Income Tax for NRI in India

What is NRI Tax in India?

NRI (Non-Resident Indian) tax refers to the tax liabilities of Indians who live outside India for more than 182 days in a financial year. NRIs are taxed only on their income earned in India, such as:

• Salary
• Rental income
• Interest from Indian bank accounts
• Capital gains from Indian assets

NRIs are not taxed on income earned abroad, but they must file tax returns if their income in India exceeds the taxable limit. NRIs can also claim tax exemptions and deductions, similar to resident Indians. 

Who is an NRI in India?

An NRI, or Non-Resident Indian, is defined as an Indian citizen who does not meet the residency criteria for a financial year. Specifically, an individual is considered an NRI if they do not stay in India for:

• More than 182 days during the financial year.
• More than 60 days during the current year and 365 days during the preceding four years.

For tax purposes, residency is assessed based on days spent in India over the last year and preceding years.

Different Residential Status in India

The Income Tax Act classifies individuals into:

1. Resident and Ordinarily Resident (ROR):
   • Resides in India for 182+ days in the financial year or has stayed 365 days over 4 preceding years and 60 days in the current year.
   • Global income is taxable.
2. Resident but Not Ordinarily Resident (RNOR):
   • Has been a non-resident in 9 out of 10 preceding years or spent less than 729 days in India in the last 7 years.
   • Only income earned in India or from business controlled here is taxable.
3. Non-Resident Indian (NRI):
   • An Indian citizen who resides outside India for employment, business, or other purposes for 182+ days in a financial year.
   • Residency status is determined based on the number of days spent in India.
4. Person of Indian Origin (PIO):
   • An individual (or their parents/grandparents) who held Indian citizenship at any point but has acquired foreign citizenship.
   • They are eligible for certain tax exemptions similar to NRIs.
5. Overseas Citizen of India (OCI):
   • A foreign citizen of Indian origin who holds an OCI card.
   • OCIs have the same tax treatment as NRIs.

Finance Act 2020 Amendments 

• Deemed Residency: Indian citizens earning over ₹15 lakh from Indian sources are deemed residents if they are not liable to pay taxes in any other country.
• RNOR Definition: The definition of RNOR has been amended to include certain Indian citizens and Persons of Indian Origin (PIOs) visiting India, impacting their tax liabilities and benefits under Double Tax Avoidance Agreements (DTAA).

Taxable and Non-Taxable Income in India

Key Notes for NRIs:

• Tax Applicability: NRIs are taxed only on income earned or accrued in India.
• Non-Taxable Items: Gifts from relatives, inheritances, and interest on NRE/FCNR accounts are significant exemptions.
• Rental Deductions: NRIs can claim a standard deduction of 30% on rental income along with property taxes paid.

Income Tax Slab for NRI in India for 2025 (FY 2024-25)

For the financial year 2024-25, NRIs can choose between the Old Tax Regime and the New Tax Regime. Each regime has its own set of tax slabs and benefits, allowing taxpayers to select the one that best fits their financial situation.

1. Old Tax Regime

   The old tax regime allows for various deductions and exemptions, which can reduce taxable income. The income tax slabs under the old regime for individuals below 60 years are as follows:

   Income Range (INR)	Tax Rate
   Up to ₹2,50,000	Nil
   ₹2,50,001 - ₹5,00,000	5%
   ₹5,00,001 - ₹10,00,000	20%
   Above ₹10,00,000	30%

   Key Features:

   • Deductions under sections like 80C (investments), 80D (health insurance), etc., can be claimed.
   • Standard deduction of ₹50,000 is available for salaried individuals.

2. New Tax Regime

   The new tax regime offers lower tax rates but removes most deductions and exemptions. The revised income tax slabs under the new regime for FY 2024-25 are:

   Income Range (INR)	Tax Rate
   Up to ₹3,00,000	Nil
   ₹3,00,001 - ₹7,00,000	5%
   ₹7,00,001 - ₹10,00,000	10%
   ₹10,00,001 - ₹12,00,000	15%
   ₹12,00,001 - ₹15,00,000	20%
   Above ₹15,00,000	30%

   Key Features:

   • Increased standard deduction to ₹75,000 per year.
   • No deductions under sections like 80C are available.

Cess and Surcharge on Income Tax in India for 2025 (FY 2024-25)

In addition to the basic tax rates applicable to NRIs under both regimes:

• Cess

  A Health and Education Cess of 4% is levied on the total tax payable.

• Surcharge

  A surcharge may apply based on the total taxable income:

  Income Slab (₹)	Surcharge on Dividend Income & Specified Capital Gains	Surcharge on Other Income
  Less than 50 lakh	Nil	Nil
  50 lakh – 1 crore	10%	10%
  1 crore – 2 crore	15%	15%
  2 crore – 5 crore	15%	25%
  Above 5 crore	15%	37% (capped at 25% for certain income sources)

This means that an NRI with a taxable income of ₹1.2 crore would pay a basic tax according to the slabs plus a surcharge of 15% on the amount exceeding ₹1 crore.

Special NRI Taxation Provisions in India for 2025

NRIs can benefit from special tax provisions for certain types of income, which are taxed at different rates than the regular NRI income tax slabs. Below is a simplified table outlining these provisions:

Points to Remember Regarding Special Provisions

1. Holding Period: The holding period for determining whether an asset qualifies for long-term or short-term capital gain has been streamlined: 
   • 12 months for listed securities, and 
   • 24 months for other assets.
2. Double Taxation Avoidance Agreement (DTAA): If you're taxed on the same income in both India and your resident country, you can avail of treaty benefits or Foreign Tax Credit (FTC) if your country has signed a DTAA with India.
3. Exemption on Long-Term Capital Gains: NRIs are exempt from taxes on long-term capital gains from specified foreign exchange assets, provided the proceeds are reinvested in Indian assets like shares, debentures, or bank deposits​.

Filing Income Tax Returns (ITR)

NRIs must file their income tax returns if their total income exceeds ₹2.5 lakh (if chosen old tax regime) or ₹3 lakhs (if chosen new tax regime) if they wish to claim a refund on TDS (Tax Deducted at Source). The last date for filing an ITR is typically July 31st unless extended by the government.

Example Scenario:

Consider Srishti, who works in the USA and has a TDS entry of ₹20,000 on interest earned from her NRO account. She has opted for old tax regime for FY 2024-25 (AY 2025-26). Since her total income from Indian sources is below ₹2.5 lakh, she does not owe any tax but must file an ITR to claim her TDS refund.

Advance Tax Payments for NRI Tax in India

NRIs are required to pay advance tax if their total tax liability exceeds ₹10,000 during the financial year. Advance tax is payable in installments as follows:

Failure to pay advance tax may result in interest penalties under Sections 234B and 234C of the Income Tax Act. 

Conclusion

NRIs are subject to income tax in India based on their income earned or received within the country. It’s essential to understand the tax residency rules, applicable tax rates, and exemptions. Proper planning and compliance with Indian tax laws can help NRIs manage their tax liabilities efficiently. Use reliable tools like income tax calculator to simplify calculations and ensure accurate filings.