NRI Taxation In India – Residential Status, Tax Slabs, Rules, and Deductions Explained

Moving back to India after years abroad is a significant transition, both financially and personally. In addition to lifestyle changes, it is important to reassess your financial and tax responsibilities.

One of the key things to figure out is your tax status, as it determines what part of your income is taxable in India. According to the Income Tax Act, 1961, NRIs are taxed only on income earned or received in India, like salary, rent, capital gains, or interest from NRO accounts.

Read on to learn more about NRI taxation in India.

Key Takeaways

• Only income earned or received in India is taxable for NRIs.
• Residential status (ROR/RNOR/NRI) decides your tax obligations.
• New tax regime offers higher exemption limits up to ₹4 lakh (FY 2025–26).
• NRIs can claim deductions under Sections 80C, 80D, 80E, and more.

How Income Tax Works for NRIs in India

If you are an NRI, not all of your income is taxed in India. Only the income that is earned in India or received in India is taxable under Indian law. This means income from abroad is usually not taxed here:

Here are some common examples of income that is taxable for NRIs:

• Salary: If you earn a salary in India or for work done in India, it is taxable here.
• Rental income: If you own property in India and earn rent from it, that rent is taxed in India.
• Capital gains: If you sell property, shares, or other assets located in India and make a profit, that profit is taxable.
• Interest income:
  • Interest from NRO (Non-Resident Ordinary) accounts is taxed.
  • Interest from NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts is not taxed.

NRI Taxation in India: How to Know Your Residential Status

When it comes to NRI taxes, your residential status decides what income India can tax. There are two types of resident status:

ROR – Resident and Ordinarily Resident

If you are classified as a Resident and Ordinarily Resident (ROR) in India, it means you are considered a full resident for tax purposes. In this case:

• India will tax your total income, both from India and abroad.
• You also need to disclose any foreign assets or income, such as overseas bank accounts, properties or investments, when filing your Indian tax return.
• If you have already paid tax on the same income in another country, you may be able to claim relief under the Double Taxation Avoidance Agreement (DTAA), so you are not taxed twice on the same income.

You qualify as ROR if:

• You stayed in India for 182 days or more in a financial year, or
• You stayed in India for more than 60 days in a year and more than 365 days in the last 4 years, and
• You were a resident in 2 of the last 10 years, and
• You spent more than 730 days in India in the last 7 years.

RNOR – Resident but Not Ordinarily Resident

If you are classified as a Resident but Not Ordinarily Resident (RNOR), you are considered a partial resident for tax purposes. This means:

• India will tax only the income you earn in the country.
• Your foreign income is not taxed, unless it comes from a business or profession that is controlled from India.

You are considered RNOR in either of the following situations:

• You stayed in India for 182 days or more during a financial year (so you qualify as a resident), but you don’t meet both of these additional conditions to be treated as a full resident (ROR):
  • You were not a resident for at least 2 out of the last 10 years, or
  • You didn’t stay in India for at least 730 days during the last 7 years.

• You are an Indian citizen or a Person of Indian Origin (PIO) visiting India.
• Your Indian income exceeds INR 15 lakh in the financial year.
• You stayed in India for 120 to 181 days during that year.
• You are not liable to pay tax in any other country.

Read: Residential Status in Taxation – ROR vs RNOR: Complete Guide with Rules and Examples

Income Tax Slabs for NRI Taxation

Here’s a quick look at the income tax slabs applicable to Non-Resident Indians (NRIs) under the Indian Income Tax Act.

Income Tax Slabs under the Old Tax Regime – FY 2025–26

Income Tax Slab (in INR)	Tax Rate
Up to 2,50,000	Nil
2.50,001 to 5,00,000	5% above 2,50,000
5,00,001 to 10,00,000	12,500 + 20% above 5,00,000
Above 10,00,000	1,12,500 + 30% above 10,00,000
Source:	IT Department

Income Tax Slabs for the Default New Tax Regime – FY 2024–25

Income Tax Slab (in INR)	Tax Rate
Up to 3,00,000	Nil
3,00,001 to 7,00,000	5%
7,00,001 to 10,00,000	10%
10,00,001 to 12,00,000	15%
12,00,001 to 15,00,000	20%
Above INR 15,00,000	30%
Source:	IT Department

Income Tax Slabs for the Default New Tax Regime – FY 2025–26

Income Tax Slab (in INR)	Tax Rate
Up to 4,00,000	Nil
4,00,001 to 8,00,000	5%
8,00,001 to 12,00,000	10%
12,00,001 to 16,00,000	15%
16,00,001 to 20,00,000	20%
20,00,001 to 24,00,000	25%
Above INR 24,00,000	30%
Source:	IT Department

Surcharge Rates for NRIs

If you are an NRI and your total income is more than INR 50 lakhs in a financial year, an extra charge called a surcharge is added to your income tax. Here’s how it works:

Total Income (in INR)	Surcharge Rate (Existing Tax Regime)	Surcharge Rate (New Tax Regime)
50 lakhs to 1 crore	10% of your income tax	10% of your income tax
1 crore to 2 crores	15% of your income tax	15% of your income tax
2 crores to 5 crores	25% of your income tax	25% of your income tax
5 crores and above	37% of your income tax	25% of your income tax

Under the new tax regime, the maximum surcharge is capped at 25%, even if your income is more than INR 5 crore.

Read: Checklist For Returning Indian NRI -What to Do Before Moving Back

Tax Deductions for NRIs in India

NRIs can reduce their tax liability in India by claiming various deductions under the Income Tax Act. These can help lower taxable income through eligible investments, insurance, loans and donations.

Deductions under Section 80C – Up to INR 1.5 lakh

NRIs can claim the following under Section 80C:

1. Life Insurance Premium: For self, spouse or children (premium should be less than 10% of sum assured).
2. Children’s Tuition Fees: For full-time education in India (up to 2 children).
3. Home Loan Principal Repayment: On residential property in India.
4. Stamp Duty & Registration: Costs on property purchase in India.
5. ULIPs: Insurance plus market-linked investment plans.
6. ELSS Funds: Equity mutual funds with a mandatory 3-year lock-in period.

Other Key Deductions for NRIs

Section	Deduction Type	Limit/Notes
80D	Health insurance premium	INR 25,000 (regular), INR 50,000 for senior citizens
80E	Interest on the education loan	No limit
80G	Donations to charities	50% or 100% of the donation (eligible NGOs only)
80TTA	Interest on savings account	Up to INR 10,000, but not for FDs
24(b)	Interest on home loan	Up to INR 2 lakh
80CCD (1)	NPS contribution	Up to 10% of income (within the overall limit of INR 1.5 lakhs)
80CCD (1B)	Extra NPS deduction	Additional INR 50,000 (over and above 80C)

Other Tax Benefits

Property Tax Deduction: Property tax paid on rental property is deductible from rental income.

Tax-Free Gifts

• Gifts received from relatives are completely tax-exempt.
• Gifts from non-relatives are tax-free up to INR 50,000 per financial year.
• If the value of gifts from non-relatives exceeds INR 50,000, the entire amount becomes taxable.

Summing Up

Understanding NRI taxation in India is important to stay compliant and avoid unexpected issues. While the rules can seem complex at first, knowing your residential status, the types of income that are taxable and the benefits available under Double Taxation Avoidance Agreements (DTAA) can help you plan better.

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