Income Tax for NRI in India — FY 2025-26 Guide (Residential Status, DTAA & ITR)

Taxation for Non-Resident Indians (NRIs) in FY 2025-26 involves rules fundamentally different from resident Indian taxation. Your residential status determines what income gets taxed in India. The new Income Tax Act 2025 (applicable from FY 2026-27) retains the NRI taxation structure with simplified language — understanding the current framework prepares you for both years.

1. Determining Your Residential Status for FY 2025-26

Status	Condition	What Gets Taxed
Resident and Ordinarily Resident (ROR)	In India for 182+ days in FY, OR 60+ days AND 365+ days in last 4 years	Global income — India + foreign
Non-Resident (NR)	Does not meet ROR conditions	Only India-sourced income
RNOR	Returned NRI — specific conditions met	India income + foreign income from India-controlled business

Exception for Indian citizens leaving for employment: If India income exceeds ₹15 lakh and you leave for employment, the 60-day rule becomes 182 days — making it harder to become NR.

2. What India-Sourced Income is Taxable for NRIs?

• Rental income from property in India
• Capital gains from selling Indian property, shares, or mutual funds
• Interest from NRO accounts and fixed deposits in India
• Dividends from Indian companies
• Salary for services rendered in India
• Business income from operations in India

NOT taxable for NRIs: NRE account interest, FCNR deposit interest, foreign salary for services abroad, foreign business income.

3. NRO vs NRE Accounts — Tax Treatment

Feature	NRO Account	NRE Account
Purpose	India-earned income (rent, dividends)	Foreign earnings remitted to India
Interest taxable?	Yes — TDS at 30%	No — fully exempt
Repatriation	Up to $1 million/year after tax	Freely repatriable

4. NRI Selling Property in India — FY 2025-26

Type of Gain	Holding Period	Tax Rate	TDS by Buyer
Short-term capital gain	Below 2 years	As per slab (up to 30%)	30% on full consideration
Long-term capital gain	Above 2 years	12.5% (without indexation)	12.5% on gain amount

Apply for a Lower TDS Certificate (Form 13) before the sale to reduce TDS deducted. Reinvesting gains in a new residential property (Section 54) or Capital Gains Bonds (Section 54EC) can save significant tax.

5. TDS Rates on NRI Income

Income Type	TDS Rate
NRO account interest	30% + surcharge + cess
Rent received	30%
LTCG from property	12.5% on gain
Dividends from Indian companies	20% (or DTAA rate if lower)
Equity LTCG (shares/MF above ₹1.25L)	12.5%

6. DTAA — Double Tax Avoidance Agreement

India has signed DTAA with over 90 countries. Key benefits for NRIs:

• Reduced TDS rates — e.g., dividend TDS with USA is 15% instead of 20%
• Foreign tax credit — tax paid in India can be claimed as credit in your country of residence
• Tie-breaker rules for dual residents

To claim DTAA benefits, provide a Tax Residency Certificate (TRC) from your country of residence and file Form 10F with the Indian income payor.

7. Should NRIs File ITR in India?

NRIs must file ITR if total India income exceeds the basic exemption limit (₹2.5 lakh), they want to claim TDS refunds, or they have capital gains or rental income. Use ITR-2 for salary, house property, and capital gains income. Due date: 31st July 2026 (or 31st October 2026 if tax audit applies).

8. New Income Tax Act 2025 — Impact on NRIs

The new Income Tax Act 2025 applies from FY 2026-27. For NRIs:

• Residential status determination rules are retained with simplified language
• NRE account and FCNR interest exemptions are retained
• DTAA provisions continue to override domestic law
• RNOR status benefits are retained
• For FY 2025-26 filing, the existing Act applies — file as usual