The single most important fact about NRI taxation is also the most misunderstood: whether you're an NRI at all is decided by how many DAYS you spent in India, not by your citizenship or where you live. Get that day-count wrong and India can tax your worldwide income; get it right and India taxes only what you earn on its soil.
The residency test — the part that actually matters
You're a non-resident for a financial year if you spent less than 182 days in India that year (with a stricter 120-day rule for people earning above ₹15 lakh of Indian income who also spent enough time abroad in prior years). There's also an in-between status — RNOR (Resident but Not Ordinarily Resident) — that many returning NRIs fall into for a year or two, which keeps foreign income tax-free during the transition back.
Check your residency statusWhat India taxes for an NRI
Once you're a confirmed NRI, India taxes only income that arises or accrues IN India:
- Rent from Indian property, and capital gains on selling Indian property or shares.
- Interest from NRO accounts and Indian deposits (NRE and FCNR interest is exempt).
- Dividends from Indian companies, and salary for work actually done in India.
- NOT taxed by India: your foreign salary, foreign investments and foreign bank interest.
The TDS trap
For NRIs, tax is often deducted at source at high flat rates before you ever see the money — around 30% on NRO interest, and TDS on a property sale that can be far more than your actual tax due. The money isn't lost: you claim the excess back by filing an Indian tax return. But many NRIs never file, and simply forfeit refunds they were owed.
Estimate your Indian taxDon't get taxed twice
If your country of residence also taxes the same Indian income, the Double Taxation Avoidance Agreement (DTAA) between India and that country lets you offset one against the other, so you don't pay full tax in both places. Claiming it needs a Tax Residency Certificate from your country of residence.
NRI tax is simpler than it feels once you hold two anchors: your STATUS is a day-count (re-check it every year), and your LIABILITY is limited to Indian-source income. File a return even when TDS was deducted — that's how you reclaim what was over-withheld. Because the edge cases (RNOR, the 120-day rule, DTAA) get technical fast, confirm the specifics with a qualified advisor before a big transaction like selling property.
Frequently asked questions
- Do NRIs pay tax on foreign income in India?
- No. A confirmed non-resident is taxed in India only on income that arises in India — Indian rent, capital gains, NRO interest, dividends, or salary for work done in India. Foreign salary and foreign investments are not taxed by India.
- How is NRI status decided?
- By days spent in India during the financial year — generally under 182 days makes you a non-resident (a stricter 120-day rule applies to those with over ₹15 lakh of Indian income). It's a residency day-count, not a matter of citizenship.
- Should an NRI file an income tax return in India?
- Usually yes — especially if TDS was deducted (on NRO interest or a property sale) at rates higher than your actual liability. Filing is how you claim the refund; skipping it forfeits money you were owed.