📖 9 min read

NRI Tax on Indian Income: The Plain-English Guide

Rent from a flat back home. Interest on an FD you never closed. Maybe a parent's property you'll eventually sell. Most NRIs have some income tied to India — and most are genuinely unsure what's taxable, what gets withheld automatically, and what they still owe. Here's the plain-English version of the actual rules.

What's Actually Taxable in India (and What Isn't)

The rule that resolves most of the confusion: as an NRI, India generally only taxes income that is earned or arises in India — not your worldwide income.

Is This Taxable? Quick Check

Tap the kind of income to see whether it's taxable in India, and roughly what gets withheld.

Rental Income

If a tenant is paying rent into an Indian account for a property you own, that rent is taxable in India — and the withholding rules are different (and stricter) than for a resident landlord.

• The tenant deducts TDS at 31.2% (30% plus 4% cess) under Section 195 — from the very first rupee of rent, with no monthly threshold like the ₹50,000 floor that applies for resident landlords. The tenant needs their own TAN to do this correctly, deposits the TDS by the 7th of the following month, files it quarterly on Form 27Q, and issues you a Form 16A.
• You can deduct a standard 30% of the net annual rental value (after municipal taxes) when working out your actual taxable rental income — so the amount you're really taxed on is usually well below the gross rent, even though the TDS is withheld on the gross amount.
• If the withholding is more than your real liability, you can apply for a Lower (or Nil) Deduction Certificate under Section 197 from the Income Tax Department, so the tenant withholds closer to what you'll actually owe instead of over-withholding and waiting for a refund.

FD and Deposit Interest

The account type is what decides the tax treatment here — and the difference is large.

• NRE interest is genuinely tax-free in India, under Section 10(4)(ii) — no TDS, nothing to declare on your Indian return. It's one of the few clean, no-catch options available to NRIs, which is why many families keep their India savings in NRE rather than NRO where practical.
• NRO interest is taxed from the first rupee, with no exemption threshold — TDS of roughly 30% plus surcharge (if your income is high enough to attract one) plus 4% cess is deducted by the bank automatically, before the interest even reaches your statement.
• DTAA can bring the NRO rate down — often to 15% or lower depending on your country of residence (15% is the cap under the India-Australia DTAA, for example) — but only if you actively submit a Tax Residency Certificate from your country's tax authority plus Form 10F to your bank before the interest is credited. Submitted after the fact, it's too late for that year's TDS; you'd need to claim the difference back when filing.

Capital Gains on Property

Selling a property in India as an NRI is its own detailed process — TDS on the sale, a possible Lower Deduction Certificate, Form 15CA/15CB before you can move the money, and the actual capital gains calculation. Rather than duplicate it here, the full step-by-step is on its own guide:

Selling a Parent's Property in India

The complete process: TDS, capital gains, Form 15CA/15CB, and repatriation — in order, in plain English.

One scope note: this guide and the property-sale guide both focus on real estate. Gains from selling Indian shares, mutual funds or other securities follow a different set of rules (and different TDS mechanics) that aren't covered here — worth a dedicated conversation with your CA if that applies to you.

Getting the Money Out

Whether you can freely move the money abroad depends on which account it's sitting in, not just whether tax has been paid.

• NRE account funds are already treated as foreign money in India's eyes — they can be repatriated abroad freely, with no cap and comparatively little paperwork.
• NRO account funds — rent, NRO interest, most sale proceeds — can be repatriated up to USD 1 million per financial year, but only after tax is settled, and only through Form 15CA (filed by you online) and Form 15CB (a CA's certificate confirming tax has been paid), submitted to your bank before the transfer. See the property sale guide's step-by-step for exactly how this works in practice.
• Sending money the other way — into India — has no general restriction on the Indian side. What can restrict it is your own country's rules: large transfers may trigger reporting obligations with your bank or tax authority abroad (for example, under Australia's anti-money-laundering reporting rules), which is worth checking with your own bank or accountant rather than assuming India's rules are the only ones that apply.

Filing Your Indian Return

• Use ITR-2, not ITR-1 — ITR-1 is for resident individuals only, and filing it as an NRI can get the return marked defective, delaying any refund. If you have business or professional income in India, ITR-3 applies instead.
• You may need to file even if TDS already covered it — for example, to claim back TDS that was withheld above your actual liability, or to formally claim DTAA relief that wasn't applied at source.
• No Section 87A rebate for NRIs. Many resident taxpayers pay zero tax up to a much higher income because of this rebate — it does not apply to NRIs, who are taxed from the basic exemption limit with nothing on top. There's also no enhanced senior-citizen exemption for an NRI, even if they're over 60.
• Basic exemption limit for FY2025-26: ₹2.5 lakh under the old regime, ₹4 lakh under the new regime — figures the Budget can change, so confirm the current year's numbers before relying on them.
• Long-term capital gains are taxed from the first rupee for an NRI — they can't be sheltered under the basic exemption limit the way some other income can.
• The usual deadline is 31 July following the end of the financial year (31 October if a tax audit applies) — but Budget announcements occasionally shift this, so check the current year's date.

Frequently Asked Questions

Is an NRI's foreign salary taxed in India?

No. India generally taxes NRIs only on income earned or arising in India — rent, NRO interest, capital gains on Indian assets, or business income in India. Salary for work actually performed outside India isn't taxable in India, even though it's likely taxable where you live and work.

What TDS rate applies to rent paid to an NRI landlord?

An effective 31.2% (30% plus 4% cess) under Section 195, deducted by the tenant from every rupee of rent — no minimum threshold. The tenant needs a TAN. A Lower Deduction Certificate under Section 197 can bring the withholding closer to your actual liability.

Is interest on an NRE fixed deposit taxable in India?

No — NRE interest is fully exempt under Section 10(4)(ii), with no TDS. NRO interest is the opposite: fully taxable, with TDS deducted at source.

How much TDS is deducted on NRO fixed deposit interest, and can it be reduced?

Roughly 31.2%–35.88% (30% plus surcharge if applicable plus 4% cess), from the first rupee. DTAA can reduce this — to 15% for Australian residents, for example — but only if a Tax Residency Certificate and Form 10F are submitted to the bank before the interest is credited.

How much money can an NRI send abroad from India each year?

NRE funds repatriate freely with no cap. NRO funds (rent, NRO interest, most sale proceeds) are capped at USD 1 million per financial year after tax, via Form 15CA/15CB through your bank. There's no general Indian-side limit on sending money into India, though your own country may have its own reporting rules.

Which ITR form should an NRI use, and can they claim the Section 87A rebate?

ITR-2 for most NRIs (ITR-3 if there's business income in India) — not ITR-1, which is resident-only and can be marked defective. NRIs cannot claim the Section 87A rebate that zeroes out tax for many residents; they're taxed from the basic exemption limit with no rebate, and long-term capital gains are taxed from the first rupee.

Where to Go Next

MyDailyCost's NRI Hub has calculators for the actual numbers once you know which rules apply to you.