NRI Taxation in India — Residential Status, TDS, DTAA & Property Sale

Residential status decides everything else

Nothing in NRI taxation makes sense until residential status is settled, because status determines scope: a Resident is taxed on worldwide income, a Non-Resident only on income that accrues or is received in India, and Resident but Not Ordinarily Resident sits between the two. Status is decided year by year on physical presence, not on citizenship, visa or intention. The basic test is 182 days in India during the financial year, or 60 days in the year combined with 365 days across the four preceding years. The second limb is relaxed to 182 days for an Indian citizen leaving India for employment or as a crew member, which is what keeps most people who move abroad mid-year outside the net. There is a tighter rule for Indian citizens and persons of Indian origin visiting India whose Indian income exceeds ₹15 lakh, where the 60-day limb becomes 120 days — a trap for someone who spends long stretches in India while holding significant Indian income. A separate deeming provision can treat an Indian citizen with Indian income above ₹15 lakh as resident where they are not liable to tax in any other country by reason of domicile or residence, though such a person is treated as RNOR rather than fully resident. Count your days and keep evidence of them; passport stamps and boarding passes are what an assessing officer will want.

TDS on Indian income, and why it is set so high

For a non-resident, tax on Indian income is largely collected at source under section 195, and the rates are deliberately conservative because the department cannot easily recover later from someone outside the country. The consequence is systematic over-deduction, which you then reclaim by filing a return. The sharpest example is a property sale: where a resident seller has 1% deducted under section 194-IA, a non-resident seller faces deduction under section 195 at the rate applicable to the capital gain, plus surcharge and cess — and crucially it is deducted on the sale consideration rather than on the gain unless you obtain relief. That is the difference between tax on your actual profit and tax on the whole sale value. The remedy is a lower or nil deduction certificate under section 197, applied for before the transaction, which tells the buyer exactly how much to deduct. Applying for it after the sale is far harder than applying before. On the deposit side, interest on NRO accounts attracts TDS at a high rate, while interest on NRE and FCNR deposits is generally exempt for a non-resident — a status-dependent exemption that quietly ends when you return to India and become resident again.

DTAA relief, repatriation and filing

India has Double Taxation Avoidance Agreements with most countries where Indians live and work, and they do the obvious thing: prevent the same income being fully taxed twice, either by exempting it in one country or by giving credit for tax paid in the other. Relief is not automatic. You generally need a Tax Residency Certificate from your country of residence, and Form 10F, and you must be able to show you are the beneficial owner of the income. Treaty rates on interest, dividends and royalties are often lower than domestic rates, so this is worth doing rather than paying and forgetting. Moving money out has its own process: remittances from an NRO account generally require Form 15CA, accompanied by Form 15CB certified by a chartered accountant above the prescribed threshold, and there is an annual limit on repatriation from NRO balances. Filing an Indian return is not optional merely because tax was deducted — and in most cases it is actively in your interest, because over-deduction under section 195 is exactly the situation a refund exists for. If you have income under more than one head, or capital gains, you will be on ITR-2 rather than ITR-1.

The transition years, when people get it wrong

The expensive mistakes cluster around the years of moving, in both directions. In the year you leave India, you may still be resident for that whole financial year if you crossed the day thresholds before departing, which means your foreign salary for the remaining months can fall within Indian scope. In the year you return, the reverse applies, and the RNOR status is worth understanding because it can shelter foreign income for a transitional period — an RNOR is not taxed on foreign income unless it is derived from a business controlled in or a profession set up in India. Get the residential status determination right for the specific year before deciding what to declare, rather than assuming that holding an NRI bank account settles the question; the bank designation and your tax status are separate things and can disagree. Account designation is its own obligation: on becoming a non-resident, resident savings accounts should be redesignated as NRO, and on returning, NRE and FCNR accounts should be redesignated as resident accounts. Leaving them as they were is a common and avoidable irregularity, and it is the kind of inconsistency that makes an otherwise straightforward return look questionable.

Rental income, investments and the paperwork that follows

Rent from Indian property is Indian-source income and taxable here regardless of where you live or where the tenant pays you. The computation is the same as for a resident — municipal taxes deducted, a standard deduction of 30% of the net annual value, and interest on a housing loan allowed — but the collection differs, because a tenant paying rent to a non-resident is required to deduct tax at source under section 195 rather than under the lighter provision that applies to resident landlords. Many individual tenants do not know this, and the liability for failing to deduct sits with them, so it is worth telling them at the start of the tenancy rather than discovering it at assessment. On investments, a non-resident can hold shares and mutual funds in India, and needs a PAN to do almost anything. Gains are taxed under the same capital-gains provisions that apply to residents, again with collection at source. Where a DTAA gives a better rate on dividends or interest, claim it with the residency certificate rather than accepting the domestic rate by default. Keep the documentary chain — purchase contracts, bank statements showing the source of funds, and remittance records — because the questions that arise years later are almost always about where money came from rather than about the tax computation itself.

Free tools for this

• Income Tax Calculator

Guides on this topic

• Why Is My ITR Refund Delayed in 2026? (And How to Fix It)
• Missed the ITR Deadline for AY 2026-27? Your Options
• Section 80C Investments 2026: Complete Comparison — PPF vs ELSS vs NPS vs NSC vs More
• Income Tax Slab Rates AY 2026-27 (FY 2025-26) — New vs Old Regime, Rebate, Surcharge & Marginal Relief
• Form 121 Has Replaced Forms 15G and 15H — How to Stop TDS on Interest from 1 April 2026

Frequently asked questions

Is an NRI taxed on global income in India?

No. An NRI is taxed in India only on income earned or received in India (Indian salary, rent, capital gains, NRO interest). Foreign income is not taxed in India.

What TDS applies when an NRI sells property?

The buyer deducts TDS on the sale consideration at the NRI rate (higher than for residents). You can apply for a lower/nil-deduction certificate and claim any excess as a refund by filing your ITR.

Is NRE/FCNR interest taxable in India?

Interest on NRE and FCNR accounts is generally tax-free in India for an NRI, while NRO interest is taxable and subject to TDS. Verify with a CA for your status.

How many days can I stay in India without becoming a resident?

The basic test is 182 days in the financial year, or 60 days in the year plus 365 days across the four preceding years. The 60-day limb is relaxed to 182 days for an Indian citizen leaving India for employment. For Indian citizens and persons of Indian origin visiting India whose Indian income exceeds ₹15 lakh, the 60-day limb becomes 120 days instead.

Can I avoid the high TDS when selling property in India?

Not avoid, but reduce it to the correct figure. Apply for a lower or nil deduction certificate under section 197 before the sale, so the buyer deducts on the actual gain rather than on the whole sale consideration. Applying after the transaction is far harder, and the alternative is waiting to reclaim the excess as a refund.