As a Non-Resident Indian you pay Indian income tax only on income that arises in India: salary for work done here, rent from Indian property, capital gains on Indian assets, and NRO account interest. Your foreign salary and overseas income stay outside India's net. The first question is always your residential status, because that single test decides what India can tax.
Short on time? Jump to the day-count rules below, then check whether your only Indian income is NRE or FCNR interest, which is tax-free.
Indian tax law sorts every person into one of three buckets for a financial year: Resident and Ordinarily Resident (taxed on worldwide income), Resident but Not Ordinarily Resident (RNOR, a middle status), and Non-Resident (NRI, taxed only on India-source income). The label is not about your passport or your OCI card. It is decided purely by how many days you were physically in India, under Section 6 of the Income-tax Act, 1961.
This trips up returning workers most. A software engineer who spent 200 days in India during a project year can become a Resident for tax, even though she holds a Gulf work visa and an NRE account. Count your days first. Everything else follows.
A note on the law: from 1 April 2026 the new Income-tax Act, 2025 replaces the 1961 Act and introduces the “tax year” term. But your filing in 2026 is for FY 2025-26 (assessment year 2026-27), which is still governed by the 1961 Act, per the Income Tax Department's transition FAQ. So the section numbers below are the 1961-Act numbers you will actually use this season.
You are a Resident for a financial year if you meet either test under Section 6:
If you meet neither, you are a Non-Resident. Two concessions matter for Indians abroad:
There is also a deemed-resident rule in Section 6(1A): an Indian citizen with Indian-source income over ₹15 lakh who is not liable to tax in any other country is treated as Resident (as RNOR), even if present in India for fewer days. This targets “stateless for tax” structures, not ordinary NRIs paying tax in their country of work.
If you are an NRI, India taxes only income that is received, accrues, or arises in India:
Your foreign salary, foreign bank interest, and overseas business income are outside India's charge while you are an NRI. You do not report them just because you are an Indian citizen.
This is the relief most NRIs care about.
The catch: these exemptions ride on your FEMA status, not your income-tax status. The day you return to India for good and become an ordinary Resident under FEMA, fresh NRE interest stops being tax-free. Returning NRIs often keep tax-free FCNR interest for a while because the FCNR exemption extends to RNORs, but NRE interest does not get that grace. Re-designate your accounts when you move back.
Interest on your NRO account is fully taxable in India. The bank deducts TDS at 30% plus applicable surcharge and cess under Section 195. If your country has a tax treaty with India, you can usually get this cut to the lower treaty rate, but only by giving the bank the right paperwork in advance (see DTAA below). Without it, the bank applies the full 30%.
India has Double Taxation Avoidance Agreements (DTAAs) with most countries where Indians work. A DTAA lets you avoid paying full tax on the same income in both countries. To claim it, follow Section 90 / 90A and assemble three things:
A separate point on foreign tax credit (FTC): if you have become a Resident and paid tax abroad on the same income, you claim credit for that foreign tax by filing Form 67 under Rule 128, on or before your return due date. FTC via Form 67 is a resident's tool; a pure NRI claiming a lower treaty rate uses the TRC plus Form 10F route, not Form 67.
When several India-sourced incomes and treaty positions stack up, it is worth getting a chartered accountant to file the year you change status. A wrong residency call is the costliest mistake.
Yes. Banks deduct TDS at 30% plus surcharge and cess on NRO interest under Section 195, because the standard Section 194A 10% rate is for residents. You can lower it to your DTAA treaty rate by submitting your Tax Residency Certificate and an electronically filed Form 10F to the bank before the interest is paid. If excess TDS is still deducted, claim the refund in your ITR-2.
Up to USD 1 million per financial year from your NRO balance, after taxes are paid, under FEMA's NRO remittance rules. You generally need a chartered accountant's certificate in Form 15CB and an online Form 15CA filing for the bank to process the outward remittance. NRE and FCNR funds are freely repatriable without this annual cap.
Often no, but check carefully. If your taxable India income is below the basic exemption limit, filing is not mandatory on income grounds alone. But you should still file ITR-2 to claim a refund of TDS deducted on NRO interest, and filing is mandatory if you meet other triggers (high-value transactions, owning an asset that requires reporting, or carrying forward a capital loss).
Yes, once you become a Resident under FEMA, fresh NRE interest is no longer exempt. The cleaner step is to re-designate NRE accounts to resident accounts (or to an RFC account) when you return for good. FCNR deposit interest can stay exempt while you are an RNOR, which buys returning NRIs some time, but plan the switch rather than assume the old status holds.
Not if you use the DTAA. The treaty assigns taxing rights and caps the rate, so income like NRO interest is taxed in India at the treaty rate and then either exempted or credited in your country of residence. Keep your TRC, Form 10F, and Indian tax-paid proof, because your foreign tax authority will ask for them when you claim relief there.