is imposed by the Finance Act, and the chart above is the one the Department has published for non-residents.

5. NRI Income Tax Return Filing: Forms, Due Dates and a Refund

NRI income tax return filing is required when Indian income, computed before the capital-gains exemptions, exceeds the maximum amount not chargeable to tax, and also when the person wants a refund of tax that was deducted. A non-resident whose only Indian income is of the kind section 207 taxes on a gross basis, and from which tax has been deducted at a rate not lower than the rate in that section, need not file a return under section 263(8). The moment there is rent, a capital gain, or a wish to claim a lower treaty rate that reduced the deduction, the return is the safer and usually the required route. A refund is not issued against a Form 26AS that nobody has put into a return.

For Assessment Year 2026-27, which is income up to 31 March 2026 and is still under the 1961 Act, a non-resident individual with no business or professional income files ITR-2. ITR-3 is the form where there is business or professional income, including trading that is business income. ITR-1 and ITR-4 are not for a non-resident. The original due date for that year has passed. A belated return under section 139(4) may be filed up to 31 December 2026, or before the assessment is completed, whichever is earlier. A belated return attracts a fee under section 234F of ₹5,000, limited to ₹1,000 where total income does not exceed ₹5 lakh, and interest under section 234A on any tax that remains unpaid.

For Tax Year 2026-27 the return is filed under section 263 on the e-filing portal. The due dates in that section, as substituted by the Finance Act, 2026, are 31 July for any other assessee, 31 August for a person whose business or professional accounts are not required to be audited, 31 October for a company and for a person whose accounts are required to be audited, and 30 November where the transfer-pricing report applies. The Board can extend a date by order. Use the form the portal offers a non-resident. The Income-tax Rules, 2026 have renumbered forms, so an old offline utility is not a safe assumption.

The return should be built from Form 26AS, the Annual Information Statement and the Taxpayer Information Summary, not from memory. NRO interest, dividends, mutual-fund redemptions and property transactions are already on those statements. A credit that is not claimed is a refund left behind. A credit that is claimed against income that is not offered is a notice. Our note on individual tax planning compares the default regime with the earlier regime for residents. For a non-resident the comparison is narrower, because several deductions in the earlier regime were already limited to residents, and the section 156 rebate is not in the comparison at all.

6. NRI Capital Gains Tax on Shares, Mutual Funds and Property

NRI capital gains tax depends on what was sold and how long it was held. Under section 2, a capital asset is short-term if it is held for not more than 24 months. For a listed security, a unit of an equity-oriented fund and a zero-coupon bond, that period is read as 12 months. Debt-oriented mutual fund units of the kind the Act specifies are taxed as short-term regardless of how long they were held.

Section 196 taxes short-term gains on listed equity shares, units of an equity-oriented fund and units of a business trust, where securities transaction tax is paid, at 20%. Section 198 taxes the long-term gains on those assets at 12.5% on the amount that exceeds ₹1,25,000. Section 197 taxes other long-term gains at 12.5%. The relief of setting an unused basic exemption against these gains is given to a resident individual or HUF. It is not given to a non-resident.

Indexation is the point that most property sellers ask about. Section 197(3) allows a resident individual or HUF, on land or building acquired before 23 July 2024, to ignore the excess of the 12.5% computation over a computation at 20% with indexation. The subsection is limited to a resident. A non-resident selling a house in Hyderabad, or anywhere else in India, computes the long-term gain at 12.5% without that indexation option. Cost in foreign currency, for specified shares and debentures of an Indian company, is dealt with under the computation rules for a non-resident. It is not a general licence to index a house.

Two exemptions are used often, and both have hard caps. Section 82 exempts long-term gain on a residential house, whose income was chargeable under house property, to the extent it is reinvested in one residential house in India, purchased within one year before or two years after the transfer, or constructed within three years. The amount used is deposited, before the due date of the return under section 263(1), in the notified account if the new house is not yet bought. If the gain does not exceed ₹2 crore, the person may opt, once, to buy or construct two houses. Cost above ₹10 crore is ignored. Section 85 exempts long-term gain on land or building to the extent it is invested, within six months, in a specified bond of National Highways Authority of India or Rural Electrification Corporation Limited, redeemable after five years. The investment counted for the exemption cannot exceed ₹50 lakh.

The buyer’s problem is separate from the seller’s rate. On a purchase from a resident, withholding on property is a small percentage of the consideration. On a purchase from a non-resident, the buyer withholds under the non-resident payment rules, and in practice often withholds on the whole consideration because the buyer does not know the cost. A certificate for deduction at a lower or nil rate, applied for before the sale, limits the withholding to the tax on the real gain. For a sale that is still being processed under the 1961 Act, that application is Form 13 under section 197. For a sale in Tax Year 2026-27, use the certificate application the e-filing portal currently prescribes. Waiting and claiming a refund in the return leaves the money blocked for the processing cycle. The steps are set out in the NRI remittance note.

7. DTAA Benefits for NRIs: Treaty, TRC and the More Beneficial Provision

DTAA benefits for NRIs come from section 159. Where the Central Government has notified an agreement with another country, the Act applies to the person covered by that agreement only to the extent it is more beneficial. The treaty does not automatically replace Indian tax. Each article is compared with the Act, and the provision that produces the lower tax on that item is the one applied. A dividend article that caps Indian tax at 10% or 15% will usually beat the 20% domestic rate. An article that gives India the right to tax gains on shares of an Indian company will usually leave the domestic capital-gains rate in place. The outcome is country-specific. India does not have one NRI treaty rate.

Section 159(8) is the condition that filings fail. A person who is not a resident is entitled to the treaty relief only when he obtains a certificate of residence from the government of the other country, and provides such other documents and information as are prescribed. That certificate is the Tax Residency Certificate. The prescribed particulars, where the certificate does not already contain them, are filed electronically. For an Assessment Year 2026-27 claim under the 1961 Act, that filing is Form 10F on the e-filing portal. For Tax Year 2026-27, file the form the portal offers under the Income-tax Rules, 2026 against section 159(8). A TRC for the wrong year, or a Form 10F that contradicts the certificate, is treated as no claim.

Foreign tax credit is a different relief, and it is easy to mix up with the treaty rate. Where the same income is taxed in India and abroad, the country of residence usually gives the credit under its own law. Form 67 under the 1961 rules is the Indian form for a resident of India who is claiming credit in India for foreign tax. A non-resident who is only claiming a lower Indian rate under a treaty does not file it. A person who has become resident and ordinarily resident, and who has paid tax abroad on income that is now taxable in India, does. Section 160 is the residual relief where there is no treaty at all, and it is computed at the lower of the Indian rate and the foreign rate on the doubly taxed income.

The treaty text, and a comparison between treaties, is published by the Income Tax Department on its international-taxation pages. Read the dividend article, the interest article, the capital-gains article and the residence article of the particular country. A blog cannot substitute for the notification. International tax advice is the right desk when the income is a mix of salary, a foreign employer’s Indian days, and Indian investments, because the treaty and the day count interact.

8. Tax Deducted Before You See the Money, and Sending It Abroad

Most NRI tax is collected before the return is filed. The payer withholds on rent, on a property purchase, on a dividend, on NRO interest and on a mutual-fund redemption. The rate is the domestic rate unless a treaty rate has been accepted, or a lower-deduction certificate is in force. Excess withholding is recovered only by filing the return and claiming the credit. This is why a year of “tax already deducted” is not a year in which the return can be skipped, if a refund is wanted or if the income is not of the narrow kind that section 263(8) excuses.

Money that has borne Indian tax can be sent abroad, within the FEMA limits and the bank’s conditions. An NRI may remit up to USD 1 million per financial year from NRO balances arising from current income, the sale of assets and inheritance, under the Reserve Bank of India’s remittance-of-assets framework. That limit is not the Liberalised Remittance Scheme. The Liberalised Remittance Scheme is for a resident individual. The bank will ask for the information and the accountant’s certificate prescribed under the income-tax rules. For remittances tied to income of a year still governed by the 1961 Act, those are Form 15CA and Form 15CB. The FEMA note on inward investment is the mirror image, for money coming into an Indian company. The Reserve Bank of India publishes the master direction the bank is applying.

A person who has returned to India and become resident has a different filing in the first full year of ordinary residence: foreign assets and signing authorities are disclosed, and foreign income comes into the return. Planning that move a year early, while the person is still not ordinarily resident, is one of the more valuable conversations in an NRI file. It is also the year in which the NRE account has to be redesignated. Leaving a resident savings account open after becoming a non-resident, or leaving an NRE account untouched after becoming a resident, is a FEMA default even when the tax return is accurate.

9. What NRI Tax Consultants in Hyderabad Actually Do on a File

NRI tax advisory services in India, done properly, start with the passport stamps and end with a return that matches the Annual Information Statement. The middle of the file is the residential-status working, the split between taxable and exempt interest, the capital-gains computation, the treaty comparison, and the withholding certificate if a property is being sold. NRI tax consultants in Hyderabad at P. Ramesh & Associates do that work for clients who are outside India for most of the year and who still have a house, a deposit or a shareholding here. The office is in Barkatpura. The papers move electronically. Presence in India is not required to file.

A property sale needs the longest lead time, because the lower-deduction certificate has to be in the buyer’s hands before the consideration is paid. A dividend or a redemption needs the TRC and the prescribed form with the payer before the credit, if the treaty rate is to be applied at source. A belated Assessment Year 2026-27 return needs to be in before 31 December 2026 if the original due date was missed. None of these is improved by starting after the payer has already deducted tax at the domestic rate.

The international taxation desk handles the cases that are no longer a straightforward NRI return: a person who is resident in two countries, a split employment, or a family trust. The income-tax practice files the return and answers the processing notice if one is issued. Contact the office with the country of residence, the approximate days in India, and a list of Indian assets. That is enough to say which status applies and which form is due. The people who do the work are the same partners who sign the computation.