Learning article
NRI Taxation in India — Basic Rules & Filing Requirements
How residential status affects tax liability, which income is taxable for NRIs, and what special provisions exist for them.
Quick takeaways
Your tax liability depends on your residential status for the year, not just citizenship.
NRIs are taxed only on income earned or received in India.
Certain income like interest on NRE accounts is exempt; interest on NRO accounts is taxable.
Story intro
When Karthik moved to Dubai, he assumed he didn’t need to worry about Indian taxes. But his rented flat in Bengaluru kept generating rental income, and his bank FDs continued to earn interest — all of which were still taxable in India because they were sourced there.
Overview
Residential status basics
An individual is a resident if they stay in India for 182 days or more in the FY, or 60 days + 365 days in preceding 4 years.
NRI: a person who does not satisfy these conditions, i.e., non‑resident.
Recently, deemed resident rules were tightened for those with Indian income > ₹15 lakh and not liable to tax in any other country.
Important facts
What is taxable for an NRI?
Income earned or accrued in India: salary for services rendered in India, rental income, capital gains on Indian assets.
Income deemed to be received in India: interest on NRO account, dividends from Indian companies.
NRE account interest and FCNR interest are tax‑free.
Key concepts
Special provisions and deductions
NRIs are not eligible for certain deductions like 80C (unless they opt for old regime and have Indian income).
TDS is often higher for NRIs — e.g., TDS on sale of property is 20‑22% (plus surcharge and cess) instead of 1% for residents.
Tax treaties (DTAA) may provide relief from double taxation.
Key takeaways
Filing ITR for NRIs
Use ITR‑2 (not ITR‑1) if you have Indian income.
File only if taxable income in India exceeds the basic exemption limit (₹2.5 lakh).
Claim TDS refund if excess deducted; many NRIs miss refunds due to not filing.
FAQs
Common questions
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