How NRI Taxation Works in India: Residential Status, DTAA & More (FY 2025-26)

🌏 Who is an NRI as per Indian Tax Laws?

In India, your tax liability is based on residential status, not just citizenship. An NRI (Non-Resident Indian) is defined as someone who is Indian Citizen but does not qualify as a resident under the Income Tax Act, 1961.

✅ Resident vs Non-Resident Criteria for FY 2025-26:

You are treated as an Indian resident if:

• You are in India for 182 days or more in a FY, or
• You are in India for 60 days or more during the FY and 365 days or more during the last 4 years.

🔹 Exception for Indian citizens/PIOs visiting India: The 60 days condition is replaced with 182 days.

🔹 For high-income earners (₹15 lakh+), and stay in India exceeding 120 days, you may be treated as "Resident but Not Ordinarily Resident (RNOR)".

💰 Taxability of NRIs in India

Residential Status	Indian Income	Foreign Income
Resident	Taxable	Taxable
RNOR	Taxable	Not taxable (except income from Indian business controlled from abroad)
NRI	Taxable	Not taxable

🔸 Only income earned or received in India is taxable for NRIs.

💼 What Type of Incomes Are Taxable for NRIs?

1. Salary (received in India or for services rendered in India)
2. Rental income from property in India
3. Capital gains on shares, mutual funds, or property in India
4. Interest on NRO account, FDs, etc.

✅ Interest from NRE and FCNR accounts is exempt (if conditions met).

🔍 TDS for NRIs (Section-wise Highlights for FY 2025-26)

Type of Income	Section	TDS Rate	Notes
Interest on NRO A/c	195	30%	No slab benefit
Rent paid to NRI	195	30%	Tenant must deduct TDS
Capital Gains on Property	195	12.5% (LTCG)	Plus surcharge & cess
Dividend	195	20%	DTAA benefit may reduce
Short-Term Capital Gain	111A	20%	For equity sales

🌐 Double Taxation Avoidance Agreement (DTAA)

India has signed DTAA with 90+ countries. If you're an NRI and earn in India, DTAA helps avoid tax being levied twice—once in India and once in your country of residence.

DTAA Relief Methods:

• Exemption Method – Income taxed in one country is exempt in another.
• Credit Method – Tax paid in India is credited against tax payable abroad.

🔗 Example: If you're a US-based NRI and India deducts 20% TDS on dividends, and your US tax rate is 25%, you'll only pay the 5% balance in the US due to DTAA.

⚠️ Important Note: Section 206AA

If you do not provide a valid PAN, TDS is deducted at higher of the applicable rate or 20% under Section 206AA. Hence, NRIs are advised to obtain PAN even if not filing returns.

📝 Filing ITR as an NRI: When is it Mandatory?

• If your taxable income in India exceeds ₹2.5 lakh
• If TDS is deducted, but actual tax liability is lower (to claim refund)
• If you have capital gains or other taxable Indian income

💡 Use our TDS Calculator to estimate tax on Indian income.

📌 Documents Required for NRI ITR Filing

• PAN Card
• Passport (for travel history)
• Bank statements
• Form 16A (TDS certificates)
• Property sale deeds (if applicable)
• Tax residency certificate (TRC) for DTAA

📊 Final Thoughts

NRI taxation in India is fairly structured—but can be tricky with multiple income streams, property sales, and foreign remittance rules. Understanding residency, DTAA, and TDS is crucial.