Tax Basics for NRIs

Millions of Indians live and work abroad. Their Indian tax depends on their residential status.

Residency rules

Broadly, an individual is resident in India for a year if they stay in India for:

• 182 days or more, or
• 60 days or more in the year and 365 days over the previous four years (with exceptions and modifications for Indian citizens visiting or leaving for work).

Otherwise, they are a non-resident (NRI). There is also a category of resident but not ordinarily resident.

What NRIs are taxed on

• NRIs pay Indian tax only on income earned or received in India, such as rent from Indian property, interest from NRO accounts or capital gains on Indian investments.
• Foreign income isn’t taxed in India for NRIs.

NRE and NRO accounts

• NRE (Non-Resident External) accounts hold foreign earnings; interest is tax-free in India.
• NRO (Non-Resident Ordinary) accounts hold Indian income; interest is taxable, with TDS.

Double taxation

India has Double Taxation Avoidance Agreements with many countries, so income taxed in one country can get credit or exemption in the other.

Returning to India

When NRIs return, their status may change gradually, and foreign income may become taxable. Planning the timing of return can matter.

Deemed residency

Indian citizens with high Indian income who aren’t taxed anywhere else may be deemed resident under rules introduced in 2020.