NRI taxation India, the working-CA guide.

Under Section 6 of the Income Tax Act, an individual is Resident in India in a financial year if they satisfy either of two tests:

• 182 days or more physical presence in India during the financial year, OR
• 60 days or more physical presence in the financial year AND 365 days or more cumulative in the preceding 4 financial years.

The 60-day threshold is replaced with 182 days for Indian citizens who leave India for employment abroad or as crew of an Indian ship, and for persons of Indian origin visiting India.

If neither test is met, the individual is a Non-Resident (NRI). If Resident, a further test determines Ordinary Resident (ROR) vs Resident but Not Ordinarily Resident (RNOR):

• RNOR: Resident in India in the current year but non-resident in India in 9 out of the preceding 10 years, OR physically present in India for 729 days or less in the preceding 7 years.
• ROR: Resident who does not meet the RNOR carve-outs.

Why it matters: ROR is taxed on worldwide income. NRI and RNOR are taxed on India-source income only. This single determination can change tax liability by lakhs or crores for high-earning returnees.

Resident and Ordinarily Resident (ROR): taxed on worldwide income — Indian salary + foreign salary + Indian capital gains + foreign capital gains + Indian rental + foreign rental + foreign business income.

Resident but Not Ordinarily Resident (RNOR): taxed on India-source income only (same as NRI), unless the foreign income is from a business controlled from India or a profession set up in India — in which case the foreign income is also taxed. RNOR is a transitional 2-3 year window for returnees that preserves NRI-like treatment on foreign assets.

Non-Resident (NRI): taxed on India-source income only. India-source includes: salary earned in India, salary paid by Indian employer regardless of where earned, rental from Indian property, capital gains on Indian assets, dividends from Indian companies, interest on Indian bank accounts (NRO), interest from Indian debt instruments.

India has special lower-rate regimes for NRIs on specific income heads:

Section 115A: NRI dividend income from Indian companies — 20% rate (plus surcharge and cess) with no deduction and no need to file return if TDS is correctly deducted. Royalty and FTS from Indian payers: 10% rate.

Section 115AB: Long-term capital gains for NRIs on specified Indian equity — 12.5% (post-July 2024) without indexation.

Section 115AC: NRI income from foreign-currency bonds / GDRs of Indian companies — 10% rate.

Section 115E: NRI investment income from specified foreign-exchange assets — 20% rate; LTCG on such assets taxed at 10%.

Section 195: general TDS mechanism for payments to non-residents — the Indian payer deducts tax at the applicable rate (treaty rate if lower, with TRC + Form 10F) at the time of payment.

Election: NRIs can choose between Section 115A/E rates (concessional) and normal slab rates — whichever is lower in their situation. The choice is made at return-filing time.

Where an NRI's country of residence has a DTAA with India (90+ countries including US, UK, UAE, Singapore, Canada, Australia, Germany, France, Mauritius, Switzerland), the treaty rate overrides the Indian domestic rate if it is lower.

Standard treaty rates for NRIs on Indian-source income:

• Dividends: capped at 10-15% under most treaties (vs 20% domestic Section 115A).
• Interest: 10-15% under most treaties.
• Royalties and FTS: 10-15% under most treaties.
• Capital gains: treaty position varies — some preserve India's right to tax, others shift to residence country. Post-2017 India-Singapore and post-2016 India-Mauritius protocols closed the earlier exemption on Indian equity capital gains.

To claim: NRI obtains TRC (Tax Residency Certificate) from their country tax authority + files Form 10F electronically on the Indian tax portal + provides the Indian payer with both before the payment. Payer withholds at the treaty rate.

NRE (Non-Resident External) account: rupee-denominated, maintained from foreign earnings. Interest earned on NRE deposits is exempt from Indian tax (Section 10(4)(ii)). Principal and interest are fully repatriable.

NRO (Non-Resident Ordinary) account: rupee-denominated, for income earned in India (rent, dividend, pension). Interest earned on NRO deposits is fully taxable in India as income. Repatriation up to USD 1M per financial year with CA certificate (Form 15CA + Form 15CB).

FCNR (Foreign Currency Non-Resident) deposit: foreign-currency denominated, no exchange risk. Interest is exempt from Indian tax (Section 10(4)(ii)). Fully repatriable.

Practical rule: route foreign earnings through NRE / FCNR (tax-free interest). Route India-source income through NRO (fully taxable). The NRE-to-NRO transfer is allowed; the reverse is not without specific authorisations.

Listed Indian equity shares (held 12+ months, LTCG): 12.5% post-July 2024, with INR 1.25 lakh exemption per year. STT must be paid at sale. Buyback: separate regime from Oct 2024 onwards.

Unlisted Indian equity shares (held 24+ months, LTCG): 20% with indexation, or 12.5% without indexation (post-July 2024 choice).

Equity mutual funds: same as listed equity for LTCG. Short-term 20%.

Debt mutual funds (post-April 2023): gains are taxed at slab rate regardless of holding period (grandfathering for pre-April-2023 holdings).

Immovable property: LTCG at 12.5% (without indexation, post-July 2024), 24-month holding period. Section 54 / 54F / 54EC reinvestment exemptions available. 1% TDS by buyer on sale to NRI (increases significantly where seller's PAN is linked to NRI status; Form 15CA/CB and Section 195 override).

Repatriation of sale proceeds: up to USD 1M per financial year through NRO account with Form 15CA + 15CB. Larger amounts need RBI approval or sequential year-wise repatriation.

When an NRI returns to India permanently, their status changes based on days present and the 10-year lookback. In most cases the returnee is RNOR for 2-3 financial years before becoming ROR.

During RNOR window:

• Foreign salary (continuing employment with foreign employer) is taxable in India to the extent of services rendered in India.
• Foreign investment income (US brokerage dividends, UK ISA, UAE bank interest) is NOT taxable in India.
• Foreign real estate rental is NOT taxable in India unless business is controlled from India.
• Foreign capital gains are NOT taxable in India.

Planning window: sell appreciated foreign assets, convert foreign IRA / 401(k) / ISA / pension corpus, during RNOR to avoid Indian tax on those gains. After the transition to ROR, worldwide income is taxable.

Documentation: maintain a passport-stamp day log for the preceding 10 years; file ITR-2 or ITR-3 with Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) once ROR.