5 Incomes that are Taxable to NRI in India

Incomes that are Taxable to NRI in IndiaIncomes that are Taxable to NRI in India

With the increased globalization, Indian’s are no more confined to work in India. Indian’s love working at onsite opportunities. However, when an Indian goes to onsite, i.e. outside India, earns some income in India, such income is still taxable. NRI’s should go through the various types of income, which is taxable and which are exempted in India and need to pay income tax on taxable income in India. Who is an NRI for Indian income tax Act? Which are the incomes that are taxable to NRI in India? How to consider such incomes from income tax act?. I have compiled the list of incomes that are taxable to NRI’s in India.

Also Read: Should NRIs invest in New Pension Scheme (NPS) in India?

Who is a Non Resident Indian (NRI)?

In simple terms, if an Indian goes out of India for long term, he/she would be termed as NRI. However, who is an NRI for Indian income tax Act? An individual is considered to be a resident of India for a financial year if he satisfies any one of the following conditions:

  • If he spends at least six months (to be exact 182 days) in India during the financial year.
  • If he/she is in India for 2 months (60days) in the previous year but has spent one whole year in the last four years.
  • If an individual fails to satisfy one of these above mentioned conditions, he is an NRI.

What is taxable income in India for NRI?

Don’t think that there is no income tax for NRI in India. If you are an NRI, the income that is accrued or received in India, is taxable in India. However, the income of diplomats and ambassadors is free from these rules.

Salary received or accrued in India, or salary for services rendered in India, income from house property located in India, capital gains on transfer of assets in India, income from fixed deposits or savings bank account are all examples of taxable income of NRIs.

5 Incomes that are Taxable to NRI in India

1) Income from salary

NRI Salary taxation in India is nothing different from others. If you or some other person on your behalf receives your salary in India, it is taxable in India. For example, if you are an NRI and you receive your salary in an Indian account directly, it is treated as income as per Indian taxation law.

If you receive any salary in lieu of any services that are rendered in India, it will be taxed in India, no matter whether you have received it directly in a foreign account. Many individuals would get confused about NRI salary taxation in India and think that it may not be taxable even if it is received in India.

2) Income from house property     

Income from any house property that is situated in India is taxable in India. Even if the house is lying vacant, it is treated as deemed to be let out and taxed. He / she is eligible to claim the standard deduction of 30%, deduct property taxes and interest on the home, if taken. The NRI can also claim deductions on the repayment of home loan principal under Sec 80C.

One important point to be noted is when the tenant is paying rent to the NRI; he has to deduct TDS @ 30%. The NRI can receive rent in his Indian bank account or foreign bank account; however, that does not affect this rule.

3) Income from other sources

Income received in the form of interest from fixed deposits and saving bank account held in India is taxable. Interest received on NRO account is fully taxable. However, for NRE and FCNR, there is no income tax for NRI in India. It’s tax free.

4) Income from business and profession

Any income earned by the means of any business that is run is India and received by NRI is taxable.

5) Income from capital gains

Any capital gain that is rising due to transfer of capital asset that is situated in India would be taxable in India only. Capital gains on investments in shares/securities would also be taxable in India.

If an NRI sells a house property and earns long term capital gain, the buyer of the house has to deduct TDS @ 20%. However, similar to the resident of India, an NRI can also claim exemption on capital gain by investing in a house property according to the section 54 or can also invest in capital gain bonds as per section 54EC.

Some Special Provisions for NRI’s regarding taxation

There are few Indian assets, in which a NRI can invest and the income so earned from it is taxed @ 20%. TDS is also deducted on this income. If this special investment income is the only income of NRI during the financial year, he need not file the Indian tax return.

Also Read: Best Investment Plans for NRI’s to invest on repatriation basis 

List of investments that qualify for special treatment

If a NRI acquires the following assets by paying foreign currency and earns income out of it, it qualifies for special treatment:

  • Shares in a public or private Indian company
  • Debentures issued by a publicly listed company
  • Deposits with banks and public companies
  • Any security of the central government
  • Other assets of the central government specified for this purpose in the official gazette    

Conclusion: This list would be helpful for paying income tax and filing income tax returns by NRI in India. Instead of avoiding tax and ignoring while filing income tax returns, better to consider them and take exemptions wherever you can and pay balance tax and be peaceful.

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Incomes that are Taxable to NRI in India



  • Ram

    Hi, nice article. Is the withdrawal amount from Insurance plan (canceling Lic insurance plan half way) considered as income and taxable in the hands of NRI?

  • Ani

    Thanks Suresh for such wonderful information.

    I have some doubt and need some clarification.
    Can you please tell me how much Income tax approx should I pay considering all below cases

    1) FD of 5 lakh (payed/opened in indian currency). Consider 8% rate.So, Interest of 40,000 per year
    2) Receiving rent of 13,000*12months= 1,56,000/year
    3) Home loan of 30 lacks..interest rate is 9.55%
    3) Share Market :-20,000 profit and 10,000 loss at the end of year. During every trade brokerage firm deduct some taxes ..

    Total income will be 40K+156K+20K = 2,16,000/-
    Do I need to pay tax of (10% on 40k) + (30% on 156k) +(10% on 20k)
    =4000+46800 +2000 = 52800 total tax
    and what about Interest of 2,86,500/- on loan amount if I consider this in 80c ?
    what will be my final Tax ? Please correct me if I am wrong somewhere .

    This basic example will help everyone to predict their Tax.

  • Ajit

    You mentioned that – for NRE and FCNR,there is no income tax for NRI, It is tax free. What are these instruments ? Would like to know more about them.
    Thanks in advance.

  • Abeesh Thomas

    Excellent post. It clarifies a lot of doubts. One clarification, if an NRI invests in any of the points mentioned in the special treatment, he doesn’t have to file the tax return?

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