How Much Tax NRIs Pay in India – A Complete Guide
NRIs (Non-Resident Indians) earning income in India often face confusion about taxation. How much tax NRIs pay in India depends on their income type, TDS applicability, and whether they benefit from Double Taxation Avoidance Agreements (DTAAs). This blog breaks it all down — from property sales to interest income.
Who is an NRI under Income Tax?
As per Section 6 of the Income-tax Act, 1961, you’re considered an NRI if:
- You stay in India for less than 182 days in a financial year, OR
- You were in India for less than 60 days in the year and less than 365 days in the last 4 years.
What Income is Taxable for NRIs?
NRIs are taxed only on income earned or received in India. Global income is not taxable unless you’re a resident.
Income taxable for NRIs:
- Rent from property in India
- Capital gains from property sale
- Interest from Indian bank accounts (except NRE/FCNR)
- Salary earned in India
- Income from business based in India
✅ Tax is charged as per slab rates, but TDS applies heavily upfront.
TDS Rules for NRIs – Property Sale is a Key Concern
One of the highest TDS burdens NRIs face is during the sale of property in India.
| Income Type | TDS Rate for NRIs |
|---|---|
| Sale of property | 20% + surcharge + cess on LTCG (Section 195) |
| Rent from property | 30% (Section 195) |
| Interest on NRO A/c | 30% (Section 195) |
| Dividend income | 20% (Section 195/115A) |
| Mutual Fund LTCG | 10% on equity, 20% on debt |
📌 Note: TDS is deducted at a higher flat rate, unlike residents who benefit from slab-based tax and basic exemption limits.
NRI Property Sale – Tax & TDS in Detail
Under Section 195, any buyer purchasing a property from an NRI must deduct TDS on the capital gain.
- LTCG (held >2 years): 20% TDS
- STCG (held ≤2 years): 30% TDS
- Plus surcharge and cess (effective rate ~22–23%)
- TDS is on the entire sale value, not just the gain, unless the NRI gets a lower TDS certificate from the AO
Practical Tip:
Apply for a Lower/Nil TDS Certificate under Section 197 via Form 13. This helps you avoid excessive deduction and claim only applicable tax.
Can NRIs Claim Tax Relief via DTAA?
Yes, India has signed DTAA treaties with over 90 countries, including the US, UK, UAE, Singapore, and Australia.
- If income is taxable in both countries, NRIs can claim relief under DTAA.
- You need a Tax Residency Certificate (TRC) from the other country.
- Helps reduce double taxation and claim refunds.
📎 View India’s DTAA List – incometaxindia.gov.in
Expert Insight: Don’t Just File — Plan Your Taxes
“Most NRIs overpay due to flat TDS and ignore tax planning. Getting a CA to file for Section 197 certificates or claiming DTAA benefits can save lakhs.”
— CA Vishal M., NRI Tax Consultant
Summary
NRIs pay tax in India on income earned or received in India, like rent, capital gains, and interest. TDS is high—especially on property sales—but relief is possible via DTAA or a lower deduction certificate under Section 197. Plan ahead to avoid excess tax.
FAQs – NRI Tax in India
Q1. Is NRE account interest taxable?
No, NRE interest is tax-free for NRIs.
Q2. Can NRIs file ITR to claim refund of excess TDS?
Yes, NRIs must file ITR-2 or ITR-3 depending on their income source.
Q3. What documents are needed to claim DTAA benefit?
You need a Tax Residency Certificate (TRC), PAN in India, and proof of income.
🚀 Filing ITR or Selling Property in India as NRI?
Let Efiletax help you file correctly, claim DTAA benefits, and apply for lower TDS certificates.
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