Sharda Associates provides skilled income tax and NRI taxation services throughout India, assisting individuals in filing accurate tax forms, calculating tax liabilities, and managing cross-border income effectively. Our professional CA- certified help NRIs with tax planning, return filing, capital gains, rental income, and ensuring compliance with the latest Income Tax Act regulations.
If you are a Non-Resident Indian (NRI), your global income is not automatically taxable in India. However, any money generated or received from Indian sources may be. This article describes the taxable income regulations for NRIs, including salary, residential property, rental income, capital gains, business income, interest income, applicable tax rates, deductions, and return filing procedures, to assist you in remaining completely compliant with Indian tax laws.
Who Is Considered an NRI for Tax Purposes?
A person’s residential status under the Income Tax Act affects whether they are taxed as a resident or a non-resident Indian. In general, if a person does not meet the minimum stay criteria in India during a fiscal year, they are considered an NRI. For NRIs, only income produced in India or derived from an Indian source is taxable; global income received outside of India is normally not taxed in India.
Income from Salary
Salary income is taxable in India if the services are really performed in India, regardless of the employee’s residency status. This means that even if an NRI works physically in India, the salary will be taxed in India. However, if a resident of India works for the Government of India and provides services outside of Indian territory, that compensation is still taxable in India—with the exception of diplomats and ambassadors, whose wages are exempt from tax.
For example, if someone works on an Indian company project while physically based abroad and receives their compensation through a foreign account, that income is often taxed based on where the services were done rather than where the salary was deposited.
Income from House Property
An NRI’s rental or notional income from a property or land in India is taxed, and it is computed in the same way as it would for an Indian resident. Whether the property is rented out or vacant, the NRI can deduct 30% of the rental income, municipal property taxes paid, and interest on a house loan, if applicable. Section 80C deductions are also allowed, including for the principal repayment of a house loan as well as stamp duty and registration fees paid while purchasing the property. This income is taxed based on the applicable income tax slab rates.
TDS on Rental Payments Made to an NRI
When a resident tenant pays rent to an NRI landlord, the renter must deduct TDS at 30% before making the payment, regardless of whether the rent is deposited to an Indian or an overseas account. For example, if a renter pays ₹30,000 monthly rent to an NRI landlord, ₹9,000 must be deducted as TDS before the balance is paid. The individual making the remittance must also file Form 15CA online with the Income Tax Department, and in many situations, a Form 15CB certificate from a Chartered Accountant is necessary prior to filing Form 15CA.
When Is Form 15CB Not Required?
Form 15CB can be skipped in certain situations, such as when the remittance does not exceed ₹500,000 in a financial year (only Form 15CA is required), when a lower TDS deduction certificate is obtained from the Assessing Officer under Section 197, or when the transaction falls under the 28 specified categories listed in Rule 37BB of the Income Tax Rules. In most other cross-border remittance cases, both a CA certificate (Form 15CB) and an online Form 15CA file are required.
Income from Other Sources
NRIs must pay taxes on the interest they earn on fixed deposits and savings accounts kept in Indian banks. However, interest on NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts is tax-free, whereas interest on NRO (Non-Resident Ordinary) accounts is completely taxable in India.
Income from Business and Profession
Any profit made by an NRI from a business established or controlled in India is taxable under Indian income tax legislation, regardless of the NRI’s country of residency.
Income from Capital Gains
Capital gains on the sale of any capital asset located in India, including bonds, securities, and immovable property, are taxable in India for non-resident Indians. When a residential property is sold and long-term capital gains are realized, the buyer must deduct TDS at 20%. However, an NRI can avoid long-term capital gains tax by reinvesting the earnings in another residential property under Section 54 or designated capital gains bonds under Section 54EC.
Special Tax Provisions for NRI Investment Income
When an NRI invests in specific Indian assets, the resulting investment income is taxed at a flat 20%. If the stated investment income is the NRI’s sole source of income for the fiscal year and TDS has already been deducted on it, the NRI is not obliged to file an income tax return for that year. This investment income does not qualify for a Section 80 deduction.
When purchased in foreign currency, the following assets are eligible for this special treatment: shares in an Indian public or private company, debentures issued by a listed Indian public company, deposits with Indian banking institutions and public companies, all Central Government securities, and other notified Central Government assets.
Special Provision for Long-Term Capital Gains on Foreign Currency Assets
Long-term capital gains from the sale of the foreign-currency assets listed above are not eligible for indexation or exemptions under Section 80. However, Section 115F provides an exemption if the gains are reinvested within the prescribed time period in shares of an Indian company, debentures of an Indian public company, deposits with Indian banks or public corporations, Central Government securities, or specified National Savings Certificates (NSC VI and VII issues).
According to this provision, if the cost of the new asset purchased is less than the net selling price, the exemption is granted proportionally. If the newly purchased asset is transferred or converted to cash within three years, the previously exempted gain is taxed in the year of transfer. These special provisions remain accessible to an NRI even after they become a resident of India, as long as a declaration is submitted to the Assessing Officer prior to the asset being converted. An NRI may also choose to opt out of these special provisions, in which case investment income and long-term capital gains will be taxed in accordance with the Income Tax Act.
Why Choose Sharda Associates for NRI Tax Filing
- Complete NRI Income Classification: correct categorization of wage, rental, business, and capital gains income under Indian tax law.
- TDS and Form 15CA/15CB Assistance: end-to-end support for remittance compliance and CA certification.
- Capital Gains Exemption Planning: Advice on Sections 54, 54EC, and 115F to Legally Reduce Tax Liability
- DTAA Guidance—assistance in implementing Double Taxation Avoidance Agreement benefits where applicable.
- We provide fast and accurate ITR filing for NRIs, preparing and e-filing their taxes within 48 hours.
- We also offer over 45,500 reports and filings. Delivered: trustworthy taxation expertise across India.
Conclusion
Understanding NRI taxation is critical to ensuring that you pay the appropriate tax on your India-sourced income while taking advantage of applicable exemptions, deductions, and DTAA provisions. Proper tax planning and timely income tax return filing help to save excessive TDS, prevent penalties, and ensure complete compliance with Indian tax regulations.
Sharda Associates has helped thousands of NRIs with income tax returns, capital gains tax planning, DTAA consultation, and general tax compliance. Our skilled Chartered Accountants offer precise, hassle-free solutions tailored to your financial requirements. For expert NRI tax guidance and fast return submission, contact +91 89899 77769
Frequently Asked Questions
Q1: Is an NRI’s overseas income taxed in India?
No, income earned by an NRI outside of India is generally not taxable in India; only income earned or arising in India is subject to tax.
Q2. Is rental income from a residence in India taxable for an NRI?
Yes, rental income from an Indian property is completely taxed for an NRI, with a standard deduction of 30% and a deduction for home loan interest.
Q3. What is the TDS rate for rent paid to an NRI landlord?
Tenants must deduct 30% TDS on rent paid to an NRI landlord before remitting the remaining amount.
Q4: Is interest on NRE accounts taxable in India?
No, interest on NRE and FCNR accounts is tax-free in India; however, interest on NRO accounts is totally taxable.
Q5. What is the TDS rate on long-term capital gains from selling real estate in India?
The buyer must deduct 20% TDS on long-term capital gains arising from an NRI’s sale of residential property.
Q6. Can an NRI claim an exemption on capital gains from selling a property?
Yes, an exemption can be claimed under Section 54 by reinvesting in another residential property or under Section 54EC by investing in certain capital gains bonds.
Q7. When is Form 15CB not necessary for remittances to NRIs?
Form 15CB is not required for remittances under ₹500,000 in a financial year, if a lower TDS certificate under Section 197 applies, or if the transaction comes under Rule 37BB’s specified list.
Q8: What is the tax rate on specified investment income for NRIs?
Specified investment income produced by an NRI on notified Indian assets purchased in foreign currency is taxed at a 20% flat rate.
Q9. Is an NRI required to submit an income tax return if just investment income is earned?
No, if specified investment income is the NRI’s only income for the year and TDS has been fully deducted, a return is not required.
Q10. How can Sharda Associates assist NRIs with tax returns?
Sharda Associates assists NRIs in correctly calculating taxable income, managing TDS and Form 15CA/15CB compliance, claiming capital gains exemptions, and filing forms within 48 hours.