If you are a Non-Resident Indian (NRI) with income or assets in India, understanding your tax obligations is critical. From rental income to property sale capital gains, from NRO account interest to mutual fund redemptions, multiple income types attract different tax treatments. This comprehensive guide covers everything NRIs need to know about taxation in India.
Step 1: Determine Your Residential Status
Your tax liability in India depends entirely on your residential status. Here are the three categories:
Resident (ROR)
Criteria: Stayed 182+ days in India during the financial year, OR stayed 60+ days in current year and 365+ days in preceding 4 years
Worldwide income taxable in India
Resident but Not Ordinarily Resident (RNOR)
Criteria: NRI in 9 out of 10 preceding years, OR stayed in India for 729 days or less in preceding 7 years
Indian income + income from business controlled in India
Non-Resident (NRI)
Criteria: Stayed less than 182 days in India during the financial year
Only Indian-sourced income taxable
What Income is Taxable for NRIs in India?
- Salary received in India or for services rendered in India
- Rental income from property situated in India
- Capital gains from sale of assets in India (property, shares, mutual funds)
- Interest on NRO savings/fixed deposit accounts
- Income from business carried out in India
- Any other income which accrues or arises in India
DTAA Benefits for NRIs
India has signed Double Taxation Avoidance Agreements (DTAA) with 90+ countries including USA, UK, UAE, Canada, Australia, Singapore, and Germany.
Lower TDS Rates
DTAA may provide lower withholding tax rates on interest, dividends, royalties, and capital gains compared to domestic rates.
Avoid Double Taxation
Income taxed in India can get credit in your resident country, preventing the same income from being taxed twice.
Exemption on Certain Income
Some DTAAs exempt specific types of income like pension, teaching income, or short-term capital gains.
Tax Residency Certificate (TRC)
Obtain a TRC from your resident country to claim DTAA benefits while filing ITR in India.
Form 15CA/15CB Process for Repatriation
Whenever money is remitted outside India (e.g., property sale proceeds), Form 15CA and 15CB must be filed.
Determine Remittance Type
Identify whether the payment falls under the specified list in RBI's LRS scheme or requires Form 15CA/15CB filing.
Obtain Form 15CB from CA
A practising Chartered Accountant examines the remittance, verifies DTAA applicability, and issues Form 15CB (certificate).
File Form 15CA Online
Using the 15CB details, file Form 15CA on the income tax portal. Select the correct part (A/B/C/D) based on amount and nature.
Submit to Bank
Provide the filed Form 15CA acknowledgement and Form 15CB certificate to your bank for processing the foreign remittance.
TDS on Property Sale by NRI
When an NRI sells property in India, the buyer must deduct TDS at 20% (for long-term capital gains) or 30% (for short-term) under Section 195. The NRI can apply for a Lower TDS Certificate under Section 197 to reduce this rate based on actual tax liability. Our team handles the complete Section 197 application process and ensures you do not pay excess TDS.
Common NRI Tax Mistakes to Avoid
- Not determining residential status correctly - this changes your entire tax liability
- Missing TDS credit on NRO account interest (banks deduct 30% TDS)
- Not claiming DTAA benefits when eligible - leads to higher tax
- Failing to file Form 15CA/15CB before property sale remittance
- Not obtaining Lower TDS Certificate (Section 197) before property purchase
- Ignoring capital gains tax on mutual fund redemptions
- Not filing ITR in India even when total income is below taxable limit (needed for TDS refund)
Need Expert NRI Tax Help?
Pujara & Co specialises in NRI taxation, DTAA advisory, Form 15CA/CB, and repatriation compliance. Get personalised guidance from CA Mitul Pujara.