NRI Tax in India
DTAA benefits, TDS rates, capital gains on mutual funds, real estate and when India can tax your income as an NRI โ explained plainly.
Am I an NRI for tax purposes?
Under Indian income tax law (Section 6), you are a Non-Resident Indian (NRI) if you were in India for fewer than 182 days during the financial year, OR fewer than 60 days in the year and fewer than 365 days in the preceding 4 years. An NRI is taxable in India only on income that arises or accrues in India.
What Income Is Taxable in India for NRIs?
| Income type | Taxable in India? | Notes |
|---|---|---|
| Salary received abroad | No | Not taxable in India if services are rendered outside India. |
| Salary for services in India | Yes | Even if paid outside India, taxable if services rendered here. |
| Rent from Indian property | Yes | TDS of 30% deducted by tenant; NRI files ITR to claim DTAA credit. |
| Interest on NRO account | Yes (30% TDS) | TDS at 30% + surcharge + cess. Reduced under DTAA. |
| Interest on NRE account | No | Fully exempt โ no TDS, no ITR filing needed for this income. |
| Mutual fund dividends (IDCW) | Yes (20% TDS) | DTAA can reduce this rate. |
| Capital gains on mutual funds | Yes | See table below for rates. TDS deducted at source by fund house. |
| Capital gains on property | Yes (20-30%) | 20% LTCG on property held >2 years; 30% STCG otherwise. TDS by buyer. |
NRI Capital Gains on Mutual Funds (FY 2025-26)
| Fund type | Holding period | Tax rate | TDS rate |
|---|---|---|---|
| Equity funds | >1 year (LTCG) | 12.5% (above โน1.25L per year) | 12.5% |
| Equity funds | โค1 year (STCG) | 20% | 20% |
| Debt / hybrid (non-equity) | Any | Slab rate (DTAA may apply) | 30% |
TDS is deducted by the fund house before redemption proceeds reach your account. You can claim a refund in ITR if the actual tax is lower (e.g., due to DTAA).
Double Tax Avoidance Agreement (DTAA)
India has DTAA with 90+ countries. The treaty sets a maximum tax rate India can charge on specific income types (dividends, interest, capital gains) for residents of the treaty country. You can pay the lower of Indian rate or treaty rate โ and get credit for Indian TDS against your home-country tax.
DTAA rates for common NRI countries
| Country | Dividend TDS (DTAA) | Interest TDS (DTAA) | Capital gains on MF |
|---|---|---|---|
| USA | 25% | 15% | Domestic rate (no reduction) |
| UK | 15% | 15% | Domestic rate |
| UAE | No DTAA on dividends | 12.5% | No relief (UAE has no income tax) |
| Singapore | 15% | 15% | Domestic rate |
| Canada | 25% | 15% | Domestic rate |
| Australia | 15% | 15% | Domestic rate |
| Germany | 10% | 10% | Domestic rate |
Rates are indicative. Actual relief depends on specific treaty provisions and the Tax Residency Certificate (TRC) you submit. Always verify with your CA.
ITR Filing for NRIs
NRIs must file an Indian ITR (typically ITR-2) if:
- Total Indian income exceeds โน2.5 lakh, or
- TDS was deducted and you want a refund, or
- You have capital gains from India (even if loss โ needed to carry forward)
Many NRIs with only NRE interest income have no ITR obligation since NRE interest is tax-exempt.
Based on Income Tax Act 1961, Finance Act 2025 and applicable DTAA treaties. For individual tax advice, consult a CA. Last updated: April 2025.