NRI Taxation in India

Now you're wondering: do I pay tax in India on all this? How much gets deducted before the money even reaches me? Do I need to file a return?

Here's everything you need to know about NRI taxation in India, written like a human explaining it to another human.

This isn't about your passport. The Indian tax department doesn't care if you have an OCI card or a green card. It cares about one thing: how many days you spent in India during the financial year (April 1 to March 31).

The 182-day rule: If you were in India for 182 days or more in a financial year, you're a tax resident. The tax department treats you like someone who lives in Mumbai full-time. Your global income — salary from Dubai, rental income from Pune, dividends from a US brokerage account — all of it gets taxed in India.

If you were in India for fewer than 182 days, you're a Non-Resident Indian for tax purposes. Only your India-sourced income gets taxed here. Your Dubai salary? Not taxed in India. Your US stock portfolio gains? Not taxed in India. Your Pune rental income? Taxed in India.

The 60-day trap for Indian citizens: Here's where it gets tricky. If you're an Indian citizen and you visited India even briefly during the year, a second rule kicks in. You become a tax resident if:

Picture this: You moved to the US in 2019. You visit India every year for Diwali — usually a three-week trip. In FY 2023-24, you stayed for 65 days. You've been in India for more than 365 days total between FY 2019-20 and FY 2022-23. Bam. You're a tax resident for FY 2023-24, even though you work full-time in California. Your global income is now taxable in India.

There's a relief valve: if your total income from Indian sources is less than Rs 15 lakh in a year, the 60-day rule doesn't apply. You fall back to the 182-day rule.

Count your days carefully. The day you land and the day you leave both count as days in India.

Only income that accrues or arises in India. Let's break that down with real examples.

Indian salary: You work remotely for an Indian company while living in London. Your salary is deposited into your Indian bank account. That's Indian-sourced income. Taxed in India at regular slab rates.

Rental income: You own a two-bedroom flat in Bangalore that you rent out for Rs 30,000 a month. That's Rs 3.6 lakh a year before deductions. Taxed in India. The tenant (or property manager) will deduct TDS at 30% before paying you, but we'll get to that.

Capital gains: You sold shares of Infosys that you bought five years ago through your Zerodha account. The profit is taxed in India. Long-term capital gains (shares held over a year) above Rs 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%.

You sold the Pune flat you inherited. The profit is long-term capital gain if you held it for more than two years. Taxed at 12.5% without indexation, or 20% with indexation — whichever is lower. The buyer deducts TDS at 20% (plus surcharge and cess, so really about 23.92%) before paying you the sale proceeds.

Interest income: Your NRO savings account earned Rs 50,000 in interest last year. Taxed in India. The bank deducts 30% (plus surcharge and cess) as TDS before crediting your account.

Your NRE fixed deposit earned Rs 1.2 lakh in interest. Not taxed in India. Zero TDS. You keep the full amount.

Dividends: Reliance Industries paid you Rs 20,000 in dividends. Taxed in India. The company deducts 20% TDS (plus surcharge and cess) before the dividend hits your account.

Foreign salary: You work for Google in San Francisco. Your salary is paid by Google US into your Bank of America account. Not taxed in India, even if you're an Indian citizen. This is foreign-sourced income.

Foreign investment income: You own shares of Apple and Tesla in your Robinhood account. You sold some last year and made a $5,000 profit. Not taxed in India. You pay capital gains tax in the US.

You have a rental property in New Jersey that generates $2,000 a month. Not taxed in India. Taxed in the US.

Interest from NRE/FCNR deposits: Your HDFC NRE fixed deposit earned Rs 2 lakh in interest. Not taxed in India. Your Axis FCNR (Foreign Currency Non-Resident) account earned $500 in interest. Also not taxed in India.

Here's what this means for you: if all your income comes from your job in Dubai and your investments in the US, and you have no Indian rental income or Indian capital gains, you have zero tax liability in India. You don't need to file an Indian tax return.

TDS is Tax Deducted at Source. The person or institution paying you deducts tax before the money reaches you. Think of it as an advance payment of your tax liability. You reconcile everything when you file your tax return.

Salary: Your Indian employer deducts TDS based on your expected annual income and the tax slab you fall into. If you earn Rs 12 lakh a year, your employer deducts TDS assuming you'll pay tax at the 20% slab (after Rs 10 lakh for the new regime). You get a Form 16 at the end of the year showing how much was deducted.

Property sale: You sold a flat in Mumbai for Rs 80 lakh. You bought it seven years ago for Rs 40 lakh. This is a long-term capital gain. The buyer (or the buyer's bank, if there's a home loan) deducts 20% TDS on the sale value — not the gain, the full sale value — before paying you. That's Rs 16 lakh deducted upfront.

Wait, what? You only made Rs 40 lakh in profit (before indexation), and they're deducting Rs 16 lakh? Yes. You'll claim the excess back when you file your tax return. This is where a lower TDS certificate (more on that below) becomes important.

For short-term capital gains (property held less than two years), TDS is 30% plus surcharge and cess.

FD interest in an NRO account: Your ICICI NRO fixed deposit earned Rs 1 lakh in interest. The bank deducts 30% (actually 31.2% after surcharge and cess) before crediting your account. You get Rs 68,800. The bank sends Rs 31,200 to the tax department on your behalf.

FD interest in an NRE account: Your SBI NRE fixed deposit earned Rs 1.5 lakh in interest. Zero TDS. The full Rs 1.5 lakh is credited to your account. This interest is not taxable in India.

Dividends: HDFC Bank paid you Rs 10,000 in dividends. TDS is 20% (plus surcharge and cess, so effectively 23.92%). You receive Rs 7,608. The company sends Rs 2,392 to the tax department.

Rental income: Your tenant pays Rs 50,000 a month. The tenant is supposed to deduct TDS at 30% if the annual rent exceeds Rs 2.4 lakh (Rs 50,000 × 12 = Rs 6 lakh, so yes). That's Rs 15,000 deducted every month. You receive Rs 35,000. The tenant deposits the Rs 15,000 with the tax department using your PAN.

In practice, most individual tenants don't do this. They pay you the full Rs 50,000. You're still responsible for the tax — you pay it when you file your return or as advance tax during the year.

Remember that property sale where the buyer deducted Rs 16 lakh on an Rs 80 lakh sale, even though your actual tax liability on the Rs 40 lakh gain is maybe Rs 8 lakh? You can prevent that.

Apply for a certificate under Section 197 from your local Assessing Officer. This is a letter from the tax department saying, "For this specific transaction, deduct TDS at X% instead of the default rate."

When to apply: Before the transaction. If you're selling property on March 15, apply in January. Processing takes 4-8 weeks, sometimes longer.

How to apply: File Form 13 on the income tax e-filing portal at https://www.incometax.gov.in. You'll need to estimate your total income for the year, your expected tax liability, and how much TDS will be deducted from various sources. You're asking the Assessing Officer to calculate a lower rate that matches your actual tax liability.

For the property example: your LTCG is Rs 40 lakh. Tax at 12.5% is Rs 5 lakh. You've already paid Rs 2 lakh in TDS on other income during the year. You ask for a certificate saying TDS on this property sale should be 5% (roughly Rs 4 lakh on Rs 80 lakh), not 20%.

The reality: Most Assessing Officers are conservative. They'll approve a lower rate, but not as low as you calculated. You might get 12-15% instead of 20%. Still better than the default.

Do you need this? If you're selling a high-value property or you have large rental income, yes. The upfront TDS can lock up Rs 10-20 lakh for months until you file your return and claim a refund. If you don't need that cash immediately, skip the hassle.

You're remitting Rs 50 lakh from your NRO account to your US bank account. The bank says, "We need Form 15CA and 15CB."

Form 15CA is a declaration you file on the income tax portal before remitting money abroad. It's the government's way of tracking foreign remittances and ensuring you've paid tax on that money if required.

Form 15CB is a certificate from a Chartered Accountant verifying the tax treatment of the remittance. The CA confirms whether the remittance is taxable in India, whether tax has been deducted, and whether you're complying with DTAA provisions (more on that in a separate guide).

When you need them: For most remittances by an NRI, you don't.

You need 15CA/15CB when you're making a payment to a non-resident that could have a tax implication. For example: you're an NRI, you hired a US-based consultant to do some work for your Indian business, and you're paying them $10,000. That payment might be taxable in India under certain conditions. You need Form 15CA/15CB.

You're remitting your own savings from your NRO account to your foreign account? You're repatriating funds under LRS (Liberalised Remittance Scheme)? Most banks don't require Form 15CA/15CB for this. You're moving your own money, not making a payment to a third party.

Some banks are overly cautious and ask for it anyway. If your bank insists, file Part D of Form 15CA on the e-filing portal. It's a simple declaration that the remittance doesn't fall under the categories requiring a CA certificate. Takes five minutes.

You earned rental income of Rs 4 lakh from your Bangalore flat. Your tenant didn't deduct TDS (most don't). You also earned Rs 1 lakh in interest from your NRO savings account — the bank deducted Rs 31,200 in TDS.

Do you need to file a return? Yes, because your total income exceeds the basic exemption limit (Rs 3 lakh under the new tax regime, Rs 2.5 lakh under the old regime for FY 2023-24).

Which form: ITR-2 in most cases. ITR-1 (the simple form) is not available to NRIs. ITR-2 covers salary, rental income, capital gains, and income from other sources (interest, dividends).

If you have business income or income from a partnership firm, you need ITR-3. If you're a partner in a firm or earning presumptive business income, consult a CA — that's beyond this guide's scope.

Deadline: July 31 of the assessment year. For FY 2023-24 (Assessment Year 2024-25), the deadline is July 31, 2024.

If you've had a capital gain from selling property or large equity holdings, the deadline is still July 31 — there's no extension to December 31 like there used to be for audit cases (unless your income requires a tax audit, which is rare for salaried NRIs).

How to file: Log in to the e-filing portal at https://www.incometax.gov.in/iec/foportal/. Register using your PAN if you haven't already. Fill out ITR-2 online. The portal is clunky but usable.

You'll enter:

The portal calculates your tax liability. If the TDS already deducted is more than your liability, you'll get a refund. If it's less, you pay the balance.

E-verify the return: After submitting, you must e-verify within 30 days. Use your Aadhaar OTP, net banking, or bank account validation. If you don't e-verify, the return is not considered filed.

You sold a flat in June for a Rs 60 lakh long-term capital gain. The buyer deducted 20% TDS (Rs 16 lakh on an Rs 80 lakh sale, let's say). Your actual tax liability on the Rs 60 lakh gain is Rs 7.5 lakh (12.5% LTCG rate).

The TDS is more than your liability, so you're good. No advance tax required.

But suppose the buyer was an individual who didn't deduct TDS (sometimes buyers structure deals to avoid TDS, though it's risky). You made Rs 60 lakh in June. Your tax liability is Rs 7.5 lakh. You can't wait until July next year to pay it. You need to pay advance tax.

The rule: If your total tax liability for the year is Rs 10,000 or more, you must pay advance tax in installments during the year. The deadlines are:

For the property example: you owe Rs 7.5 lakh. By June 15, you should have paid Rs 1.125 lakh (15% of Rs 7.5 lakh). By September 15, Rs 3.375 lakh (45% total). And so on.

If you don't pay on time, you'll owe interest under Section 234B and 234C. It's 1% per month (simple interest, not compounded) on the shortfall. Not devastating, but it adds up. On Rs 7.5 lakh unpaid for six months, that's Rs 45,000 in interest.

How to pay: Use Challan 280 on the tax portal. Select "Advance Tax (100)" as the payment type. Enter your PAN and assessment year. Pay via net banking. Save the receipt.

In practice: Most NRIs with only rental income and salary income don't worry about advance tax. Their TDS covers it. Advance tax becomes important when you have capital gains from property or large stock sales with no TDS.

So what does this mean for you? If you own property in India, have an NRO account, or sold stocks in your Indian demat account, you're paying tax in India. The bank, the tenant, or the buyer probably deducted TDS at punitive rates. File your return by July 31 to claim any refund. If you're sitting on large capital gains, pay advance tax quarterly to avoid interest. And if you're just earning salary abroad with no Indian income? You don't owe India a rupee.

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