A Complete Guide to Taxable Income for NRIs in India

Moving abroad doesn’t automatically end your tax obligations in India. Your taxability in India is primarily determined by your residential status under the provision of the Income Tax Act. As long as you have income from India, such as rental income from property ownership, investing in Indian stocks and mutual funds, earning income through pensions, and so forth, you could be liable for payment of tax in India. It is all about how the income originates and not where you reside.

Taxable income for NRIs in India includes income that is earned or received in India, while income earned outside the country is generally not taxed in India. In this blog, we’ll explain which income is taxable, what income remains exempt, and the tax slabs that apply to NRIs.

Which Types of Income are Taxable for NRIs?

As an NRI, only income that has its source in India is usually taxable. Here’s a closer look at the different types of income that fall under the Indian tax net.

1. Salary Income

If you receive a salary for work done in India, that income is taxable in India. Whether the salary is credited to an Indian bank account or a foreign bank account is generally not relevant. What matters is where the services are rendered.

Example:

Suppose you work for a company based in the UAE but spend two months in India working on a project. The salary earned for those two months may be taxable in India.

2. Rental Income from Property in India

If you own a house, apartment, or commercial property in India and earn rent from it, that rental income is taxable. You can also claim eligible deductions available under the Income Tax Act before calculating your final tax liability.

Example:

An NRI living in Australia owns an apartment in Hyderabad that is rented out every month. The rent received from that property is taxable in India.

3. Capital Gains from Indian Assets

The earnings that an individual makes by selling assets, such as any property in India, stocks, or mutual funds, will be taxed. The tax treatment depends upon the nature of the asset, its holding period and the applicable provisions of the Income-tax Act.

Example:

If you sell an investment property in Pune or redeem equity mutual funds at a profit, you may have to pay capital gains tax based on the applicable rules.

4. Interest Income

Certain types of interest earned in India are also taxable for NRIs. This includes interest received from NRO accounts, fixed deposits linked to NRO accounts, and some debt investments.

However, interest earned on eligible NRE and FCNR deposits is generally exempt from tax as long as the prescribed conditions are satisfied.

Example:

If you have an NRO fixed deposit that earns annual interest, that interest is taxable in India.

5. Dividend Income

If you receive dividends from shares of Indian companies or mutual fund investments, the dividend income is taxable in the hands of the shareholder at the applicable tax rates and may also be subject to TDS, wherever applicable.

Example:

An NRI holding shares of an Indian listed company receives dividends during the financial year. The dividend amount is taxable and should be considered while filing the income tax return.

6. Business or Professional Income

If you own a business that operates from India or provides professional services within India, the income earned from those activities is taxable. This rule applies even if you are residing overseas because the source of the income is in India.

Example:

An NRI based in Dubai provides architectural consultancy through an office in Bengaluru. The fees earned from Indian clients are taxable in India.

7. Pension Income

In case a person receives a pension from the services performed in India, it would be taxable in India. The manner of taxation might vary according to whether it is a government pension or a private one, but still it will form part of taxable income.

Example:

An NRI who retired from a private company in India and now lives in Canada continues to receive a monthly pension. That pension is generally taxable in India.

8. Other Income

Apart from the above, certain other incomes earned in India may also be taxable, including:

• Family pension
• Royalty income
• Fees for technical services
• Commission income
• Lottery or game show winnings
• Any other income that accrues, arises or is deemed to accrue or arise in India.

The tax treatment may vary depending on the nature of the income and the applicable provisions under the Income Tax Act.

Income That is Exempt from Tax for NRIs

Not every rupee earned by an NRI is taxable in India. Some common examples include:

• Salary earned for employment carried out completely outside India.
• Business income earned and received outside India without any business connection in India.
• Income earned and received outside India from foreign investments.
• Interest earned on eligible NRE accounts.
• Interest earned on eligible FCNR deposits while maintaining NRI status.
• Gifts received from specified relatives, subject to applicable tax provisions.

Old vs. New Tax Regime for NRIs

Before filing your income tax return, it’s important to understand the income tax slab for NRIs in India under both the old and new tax regimes.

Income Tax Slabs as per Old Tax Regime (FY 2025-26)

Income Tax Slabs as per New Tax Regime (FY 2025-26)

Deductions Available for NRIs

If you have earned taxable income in India, do not forget the deductions that you may be eligible to claim. Here are a few deductions that NRIs commonly claim.

Section 80C

One of the most popular tax-saving provisions, Section 80C, lets NRIs claim deductions of up to ₹1.5 lakh in a financial year. The deduction can be claimed based on various investments and expenses as follows:

• Life insurance premiums
• ELSS (Equity Linked Savings Scheme) investments
• Tuition fees paid for children studying in India
• Home loan principal repayment
• Stamp duty and registration charges are paid while buying a residential property

Section 80D

Health insurance premiums can also help lower your tax outgo. If you’ve purchased a policy for yourself, your spouse, children, or parents, you may be able to claim a deduction under Section 80D, subject to the prescribed limits and conditions.

Section 80E

If you are paying back a loan related to your education, the interest paid on such a loan can be claimed as a deduction under Section 80E. Unlike many other deductions, there is no monetary ceiling on the amount of interest you can claim.

Section 80G

If you’ve contributed to eligible charitable organisations or notified relief funds, you may also be entitled to a deduction under Section 80G.

Conclusion

Every NRI’s financial situation is different, so there’s no one-size-fits-all answer when it comes to taxation. The important thing is to identify which of your income sources are taxable in India and understand the rules that apply to them. Doing so can help you avoid errors and file your taxes with greater confidence.

Disclaimer - The information provided in this blog is intended solely for educational and informational purposes and should not be construed as investment advice, financial advice, tax advice, legal advice or a recommendation to buy, sell or hold any financial product or security. The regulatory, taxation, repatriation and investment-related information discussed herein is based on the laws, regulations and guidelines prevailing as on the date of publication and is subject to change without notice. Investments in securities and market-linked instruments are subject to market risks. Readers are advised to consult qualified financial, tax, legal and other professional advisors before making any investment decisions. Past performance and market trends are not indicative of future results.

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