NRI Taxation covers the tax rules, reporting and repatriation norms that apply to Non-Resident Indians (NRIs) who earn or invest in India. Tax liability depends on an individual’s residential status under the Income Tax Act — NRIs are ordinarily taxable only on income that accrues or arises in India. Common taxable heads for NRIs include rental income, capital gains from sale of Indian assets, interest on NRO accounts/FDRs and dividends (subject to specific rules). NRIs must also comply with TDS (Tax Deducted at Source) provisions, claim relief under applicable Double Taxation Avoidance Agreements (DTAAs), and file Indian tax returns when required. Understanding account choice (NRE / NRO / FCNR), repatriation limits, and timely documentation is essential to optimise taxes and ensure regulatory compliance.
Start by determining your residential status for tax purposes and list your Indian-source incomes. Choose account types aligned to your goals — use NRE/FCNR for fully repatriable INR/foreign-currency holdings, and NRO for Indian-source income that may require local taxation. Select investment products that match your repatriation needs and tax appetite: for example, NRE FDs/FCNR for tax-efficient deposits, PIS route for direct equities, and mutual funds for diversified exposure. Check DTAA provisions with your country of residence to understand creditability and withholding implications. Finally, engage a cross-border tax advisor or your bank’s NRI desk to structure investments, claim refunds, and prepare accurate ITRs when necessary.
Core accounts for NRIs — NRE (INR deposits, fully repatriable, interest generally tax-free), NRO (for Indian income, interest taxable), and FCNR (foreign-currency deposits to avoid forex risk).
Equity and debt mutual funds are accessible to NRIs (subject to KYC/PIS rules for some flows); pay attention to capital gains taxation and repatriation via bank accounts.
Buy listed Indian stocks through the PIS route (RBI-regulated), enabling direct market exposure while complying with reporting and repatriation norms.
Invest in government securities, corporate bonds or NCDs (subject to eligibility) for predictable income—understand tax treatment and any withholding requirements.
Direct property investment (with certain FEMA restrictions) or listed real-estate vehicles like REITs/INVITs for liquidity and professional management; capital gains and rental income are taxable in India.
Eligible NRIs (subject to minimums and investor criteria) can access AIFs, PMS or private equity for institutional-style exposure — these carry specific tax and lock-in considerations.
Interest from NRO accounts is taxable in India and may attract TDS; interest on NRE/FCNR deposits is typically tax-exempt in India for NRIs.
Capital gains from listed securities, mutual funds and property are taxed in India — short-term and long-term rates differ and some exemptions/indexation apply for property.
Dividends, rental income and business income sourced in India are taxable; TDS may be applicable at source with possible DTAA relief.
Many payments to NRIs (interest, dividends, sale proceeds) are subject to TDS; NRIs should track TDS certificates and claim refunds via ITR if over-deducted.
Manage repatriation using NRE/FCNR accounts for free movement of funds; NRO repatriation has prescribed limits and documentation requirements.
Where India has DTAA with an NRI’s country of residence, the taxpayer can claim tax credits or reduced rates — always preserve documentation and residency proofs to claim benefits.
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Individuals earning income from properties in India (residential or commercial) must comply with TDS and file ITR to report this income.
NRIs who invest in Indian equities, mutual funds, or bonds are subject to capital gains tax—making proper tax planning crucial.
Interest earned on NRO fixed deposits and savings accounts is fully taxable in India, with TDS applied at source.
Those with income abroad but financial ties in India need to ensure they are not considered 'Residents' under FEMA or Income Tax rules.
NRIs residing in countries with a Double Taxation Avoidance Agreement (DTAA) with India must understand how to claim relief effectively.
Check your residency status under the Income Tax Act (NRI, Resident, or RNOR), as it decides your taxable income in India.
Review how much tax is deducted at source (TDS) and apply Double Taxation Avoidance Agreement (DTAA) benefits, if applicable.
Work with professional advisors to optimize your tax liability, ensure compliance, and plan future investments tax-efficiently.
Evaluate income earned in India—such as rent, dividends, capital gains, or FD interest—that is subject to taxation.
Ensure timely filing of ITR in India if you earn taxable income, claim refunds, or adjust TDS already deducted.
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See how taxation rules apply differently for NRIs compared to residents
Raj, an NRI living in Dubai, earns rental income from his apartment in Mumbai and also invests in Indian mutual funds.
Raj earns ₹50,000 per month in rental income. This income is taxable in India, with 30% TDS deducted by the tenant before payment.
He invests ₹10 lakh in Indian mutual funds. When redeemed, capital gains tax applies at 20% (long-term) with indexation benefits.
Since Raj also files taxes in Dubai (where income is tax-free), he benefits from India-UAE DTAA provisions, avoiding double taxation.
By filing his Indian ITR and claiming DTAA relief, Raj manages his tax liability effectively, ensuring compliance while optimizing returns.
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