What Income is Taxable for NRIs in India?
Rental income, interest, capital gains — find out what NRIs must report in India.
If you're an NRI earning income from India, you may be wondering — what exactly is taxable?
It’s one of the most common (and confusing) questions we get from Indian immigrants, OCIs, and NRIs across the globe.
Here’s a simple breakdown to help you stay informed and compliant when filing your Indian taxes.
What Income is Taxable for NRIs in India?
As an NRI, you're taxable only on income that is earned or accrued in India — known as India-sourced income. This includes:
🏠 Rental Income
Income from a residential or commercial property located in India is fully taxable, regardless of where you live.
Standard deduction of 30% is allowed on rental income.
You may also claim property tax and home loan interest deductions (if applicable).
💰 Interest Income
Interest from NRO accounts and fixed deposits is taxable at 30% (plus surcharge & cess).
Interest from NRE accounts and FCNR deposits is tax-free, provided you maintain NRI status.
📈 Capital Gains
Capital gains from the sale of property, stocks, or mutual funds in India are taxable.
The rate depends on the holding period:
Long-term gains: 10%–20%
Short-term gains: Taxed at applicable slab or 20% for equities
TDS is deducted at source when an NRI sells property or earns capital gains — but you may be eligible for a refund after filing your return.
🏢 Business or Professional Income
If you run a business or provide services in India, the income generated is taxable in India.
This also includes income from freelancing or consulting work delivered to Indian entities.
💰 Dividends
Dividends earned from Indian stocks or mutual funds are fully taxable as per your slab rate.
What’s NOT Taxable in India for NRIs?
Foreign income: Salary, investments, or business income earned outside India is not taxable (unless received directly in India).
Interest from NRE/FCNR accounts
Gifts received from close relatives (as defined by law)
Why It’s Important for NRIs to File Taxes in India?
Many NRIs mistakenly believe that if tax has already been deducted at source (TDS), or if they live outside India, filing a tax return isn’t necessary. But that’s not true — and it could cost you in the long run.
Here’s why filing your ITR (Income Tax Return) in India is not just a good idea, but often essential:
1. Claim TDS Refunds
When you earn income like rent, capital gains, or interest in India, banks and buyers often deduct TDS at a flat rate (e.g. 20–30%) — regardless of your actual tax liability.
If your final tax liability is lower than the TDS deducted, filing your return is the only way to get a refund.
For example:
If TDS of ₹2,00,000 is deducted on property sale, but your capital gains tax is only ₹80,000, you can claim ₹1,20,000 back — but only if you file.
2. Avoid Double Taxation
Filing under the DTAA (Double Taxation Avoidance Agreement) lets you claim tax relief and avoid being over-taxed.
3. Ensure Easy Repatriation of Funds
If you plan to remit or repatriate funds from India to your country of residence — whether from a property sale, mutual fund redemption, or business — your ITR serves as a key document.
Banks and authorized dealers often request your ITR as proof of source and tax compliance before allowing large remittances.
4. Maintain a Clean Tax Record in India
Just like credit scores, your PAN and tax filing history impact your financial footprint in India.
Filing regularly keeps your financial records in good standing, which is important when you:
Apply for a home loan in India
Open or close NRO/NRE accounts
Invest in real estate or financial markets
Return to India and resume tax residency
5. Required in Certain Cases — Even Without Income
If you own property, earn interest, or even sell a capital asset like a mutual fund or flat — you may be required by law to file an ITR, regardless of the amount. Failing to do so can lead to notices, interest, or penalties.
Lastly, filing your Indian tax return is not just about tax — it’s about smarter money management, regulatory clarity, and future planning.
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