What is NRI Taxation in India?

One thing worth checking for 2026 is which tax law applies to the year you're talking about.

The Income Tax Department says the Income Tax Act, 2025 applies to tax years beginning on or after April 1, 2026. For earlier tax years, residential status continues to be determined under the Income Tax Act, 1961.

The basic residence test hasn't fundamentally changed under the new Act. The current Income Tax Department guidance says an individual generally becomes resident based on the applicable stay tests, including the 182-day test or the 60-day-plus-365-day test, subject to the special rules that apply to Indian citizens and persons of Indian origin visiting India.

So I'd avoid calculating your status based only on the fact that you have lived abroad for several years.

Count your days in India and look at the relevant preceding years as required.

Also, if you have foreign income and Indian income, check whether a Double Taxation Avoidance Agreement (DTAA) applies. The Income Tax Department specifically notes that DTAA provisions can affect the taxation of non-residents.

I agree with the previous response, but I'd put residential status first because that determines the scope of taxation.

For a Non-Resident, the Income Tax Department says income received or deemed received in India, and income that accrues or arises or is deemed to accrue or arise in India, can be taxable in India.

So an NRI can still have an Indian tax liability even while living permanently overseas.

Some examples that commonly come up are:

• Rent from property located in India
• Interest from Indian bank deposits
• Dividends from Indian investments
• Capital gains from Indian assets
• Certain business or professional income connected with India

The part I wouldn't generalize is foreign salary.

If someone works in the UK, US, Canada or Australia and earns salary there, the tax treatment needs to be considered based on where the services are performed, their Indian residential status and any applicable tax treaty. The Income Tax Department specifically notes that salary can be taxable in India where the services are rendered in India.

Also, don't confuse FEMA residential status with income-tax residential status. They can be relevant for different purposes.

I made that mistake initially because most NRI banking articles use “NRI” in a FEMA/banking context.

I went through something similar after moving to Canada.

The biggest misconception I had was thinking that “NRI” means no Indian income tax at all. That's not really how it works.

The first thing I did was determine my Indian tax residential status for the relevant year. Residential status is assessed separately for each tax year and affects how much of your income is within the Indian tax net. The Income Tax Department currently distinguishes between Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR).

Once I established that I was non-resident, I looked specifically at my Indian income.

In my case, rental income from my apartment in India was relevant, as was interest from my NRO account. I also had some capital gains from an Indian investment.

My Canadian salary was a separate issue because it was foreign income and I was non-resident in India.

One thing I'd recommend is making a spreadsheet of all your Indian income sources before filing. I listed rent, bank interest, dividends, capital gains and TDS separately. That made it much easier to figure out what actually needed attention.

Obviously, everyone's facts are different, especially if they spend substantial time in India.

There is a DTAA agreement for NRIs, which is basically a Double Taxation Avoidance Agreement. So, if an NRI earns income in India, such income will be taxable in India. Also, the country where the NRI is a resident will have the right to tax such income because it is the NRI's residence state. This way, the NRI will have to pay tax twice on the same income. To avoid this situation, India has agreed to the DTAA with several countries, which will help the NRI in avoiding double taxation by allowing them to claim credit for foreign taxes that they pay while filing their return of income in their home country.

Being an NRI, if your income in India exceeds Rs 2.5 lakh, then you will be liable to file your return of income in India. You are supposed to pay taxes in India on income that is earned or received in India through salary, rent. capital gains, interest, etc. However, certain types of income, such as income from agriculture or specific investments like tax-free bonds, may be exempt from tax for NRIs.