A Complete Guide to NRI Taxation in India

For Non-Resident Indians, tax obligations in India depend heavily on residential status, the source of income, and any Double Taxation Avoidance Agreement (DTAA) between India and the country of residence. Here’s an overview of the key concepts NRIs typically need to understand.

Step one: confirm your residential status

Your tax liability in India starts with your residential status for a given financial year — Resident, Resident but Not Ordinarily Resident (RNOR), or Non-Resident — which is determined by the number of days spent in India during the year and the preceding years. This isn’t the same as your visa or citizenship status, and it’s assessed fresh every financial year. Getting this classification right is the foundation for everything else, since it determines whether your global income or only your India-sourced income is taxable in India.

What counts as India-sourced income for an NRI

Regardless of residential status, certain income is generally taxable in India if it arises here, including:

Rental income from property located in India
Capital gains from the sale of property, shares, or other capital assets situated in India
Interest on NRO (Non-Resident Ordinary) accounts and India-based fixed deposits
Income from a business or profession controlled in India

Interest on NRE (Non-Resident External) and FCNR accounts is generally exempt, subject to conditions being met.

Selling property in India as an NRI

This is one of the most common — and most misunderstood — NRI tax situations. When an NRI sells property in India, the buyer is required to deduct TDS at a rate that is notably higher than the standard rate applicable to resident sellers, deducted on the sale value rather than only on the gain, unless a lower/nil deduction certificate is obtained.

Two things are worth knowing upfront:

A Lower Deduction Certificate (Form 13 application to the tax department) can often reduce the TDS actually deducted to something closer to the real tax liability on the gain, rather than a flat deduction on the full sale value — but this needs to be applied for before the sale is registered.
Form 15CA/15CB is required when repatriating sale proceeds out of India, certifying that applicable taxes have been paid or accounted for.

Because the TDS and repatriation process has several moving parts and strict timelines, it’s worth planning this well before the sale — not after.

Double Taxation Avoidance Agreements (DTAA)

India has DTAA treaties with many countries, which are designed to prevent the same income from being taxed twice — once in India and again in the country of residence. Depending on the treaty and the type of income, relief is typically available either as an exemption or as a tax credit for tax already paid in India. The specific relief available depends on the treaty with your country of residence and needs to be claimed correctly in your return.

Filing requirements

NRIs are required to file an income tax return in India if their India-sourced income exceeds the basic exemption threshold (which is revised from time to time), or in certain other specified situations — such as wanting to claim a refund of excess TDS deducted. Filing is also often necessary to formally claim DTAA relief or to establish a documented tax position for future reference (for example, when repatriating funds).

How we can help

We regularly work with NRI clients on income tax return filing, Lower Deduction Certificate applications, Form 15CA/15CB certification, DTAA-based tax planning, and repatriation compliance. See our NRI Taxation & Advisory service for details.

Frequently asked questions

Do NRIs need to file an income tax return in India if TDS has already been deducted? Often yes — filing is usually the only way to claim a refund if the TDS deducted exceeds the actual tax liability, which is common in property sale transactions.

Can I repatriate the full sale proceeds of property sold in India? Repatriation is generally permitted up to specified limits and conditions under FEMA, and requires Form 15CA/15CB certification confirming the applicable taxes have been accounted for.

Does having an NRE account mean my income is automatically tax-free in India? No — the tax treatment depends on the type and source of income, not just which account it’s routed through. NRE account interest is generally exempt, but income from Indian property, business or capital assets is generally taxable regardless of which account it’s received in.

Planning a property sale, or unsure about your filing obligations as an NRI? Get in touch — this is exactly the kind of situation worth getting ahead of, rather than sorting out after the fact.