3 days Ago By Sandra
Sign In Sign Up Top Stories For millions of Indians living and working abroad, staying connected to home isn’t just about family and festivals; it’s also about managing money, investments, and taxes back home. Whether you’re earning rental income from a flat in Bengaluru or investing in mutual funds through your NRO account, the Indian tax system has specific rules that apply to Non-Resident Indians (NRIS). With the Union Budget 2025 introducing notable changes to income tax slabs and exemptions, especially under the new tax regime, it’s a good time for NRIS to pause and reassess how their income in India is taxed.
Here’s a deep dive into what NRIS need to know about taxation in India this year. First things first: Who is considered an NRI? Your passport doesn’t determine tax residency; it depends on where you’ve been. Under Indian tax law, an individual qualifies as a Non-Resident Indian (NRI) if they were in India for less than 182 days during the financial year, and for less than 365 days over the previous four years combined, provided they were in India for less than 60 days in the current year.
There are exceptions to this rule, especially for Indian citizens or PIOS who visit India frequently. This classification is essential because your residency status decides what kind of income is taxable, and how. Know How to Prepare Estimation and Viability for Project Reports? Know more Click here What income is taxable for NRIs in 2025? As a rule of thumb, only income that arises or accrues in India, or is received in India, is taxable for NRIs.
So, your salary from a job in Dubai or London isn’t taxed in India. Still, your rent from a property in Mumbai, interest on Indian bank deposits, capital gains from shares or mutual funds, or income from a business in India could be. If you’re earning from Indian sources, those incomes fall under one of the five heads of income, just like any resident taxpayer: Income from salary (for services rendered in India), Income from house property (rent, for instance), Capital gains (from selling shares or property), Business or professional income (if the company is based in India), Income from other sources (like interest on NRO accounts).
From Confusion to Clarity – UAE Tax Law Explained Simply | Click Here Revised tax slabs in Budget 2025: What’s new? The Union Budget 2025 has introduced a more generous set of income tax slabs under the new tax regime, which is now the default option unless you explicitly opt for the old regime. The key factor? A complete tax exemption for salaried taxpayers (including NRIS) with income up to ₹12 lakh per annum, provided they meet specified conditions such as making contributions to NPS and claiming standard deductions. Here’s how the new tax slabs for FY 2025-26 (AY 2026-27) look: Up to ₹4,00,000 – 0% ₹4,00,001 to ₹8,00,000 – 5% ₹8,00,001 to ₹12,00,000 – 10% ₹12,00,001 to ₹16,00,000 – 15% ₹16,00,001 to ₹20,00,000 – 20% ₹20,00,001 to ₹24,00,000 – 25% Above ₹24,00,000 – 30% Do note that these rates apply under the new regime, which disallows many traditional deductions like Section 80c (investments), 80d (insurance), and House Rent Allocation (HRA) unless specifically allowed.
practical case studies in forensic accounting & corporate fraud investigation Click here TDS for NRIs: No escaping the net One of the significant challenges many NRIS face when dealing with taxation in India is the higher rate of Tax Deducted at Source (TDS) on various income streams. TDS is typically deducted steeply, whether rent is received from a tenant or interest earned on an NRO bank account. For instance, in 2025, rent and interest on NRO accounts attract TDS at 30%, long-term capital gains on listed securities are taxed at 10%, short-term gains at 15%, and proceeds from the sale of property are subject to a 20% TDS, plus applicable surcharge and cess depending on the transaction value.
While these rates might seem high, NRIs can claim a refund when filing their Income Tax Return (ITR) if the deducted amount exceeds their tax liability. It’s also important to note that filing an ITR is mandatory for NRIs if they have taxable income in India, even if their global income remains outside the Indian tax net. Get the complete breakdown of TDS & TCS under The Finance Act, 2025| Click Here What about DTAA, can it help you? India has signed Double Taxation Avoidance Agreements (DTAA) with over 90 countries, including the US, UK, UAE, and Canada.
This means if you’re paying tax in the country where you live, and on the same income in India, you can claim credit to avoid being taxed twice. For instance, if you’re an NRI in the UAE and earn interest income from India, you might be able to reduce or eliminate TDS by submitting the required DTAA documentation to your bank. You’ll usually need a Tax Residency Certificate (TRC) from your home country to avail of this benefit.
Step by step guide of preparing company Balance sheet and profit & loss account Click here Filing taxes as an NRI in 2025: What you need to keep in mind Filing your tax return as an NRI in 2025 is similar to the process followed by resident taxpayers, but there are a few important distinctions to be aware of. NRIS are typically required to use ITR-2, as they are not eligible to file using the simplified ITR-1 (Sahaj) form. Another critical aspect is ensuring that foreign income is correctly excluded from Indian taxation, since only income earned or received in India is taxable for NRIS.
Additionally, NRIS cannot claim the ₹50,000 rebate under Section 87a, which is reserved exclusively for resident individuals. Despite these limitations, filing your income tax return offers several benefits: it enables you to claim refunds on excess TDS, maintain a clean compliance record, facilitate the repatriation of funds abroad, and avoid unnecessary scrutiny or legal complications. Get the complete breakdown of TDS & TCS under The Finance Act, 2025| Click Here Conclusion India’s tax system has taken steps toward simplification and digitalization, but NRI taxation remains nuanced.
With the 2025 updates offering some relief through higher tax exemptions, it’s a good time for NRIS to reassess their India income strategy. The key is to stay compliant, use DTAA benefits smartly, and seek professional advice when needed. As always, if your financial footprint in India is growing through real estate, startups, or capital markets, it’s wise to keep an eye on the tax code.
Because in India, as they say, “income might be global, but taxes are local.” Support our journalism by subscribing to Taxscanpremium . Follow us on Telegram for quick updates Topics © 2025 Taxscan © 2025 Taxscan.
