NRI Tax in India 2026: What Is Taxable, What Is Exempt and When to File

Being an NRI does not mean you stop paying tax in India. It means you pay Indian tax only on income that arises in India. That distinction matters, because millions of NRIs hold Indian bank accounts, mutual funds, property and family ties back home. This guide makes it clear what is taxable, what TDS applies, and when you must file a return. As you read, you can run your own figures through the NRI tax calculator.

Who is an NRI for tax purposes?

You are a Non-Resident Indian for a given financial year if you spent fewer than 182 days in India that year. From FY 2020-21 a second test applies: if you stayed fewer than 120 days but your Indian income crosses 15 lakh, the deemed-resident rule can change how you are treated. Because the count resets every year, check your status at the start of each financial year rather than assuming last year's answer still holds. The Income Tax Department sets out the full residential status test.

What Indian income is taxable for NRIs?

The rule is simple in principle: income that arises or accrues in India is taxable, and income earned abroad is not. Taxable Indian income includes salary for work done in India, rent from Indian property, capital gains on Indian shares, funds and property, interest on NRO accounts and Indian fixed deposits, dividends from Indian companies, and any business income from India. Outside the net sit your foreign salary, interest on NRE and FCNR deposits, foreign dividends, and capital gains on foreign assets that you do not bring into India.

NRE vs NRO, the difference that decides your tax

The two account types do very different jobs. An NRE (Non-Resident External) account is funded with foreign currency, its interest is fully tax-free in India, and both interest and principal are freely repatriable. It is the right home for money you earn abroad. An NRO (Non-Resident Ordinary) account is built for income that arises in India such as rent and dividends. Its interest is taxable, 30 percent TDS is deducted, and you can repatriate up to one million dollars a year with a CA certificate. Most NRIs should hold both: NRE for foreign earnings, NRO for Indian income.

TDS rates on NRI income in 2026

Tax on NRI income is usually deducted at source before you ever see the money. The headline rates look like this:

TDS is only an advance. If the tax actually due on your income is lower than the amount deducted, you claim the difference back as a refund when you file. That is why many NRIs who only earn a little Indian interest still file a return: to recover the 30 percent that was withheld.

DTAA, your protection against double tax

India has Double Tax Avoidance Agreements with more than 90 countries, including the UAE, USA, UK, Canada, Australia, Singapore, Germany and the Netherlands. DTAA does two useful things. It can lower the TDS rate on dividends, interest and royalties, and it gives you credit in your country of residence for tax already paid in India, so you are not taxed in full on both sides. Take a US-based NRI with Indian rental income: India taxes the rent, the US taxes worldwide income, but the US grants a credit for the Indian tax paid, so the rent is not taxed twice over. To claim DTAA benefits, submit a Tax Residency Certificate from your country to the Indian payer.

Capital gains for NRIs in 2026

Budget 2024 reset the capital gains rules from 23 July 2024, and the same rates apply to NRIs. On listed equity and equity mutual funds, short-term gains held under a year are taxed at 20 percent, and long-term gains over a year at 12.5 percent on the amount above the 1.25 lakh annual exemption. On property, long-term gains are taxed at a flat 12.5 percent without indexation, while short-term property gains are taxed at your applicable slab rate. There is a special wrinkle for property: when a buyer purchases from an NRI seller, the buyer must deduct TDS on the sale, at 12.5 percent for long-term and at the slab-based rate for short-term, and deposit it with the government. Read the full detail in our capital gains tax guide, and work out a specific case in the capital gains calculator.

When must an NRI file an ITR?

You must file an Indian return if your Indian income before TDS is above 2.5 lakh, if TDS was deducted and you want a refund, if you have Indian capital gains, or if you hold unlisted shares. The due date is July 31 for the previous financial year. Most NRIs use ITR-2, which covers salary, house property, capital gains and other income, and switch to ITR-3 only if they run a business in India. Check the slab maths first with the salary and tax calculator.

Should NRIs keep money in India or abroad?

It comes down to the after-tax return. An NRO fixed deposit at 6.5 to 7 percent loses 30 percent to TDS, leaving roughly 4.55 to 4.9 percent net. A UAE bank paying 4 to 5 percent tax-free, or a US high-yield savings account near 4.5 to 5 percent, can match or beat that on a net basis. Keeping money in India makes most sense when you plan to return, when you have Indian expenses such as family support, or when the capital sits in a tax-free NRE account. Otherwise, compare the net numbers before deciding where your savings should live, using the NRI tax calculator to model the Indian side.

⚠️Disclaimer: NRI tax rules are complex and change every year. This guide is for general awareness only. Consult a CA with NRI tax expertise for your specific situation and any DTAA claim, and verify current rules at incometax.gov.in.