Indian income tax for an NRI works on one core principle: only India-source income is taxed. Your foreign salary, your overseas savings and your investments abroad are outside the Indian net entirely — what gets taxed is the rent, dividends, capital gains and interest that arise in India. This guide sets out the FY 2025-26 (AY 2026-27) slab rates, the rebate nuance that catches NRIs out, the heavy TDS on Indian income, and how DTAA and RNOR status reduce the bill. Rules are as of June 2026; verify current law before filing.
What income is taxable in India for an NRI?
- Salary earned in India or received in India (e.g., for work physically done here).
- Rental income from property situated in India.
- Capital gains on Indian shares, mutual funds and property.
- Interest from NRO accounts, Indian bank deposits and bonds (NRE and FCNR interest is exempt).
- Business income from a business controlled in or a profession set up in India.
Income that is both earned and received abroad — your foreign job, for instance — is not taxable in India while you are an NRI.
NRI tax slabs — new regime FY 2025-26
NRIs are taxed on India-source income using the same new-regime slabs as residents (FY 2025-26 (AY 2026-27)):
| Taxable income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
A 4% health-and-education cess applies on the tax, and a surcharge kicks in at higher incomes. You can model the resident version of this in our income tax calculator — but note the rebate difference below.
The rebate nuance: NRIs don't get Section 87A
This is where NRI tax diverges sharply from resident tax. Under the new regime a resident pays zero tax up to ₹12 lakh of taxable income because of the Section 87A rebate. An NRI cannot claim 87A — so an NRI with, say, ₹8 lakh of taxable Indian rental income pays tax from the ₹4 lakh slab onwards, while a resident with the same income would pay nothing. Plan around this: it makes the basic exemption, not ₹12 lakh, your real tax-free ceiling.
30% TDS on NRO interest and Indian income
Tax on NRI income is collected aggressively at source. NRO interest suffers 30% TDS (plus surcharge and cess) with no basic-exemption cushion and no Form 15G/15H option. Rent paid to an NRI, and capital gains on Indian assets, are likewise subject to TDS at the applicable rate. If too much was withheld, you reclaim it by filing an Indian return — or you reduce it upfront via DTAA.
DTAA relief — paying tax once, not twice
A Double Taxation Avoidance Agreement between India and your country of residence prevents the same income being taxed in full on both sides. Practically, to get a lower treaty TDS rate on NRO interest you hand your bank a Tax Residency Certificate (TRC), Form 10F and a self-declaration; many treaties cut interest TDS from 30% to a treaty rate (commonly 10%–15%). On the other side, your resident country usually lets you claim a foreign tax credit for Indian tax paid. Exact rates differ by country — check your specific treaty.
RNOR — the returning-NRI grace period
When you move back to India for good, you don't jump straight to worldwide taxation. For two to three years you typically qualify as RNOR (Resident but Not Ordinarily Resident), during which foreign income stays untaxed in India — only India-source income is taxed, just as before. This window is gold for tidying up: redeem foreign investments, close overseas accounts, and redesignate NRE/FCNR deposits before full residency triggers worldwide tax. The mechanics of those accounts are in our NRE vs NRO guide, and if you are selling a flat before or after returning, see NRI property sale TDS.