NRI Tax Rules Under New Income Tax Act 2025
- Substantive NRI rules unchanged. Residential status, scope of income, and TDS triggers stay the same.
- Section 9 (income deemed to accrue in India) mapped under the new Act with same business connection and salary rules.
- TDS for NRIs: Now under Section 400. Rates and rules preserved.
- DTAA continues. Tax credit claims via Form 67 still required for foreign tax relief.
If you are a Non-Resident Indian (NRI) earning income in India - rental income, capital gains, interest, dividends, or salary - the new Income Tax Act 2025 applies to you from April 1, 2026. The good news: the substantive rules for NRI taxation are unchanged. Here is what you need to know.
Key Section Mapping for NRIs
Residential Status: Still the Same Tests
Your tax liability depends on whether you are Resident, Non-Resident, or Resident but Not Ordinarily Resident (RNOR). The determination rules remain identical:
- Resident: Present in India for 182 days or more in the financial year, OR present for 60 days in the current year AND 365 days in the preceding 4 years
- NRI: Does not satisfy either condition above
- RNOR: Resident who has been NRI in 9 out of 10 preceding years, OR has been in India for 729 days or less in the preceding 7 years
The 60-day rule has exceptions for Indian citizens leaving India for employment, or visiting India. These exceptions continue under the new act.
What Income Is Taxable for NRIs
Under new Section 9 (old Section 9), NRIs are taxed on:
- Income received in India - salary received in India, rent from Indian property, interest from Indian banks
- Income deemed to accrue in India - business connection in India, capital gains on Indian assets, income through transfer of an asset situated in India
- Salary earned in India - for services rendered in India, regardless of where it is paid
Income earned outside India from sources outside India remains non-taxable for NRIs. This has not changed.
TDS on Payments to NRIs: Now Section 400
Old Section 195 (TDS on payments to non-residents) has been consolidated into new Section 400 along with related provisions. Key points:
- Any person paying income to an NRI must deduct TDS at the applicable rate
- TDS rate depends on nature of payment and the applicable DTAA
- Lower deduction certificate (old Section 197, now part of Section 400) can reduce TDS if the NRI's total income is below the taxable threshold
- Form 15CA/15CB requirements for foreign remittances continue
DTAA Benefits: Now Section 159
Double Tax Avoidance Agreements between India and other countries continue to apply. Old Sections 90 and 90A are now consolidated under new Section 159. Key points:
- NRIs can choose between the Income Tax Act rate and the DTAA rate - whichever is lower
- Tax Residency Certificate (TRC) is still required to claim DTAA benefits
- Unilateral relief under old Section 91 (now Section 160) available where no DTAA exists
NRI Property Transactions
- Rental income: Taxable in India. TDS at 30% by the tenant (or as per DTAA). File ITR to claim refund if actual tax is lower.
- Capital gains on property sale: LTCG at 20% with indexation (new Section 197). Buyer must deduct TDS at 20% under Section 400. Exemptions under new Section 82 (old 54) and Section 85 (old 54EC) available.
- Repatriation: Covered under FEMA/RBI guidelines. Form 15CA/15CB required for remittance.
Without a TRC from your country of residence, you cannot claim DTAA benefits under Section 159. Most banks and ITR officers ask for it during scrutiny. Renew it annually and keep a digital copy with your tax records.
Frequently Asked Questions
Do NRIs need to file income tax returns in India?
Yes, if your total income in India (before exemptions) exceeds Rs 2.5 lakh, or if you want to claim a TDS refund. Rental income, capital gains on Indian assets, and interest from Indian banks all count as Indian income.
What is the TDS rate on NRI property sale?
The buyer must deduct TDS at 20% on the sale amount for long-term capital gains under Section 400 (old 195). NRIs can apply for a lower deduction certificate if the actual tax liability is lower than 20%.
Can NRIs claim DTAA benefits to avoid double taxation?
Yes. Under Section 159 (old Sections 90 and 90A), NRIs can choose between the Income Tax Act rate and the DTAA rate, whichever is lower. A valid Tax Residency Certificate (TRC) from your country of residence is mandatory.
How is residential status determined for NRIs?
You are an NRI if you were present in India for less than 182 days in the financial year and do not satisfy the 60-day plus 365-day combined test. The rules under Section 6 remain unchanged in the new act.
For foreign income disclosure (Schedule FA, Form 67), see foreign income in ITR. For capital gains on Indian assets sold by NRIs, see capital gains now Section 67.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
NRI with Indian Income?
Our CA team specialises in cross-border taxation, DTAA claims, and NRI compliance under the new act.