How is an NRI taxed in India?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-07-28 · ~4 min read

⚡ Quick answer

An NRI (Non-Resident Indian) is taxed in India only on income that is earned or received in India — for example salary for services rendered in India, rent from Indian property, capital gains on Indian shares or property, and interest from NRO accounts. Income earned abroad is not taxed in India at all. An NRI must file an Indian ITR if their Indian income exceeds the basic exemption limit, and can use the DTAA (tax treaty) to avoid being taxed twice on the same income.

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If you're an NRI, Indian tax can feel confusing — do you pay tax here on your overseas salary? On your Indian flat's rent? On your NRE deposits? The good news is that the rule is actually simple once you grasp the core principle: India taxes an NRI only on Indian income. This guide explains what's taxable, what's exempt, how the NRE/NRO accounts differ, and how to use a tax treaty to avoid double taxation.

1The core principle

Your tax depends on your residential status. A resident is taxed on global income; an NRI is taxed in India only on income that accrues, arises or is received in India. Everything you earn and keep abroad stays outside the Indian tax net.

Your residential status is decided each year by the number of days you spend in India — broadly, you're a non-resident if you're in India for less than 182 days in the year (with some additional conditions).

2What's taxable in India for an NRI

These Indian-source incomes are taxable for an NRI:

Salary for services actually rendered in India
Rent from a house property located in India
Capital gains on Indian shares, mutual funds or property
Interest on an NRO (Non-Resident Ordinary) account and on Indian fixed deposits

⚠️ ImportantYour foreign salary, foreign business income and foreign investments are NOT taxed in India — even if you bring some of that money into India later.

3NRE, NRO and FCNR accounts

The account type changes the tax outcome, which is why NRIs keep them separate:

NRE (Non-Resident External) account interest: exempt from Indian tax
FCNR (Foreign Currency Non-Resident) deposit interest: exempt from Indian tax
NRO (Non-Resident Ordinary) account interest: taxable in India, with TDS deducted (often at 30% plus surcharge/cess, reducible under a treaty)

💡 ExamplePriya, an NRI in Dubai, earns a salary in the UAE (not taxed in India), keeps savings in an NRE account (interest exempt), and rents out a flat in Pune. Only the Pune rental income — and any NRO interest — is taxable in India; she files an Indian ITR to report it and claim back any excess TDS.

4Filing and avoiding double taxation

An NRI files ITR-2 (or ITR-3 for business income) if Indian income crosses the exemption limit, or to claim a refund of TDS. To avoid being taxed on the same income both in India and in your country of residence, use the Double Taxation Avoidance Agreement (DTAA):

Obtain a Tax Residency Certificate (TRC) from your country of residence
File Form 10F on the Indian portal
Claim treaty relief (either an exemption or a credit for tax paid in the other country)

✅ TipIf TDS was deducted on your NRO interest or property sale at a high rate, file an Indian return — you can often claim a substantial refund, especially after applying the lower DTAA rate.

Key takeaways

An NRI is taxed in India only on Indian-source income — foreign income isn't taxed here.
Taxable: Indian salary, Indian rent, capital gains on Indian assets, and NRO interest.
Exempt: NRE and FCNR account interest.
File ITR-2 if Indian income crosses the exemption limit or to reclaim excess TDS.
Use the DTAA (with a TRC and Form 10F) to avoid double taxation and lower TDS rates.

Frequently asked questions

Do NRIs have to pay tax on foreign income in India?

No — NRIs are taxed in India only on income earned or received in India. Income earned abroad is not taxable in India, though it may be taxable in the country where you are resident.

Is NRE account interest taxable in India?

No — interest on NRE and FCNR accounts is exempt from Indian income tax for an NRI. Interest on an NRO account, however, is taxable and has TDS deducted.

What TDS applies when an NRI sells property in India?

TDS on an NRI's property sale is deducted at the capital-gains rate (often 12.5% for long-term, plus surcharge and cess) — typically higher than the 1% for residents. You can apply for a lower-deduction certificate, and reclaim excess TDS by filing a return.

How does an NRI avoid double taxation?

Use the DTAA between India and your country of residence: get a Tax Residency Certificate, file Form 10F, and claim either an exemption or a credit so the same income isn't taxed twice.