NRI tax in India: residency, what is taxed, and how to get the excess TDS back

Status is decided afresh for every financial year under section 6 of the Income-tax Act.

• You are resident if you were in India for 182 days or more in the year, or for 60 days or more in the year and 365 days or more in the four preceding years.
• For an Indian citizen who leaves India for employment abroad or as crew of an Indian ship, and for an Indian citizen or person of Indian origin who comes on a visit, the 60 days becomes 182.
• The exception to that relaxation: a visiting citizen or PIO whose Indian income exceeds ₹15 lakh is resident at 120 days (with 365 days in the preceding four years), but is then treated as not ordinarily resident.
• An Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country by reason of domicile or residence is a deemed resident, also not ordinarily resident.
• A resident is not ordinarily resident if they were non-resident in nine of the ten preceding years, or were in India for 729 days or less in the seven preceding years.

Both the day of arrival and the day of departure count as days in India. Keep the passport stamps: this single determination decides whether your worldwide income is taxable here.

Indian income means income received in India or accruing here: salary for services rendered in India, rent from Indian property, gains on Indian assets, interest on NRO accounts and deposits, dividends from Indian companies, and business income through a connection in India.

Bank accounts. Interest on an NRE account and on FCNR deposits is exempt while you remain a person resident outside India under the foreign exchange law. Interest on an NRO account is fully taxable. The balance in an NRE account is freely repatriable; the NRO account is repatriable up to USD 1 million a financial year after tax, with Form 15CA and 15CB; see our 15CA and 15CB guide.

These are withholding rates, not the final tax. A non-resident with ₹6 lakh of NRO interest has ₹1.87 lakh deducted, while the slab tax on that income is a fraction of it; the difference comes back only through a return. For property, apply in Form 13 for a lower-deduction certificate before the sale; the mechanics are in our TDS on property guide, and the property gains calculator estimates the tax.

• The rebate under section 87A is not available, so tax starts from ₹4 lakh in the new regime.
• The basic exemption cannot be set against long-term gains or short-term gains on listed shares; those are taxed from the first rupee.
• The option of 20 percent with indexation on property bought before 23 July 2024 is for residents only; non-residents pay 12.5 percent without indexation.
• Deductions under section 80C and 80D are available in the old regime; several instruments, such as the public provident fund and senior citizen schemes, cannot be newly opened.
• Presumptive taxation under 44AD and 44ADA is not available.
• Advance tax applies where the tax after TDS is ₹10,000 or more.

India has double taxation avoidance agreements with about 90 countries. A treaty may cap the Indian tax on interest, dividends and royalties at 10 to 15 percent, give one country the sole right to tax certain income, or leave both to tax with a credit in the country of residence. To claim a treaty rate you need a tax residency certificate from the other country for the year, Form 10F filed electronically on the Indian portal, and a declaration of no permanent establishment, given to the payer before the payment so that tax is deducted at the treaty rate.

Relief is not automatic and the treaties differ: the UAE treaty is widely misread, and the US and UK treaties tax Indian rent and property gains in India regardless.

A non-resident must file if Indian income exceeds the basic exemption, and should file below it whenever tax has been deducted, because that is the only route to the refund. The form is ITR-2, or ITR-3 with business income; ITR-1 and ITR-4 are not available. The due date is 31 July. Refunds are paid only to an Indian bank account pre-validated on the portal; an NRO account serves.

On returning to India, most long-term non-residents are not ordinarily resident for two or three years, during which foreign income stays outside Indian tax. That window is the time to realise foreign gains, restructure holdings and close what need not continue. NRE and FCNR accounts must be redesignated as resident or RFC accounts on return, after which the interest becomes taxable, and once ordinarily resident, every foreign account, asset and income must be disclosed in Schedule FA, with a penalty of ₹10 lakh a year under the black money law for omission.

Our NRI return service determines status, applies the treaty and recovers excess TDS; the NRI desk handles lower-deduction certificates, repatriation and return-to-India planning.