Income Tax for NRI

Updated: 10-07-2025 10:12:03 AM

How to determine the residential status of an individual?

Any citizen of India  will be considered as a Resident Indian by tax authorities if either of the following conditions are met:

• He/she has spent 182 days or more during the financial year in India.

                                                       Or

• He/she should have stayed in India for 60 days or more during the relevant financial year and also for a period of 365 days or more in the 4 years preceding the financial year.

However, an Income Tax assessee would be considered as a Resident Indian by the Income Tax Department if he/she continues to remain on the payroll of an Indian company even after going abroad for work.

Non-Resident Indian (NRI)

As per section 115C of the Income Tax Act, 1961, any individual, who is either a citizen of India or person of Indian origin but does not qualify as a “resident” Indian, is considered to be a Non-Resident Indian (NRI).  

Tax Treatment of NRI Income

An NRI assessee will be liable to pay tax in India on the following incomes:

• Any income earned in India
• Any income accrued in India

So any income from house property situated in India, capital gains from asset sale/transfer, salary income, interest income from bank deposits in India, etc., are all counted as part of the taxable income in India.

Tax Deductions and Exemptions for NRIs

• NRIs can claim same tax deduction benefits under section 80C as those available to resident Indians. Some of the common Section 80C investments/expenses are premium paid for life insurance, investments in ELSS and ULIPs, term deposits, pension schemes and so on.
• However, NRIs can not claim tax benefits on investment avenues such as Public Provident Fund (PPF), National Saving Certificate (NSC), senior citizen saving schemes etc. as NRIs are not allowed to invest in these options.
• Apart from 80C deductions, NRIs can also claim the other deductions available to resident Indians under the Income Tax Act, 1961 such as applicable deductions under section 80D, 80G, 80E, 80U and Section 54.
• Interest income earned from Foreign Currency Non Resident (FCNR) and Non Resident External (NRE) accounts is exempted from income tax.
• Dividend income received by holding the shares of Indian companies is exempt from income tax in India.
• NRIs are also allowed to claim tax exemption under section 54, section 54EC and section 54F on long-term capital gains.

Is it mandatory for NRIs to file ITR?

Any individual (resident/NRI) having net taxable income of Rs. 2.5 lakh or more is mandated to file Income tax Return (ITR) and liable to pay income tax as per the slab rate. However, in case of an NRI, only income earned or accrued in India will be considered as taxable income. Income earned by the NRI outside India is not taxable in India.

Are NRIs also mandated to pay advance tax?

If the tax liability of any NRI (based on expected income in India) exceeds Rs. 10,000 for the financial year, he is liable to pay advance tax. Interest penalty under section 234B and section 234C is also applicable if he fails to pay the advance tax on time.

What is the last date for filing ITR for an NRI?

The due date for filing the income tax return remains unchanged irrespective of the residential status of the taxpayer.

Can an NRI save TDS on interest income by filing Form 15G or Form 15H?

NRIs can not use Form 15G or 15H to prevent TDS deduction on the interest income. If the TDS deducted exceeds the net income tax liability of the NRI, they need to first file ITR along with applicable proof of the investment. Only then can NRIs claim a tax refund for excess tax paid. Further, in such situations, where the actual tax liability is lower than the TDS deducted, NRIs can also apply for an Income Tax Exemption Certificate from the Income Tax Department.