NRI Income Tax Guide: Everything You Need To Know

NRIs generating revenue in India must obey the country's tax guidelines. As per the Income Tax Act of 1961, an NRI is defined by how his income would be liable to taxation and what deduction or exemption is available. The Indian government has brought about several changes in Budget 2025 to ease the taxation of NRIs and curb tax avoidance.

Knowing your tax responsibilities and obligations ensures that you do not incur penalties while maximising the benefits granted to you in terms of exemptions and deductions.

Learn how to determine your NRI status, understand what income is taxable in India, explore available deductions, and see an example of NRI tax calculation for better clarity.

Who Is An NRI?

An Indian national who doesn't live in India permanently is termed as a Non-Resident Indian or the commonly used phrase NRI. The NRI’s residential status depends upon the total number of days spent in India during the Financial Year.

How to Determine Residential Status?

One is classified as a Resident Indian if one meets any of the following criteria:

• You spend at least 182 days in India during a given financial year from April 1 to March 31 of the following year.

• You remain in India for at least 60 days within a particular fiscal year and a minimum of 365 days during the preceding four fiscal years.

For Indian citizens employed overseas or some Indian crew members of ships, only the first restriction will count. Failure to satisfy these conditions shifts your classification to NRI.

An individual qualifies as RNOR if:

• They have been classified as an NRI for nine or more of the past ten financial years or

• They have spent 729 days or less within the borders of India over the preceding seven years.

Update on the 2025 budget:

• They will be exempted from the penalty of 10 lakh if the assets declared by them are less than 20 lakh under the black money act.

Read More: Decoding Income Tax Act 1961 Section 44 AD!

How Are NRIs Taxed In India?

NRIs are taxed differently from resident Indians. Below is a comparison of tax rates:

New vs. Old Tax Regime for NRIs (FY 2024-25)

Surcharge Rates for NRIs:

• 10% on income exceeding ₹50 lakh

• 15% on income above ₹1 crore

• 25% on income above ₹2 crore

• 37% on income above ₹5 crore

Read More: Understanding The New Income Tax Bill 2025

Income Tax Exemptions & Deductions For NRIs

NRIs can reduce their tax liability in India through exemptions and deductions. Knowing these benefits helps in better tax planning and saving money.

Exemptions Available:

• Interest earned on NRE & FCNR deposits

• Long-term capital gains on certain investments

• Income from foreign employment

Deductions Available:

How to File Tax Returns for NRIs?

Even though filing taxes as an NRI can be complicated, it can be easily accomplished with a few straightforward actions. You need to fill out an Income Tax Return (ITR) if your overall earnings in India are more than ₹2.5 lakh.

Steps To File An ITR

Step 1: Log in to the Income Tax Portal.

Step 2: Select ITR-2 Form (for NRIs).

Step 3: Enter Income Details (Salary, Property, FD Interest, etc.).

Step 4: Claim Deductions & Exemptions.

Step 5: Verify Tax Liability.

Step 6: Submit and E-Verify.