Income Tax For NRI In India: Tax Slabs, Filing, Exemption and Tips For FY 2024-25

Navigating income tax as a Non-Resident Indian (NRI) can be complex due to differing rules based on residency status, income sources and applicable exemptions. Whether you earn rental income in India or have capital gains from investments, understanding your tax obligation is crucial.

This article breaks down the tax slabs, filing requirements, exemptions and small tips to help NRIs manage taxes effectively and stay compliant with Income Tax laws.

Understanding NRI status for Taxation

For tax purposes, an individual is considered as a Non-resident (NRI) if they do not meet the residency criteria as per Income Tax Act.

An individual is considered as a resident if they

• Stay in India is for 182 days or more in a financial year (or)

• a. Stay in India is for 60 days or more in a financial year (and)
• b. Stay in India is for 365 days in the past 4 years.

If any of the conditions is not met, then the individual is considered as a Non-Resident.

NRIs are taxed only on income earned or received in India. Global income is not taxable in India for NRIs, but declaring residential status correctly is key to compliance.

Income Tax Slabs Applicable to NRIs

NRIs are taxed based on the income earned or received in India. They can choose between the old regime and new tax regime, each with distinct slab rates and benefits. Notably, NRIs are not eligible for certain deductions and rebates available to resident Indians, such as the rebate under Section 87A.

Unlike Resident Senior citizens who enjoy a basic exemption limit of up to INR 3,00,000 under the old regime, non-resident senior citizens are not eligible for this benefit.

Normal Regime (Old Tax Regime)

Income Slab	Tax Rate
0 to 2.5 Lakhs	0%
2.5 to 5 Lakhs	5%
5 to 10 Lakhs	20%
More Than 10 Lakhs	30%

Default Regime (115BAC)

Income Slab	Tax Rate
0 to 3 Lakhs	0%
3 to 7 Lakhs	5%
7 to 10 Lakhs	10%
10 to 12 Lakhs	15%
12 to 15 Lakhs	20%
More Than 15 Lakhs	30%

Under the New Tax regime, a standard deduction of 75,000 is available to salaried individuals, including NRIs.

Additionally, a health and education cess of 4% is levied on the total tax amount.

Surcharges are applicable for higher income brackets as follow:

Income Surcharge	Rate
50 Lakhs to 1 Crore	10%
1 Crore to 2 Crore	15%
2 Crores to 5 Crores	25%
Above 5 Crores	27%

Filing Income Tax Returns (ITRs) for NRIs

NRIs are required to file an income tax return in India if their total taxable income exceeds INR 2.5 Lakhs or if they have capital gains, even if the total income is below the threshold. Typically, NRIs use ITR-2 (for salaried, capital gains or rental income) or ITR-3 (if they have business/professional income in India). Filing is done online via the Income Tax Department’s portal, and the deadline is 31st July (or 31st October if audit applies). Late filing may attract penalties up to INR 10,000. Required documents include PAN card, TDS certificates and bank details. After filing, the return must be verified electronically or by sending the signed ITR-V to CPC Bengaluru.

Exemptions and Deductions Available to NRIs

NRIs can claim deductions under Section 80C (up to ₹1.5 lakhs) for eligible investments like ELSS, life insurance premiums, and home loan principal.

Section 80D allows deductions for health insurance premiums. Interest earned on NRE and FCNR accounts is fully exempt.

Section 24(b) permits up to ₹2 lakh deduction on home loan interest. Capital gains exemptions under Sections 54, 54 EC and 54F are also available through reinvestment in specified assets.

TDS (Tax Deducted at Source) Rules for NRIs

Income earned by NRIs in India-like rent, interest, or capital gains-is subject to TDS at higher rates compared to residents. For instance, interest on NRO deposits can attract TDS at 30%, while property sale proceeds may face TDS up to 20% (plus surcharge and cess). To reduce or avoid excess TDS, NRIs can apply for a lower or nil deduction certificate under Section 197.

Important Deadlines and Penalties

The due date for NRI tax return filing is usually 31st July (non-audit cases) or 30th October (audit cases) of Assessment Year. Filing after due date can attract a penalty of ₹5,000 to ₹10,000 under Section 234F. Additionally, interest under Sections 234A/B/C may apply for delayed payments or shortfall in advance tax. Timely compliance helps avoid penalties and ensures smoother refund processing.

Few Tips for Efficient Tax Planning for NRIs

NRIs should maintain clear records of income, investments and TDS certificates. Opt for tax-free accounts like NRE/FCNR and invest in ELSS or NPS (if eligible) for deductions. Reinvest capital gains to claim exemptions and consider joint ownership of property with family for tax efficiency.

Common Mistakes NRIs Should Avoid

NRIs often make errors like misreporting residential status, claiming ineligible deductions (e.g. PPF), or not disclosing Indian income. Ignoring TDS on property sale or missing filing deadlines can lead to penalties. Always file an ITR if taxable income or capital gains exist, even if TDS is already deducted.

Recent Changes and Updates in NRI Tax Laws

Recent updates include stricter rules for determining residential status and increased monitoring of foreign remittances under the LRS scheme.

Other changes and updates provided in Budget for FY 24-25 related to Tax slabs, Capital gains, Higher TCS threshold for foreign remittances, Standardized tax year, are to be complied by NRIs.

Further, Global Income Taxation for High-Income is faced by NRIs. A short explanation of same is explained herewith:

As per Income tax laws, NRIs are generally taxed only on income earned or accrued in India. However, NRIs may face global income taxation under specific conditions:

Deemed Residency Rule (Section 6(1A))

From FY 20-21 onward, if Indian citizen:

• Earns more than ₹15 lakhs in India and
• Is not liable to pay tax in any other country due to domicile or residence,

they will be treated as a deemed resident of India, and their global income becomes taxable in India.

Resident but Not Ordinarily Resident (RNOR) Status

In certain cases, high-income NRIs may be classified as RNOR, where only Indian income and income from business controlled in India are taxable. RNOR status usually applies for a transitional period after return or change in residency.

Double Taxation Avoidance Agreement (DTAA)

High-income NRIs earning globally should check if India has a DTAA with the country of residence. It helps avoid double taxation by allowing:

• Tax credit in one country for tax paid in another.
• Exemption in one country depending on treaty terms.

Reporting Foreign Assets

NRIs who qualify as residents (including deemed residents) must report global income and foreign assets under Schedule FA in the income tax return, failing which can attract severe penalties under the Black Money Act.

Conclusion

Understanding income sources, tax liabilities, and available benefits is crucial for NRIs. With timely filing, smart planning, and awareness of rules, NRIs can ensure tax efficiency and avoid legal hassles. Responsible compliance not only saves money but also builds a strong financial foundation in India.