Managing taxes as a Non-Resident Indian (NRI) doesn't have to be a headache, even with the latest 2025-26 rules. The most important thing to remember is that India only taxes you on the money you actually make in India. Your hard-earned salary in Dubai, London, or New York stays yours. However, if you have a house in Mumbai bringing in rent, a fixed deposit in an NRO account, or you’ve sold some Indian stocks, the taxman will want a look. By staying on top of the latest New Tax Regime slabs and knowing which deductions still work, you can easily keep your Indian tax bill under control and avoid any unnecessary legal drama back home.

Are you actually an NRI this year? (Status check)

In 2025, your tax status is still all about the calendar. You are generally considered an NRI if:

You spent less than 182 days in India during the financial year.
OR You spent less than 60 days in India this year and less than 365 days over the last four years.

The ₹15 Lakh Rule Reminder: If your total Indian income is more than ₹15 lakh, the government is a bit stricter. In this case, you become a Resident if you stay for 120 days or more. If you stay between 120 and 181 days, you are called an RNOR (Resident but Not Ordinarily Resident), a sweet spot where your foreign income is still safe from Indian tax.

What exactly does India tax?

India follows a source-based system for NRIs. Here is the checklist of what is taxable:

Income Source

Tax Treatment in 2025-26

Salary

Only if the work was physically done in India.

Rental Income

Fully taxable (minus a flat 30% for repairs/maintenance).

NRO Interest

Fully taxable (Banks usually cut 30% TDS automatically).

NRE/FCNR Interest

100% Tax-Free in India.

Dividends

Taxable at your slab rate (usually 20% TDS).

Capital Gains

Taxable on sale of Indian property, shares, or mutual funds.

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The New vs. Old tax regime (2025 Edition)

For the Assessment Year 2025-26, the New Tax Regime is now the default. If you don't choose one, the government puts you in the New one automatically.

New tax regime slabs (The Simple Way)

This regime has lower rates but no deductions (except the ₹75,000 Standard Deduction for salary).

Up to ₹4 Lakh: Nil
₹4 Lakh – ₹8 Lakh: 5%
₹8 Lakh – ₹12 Lakh: 10%
₹12 Lakh – ₹16 Lakh: 15%
₹16 Lakh – ₹20 Lakh: 20%
₹20 Lakh – ₹24 Lakh: 25%
Above ₹24 Lakh: 30%

Old tax regime slabs (The Deduction Way)

This is better if you have big LIC premiums, home loans, or health insurance in India.

Up to ₹2.5 Lakh: Nil
₹2.5 Lakh – ₹5 Lakh: 5%
₹5 Lakh – ₹10 Lakh: 20%
Above ₹10 Lakh: 30%

Deductions: How to lower your bill?

If you stick with the Old Tax Regime, you can use these tax savers to bring down your taxable income:

Section 80C (Up to ₹1.5 Lakh): For life insurance premiums, children's tuition fees paid in India, ELSS (tax-saving mutual funds), and principal repayment of a home loan. (Note: NRIs cannot open new PPF accounts, but can contribute to old ones).
Section 80D: Up to ₹25,000 for health insurance for your family and up to ₹50,000 if you pay for your senior citizen parents.
Section 24(b): Up to ₹2 Lakh deduction on the interest of a home loan for a property in India.
Section 80TTA: Interest on NRO savings accounts up to ₹10,000.

Filing your return: Step-by-step walkthrough

You must file an ITR if your total Indian income is more than the basic exemption (₹2.5L or ₹4L, depending on the regime). But even if your income is ZERO, you should file if you want a Refund of the TDS your bank cut on your NRO interest.

Step 1: Get your documents

Grab your PAN card, bank statements (NRE & NRO), and download your AIS (Annual Information Statement) from the tax portal. It shows everything the government already knows about your Indian earnings.

Step 2: Pick the right Form

ITR-2: This is the most common form for NRIs. Use it for salary, rent, and capital gains.
ITR-3: Use this only if you have a business or professional setup in India.
Note: NRIs cannot use ITR-1.

Step 3: Filing & Deadlines

The deadline for FY 2025-26 is July 31, 2026. You can file online at the Income Tax e-Filing portal. Don't forget to e-verify using your Aadhaar OTP or Net Banking; otherwise, your filing isn't valid!

Conclusion

Taxation for NRIs in 2025 is actually quite friendly if you know the basics. The shift toward the New Tax Regime makes things much simpler if you don't have many investments in India. However, if you are paying off a home loan or supporting parents' health insurance, the Old Regime is still a powerful ally. Just remember to file by July 31st, it's the only way to get back that 30% TDS the banks keep taking from your NRO account!

Frequently Asked Questions (FAQs)

Is my foreign salary taxed in India?

No. As long as you are an NRI, your income earned outside India is 100% tax-free in India.

Can I get a refund for the 30% TDS on my NRO interest?

Yes! If your total Indian income is below the taxable limit (like ₹2.5 lakh), you can file an ITR to get that entire TDS back.

Do I need an Aadhaar card to file?

NRIs are usually exempt from mandatory Aadhaar-PAN linking, but you do need a valid PAN card to file your returns.

What is DTAA?

It stands for Double Taxation Avoidance Agreement. It’s a treaty that ensures you don't pay tax on the same income in both India and your current country. You might need a Tax Residency Certificate (TRC) from your home country to use this.

Can I invest in a Tax-Saving FD?

Yes, NRIs can invest in 5-year tax-saving fixed deposits and claim a deduction under Section 80C (Old Regime).

I have an NRE account. Is that interest taxable?

No, NRE and FCNR interest is completely exempt from tax for NRIs.

Can I claim HRA as an NRI?

Only if you are earning a salary in India and paying rent for a house in India. If you live abroad, you cannot claim HRA against your Indian income.

What happens if I file my ITR late?

You can file a Belated Return until December 31, 2026, but you'll have to pay a late fee ranging from ₹1,000 to ₹5,000.

Can I claim deductions for my parents' medical bills?

If your parents are senior citizens and don't have insurance, you can claim up to ₹50,000 for their medical expenses under Section 80D (Old Regime).

Do I need to report my foreign bank accounts in India?

No. As an NRI, you do not need to disclose your foreign assets or bank accounts to the Indian tax authorities.

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