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The one rule that governs everything: NRIs are taxed only on income that's earned, accrued, or received in India — never on income earned entirely abroad. Here's how each income type actually gets taxed.
Unlike residents who pay tax on global income, NRIs are taxed only on income that arises, accrues, or is received in India. Salary earned and paid for work done abroad, foreign business income, foreign rental income — none of it is taxable in India. The moment income has an Indian source — an Indian employer, Indian property, Indian securities — it enters the Indian tax net regardless of which country the money eventually sits in.
Salary is taxable in India if the services were performed in India — this holds true regardless of where the salary is actually paid or received. An NRI who works for an Indian company remotely from Dubai for part of the year, and travels to India for a few weeks of onsite work, owes Indian tax on the portion earned during those India-based weeks, even if the whole salary lands in a foreign account.
| Scenario | Taxable in India? |
|---|---|
| Services performed entirely outside India | No |
| Services performed in India (even partially) | Yes, for that portion |
| Salary paid by Indian employer for work done abroad | No — location of service matters, not the payer |
Employers must deduct TDS at applicable slab rates on the taxable portion; if they don't, the liability falls on the NRI at filing time.
Any property situated in India that generates rent is taxable in India — it makes no difference that the rent lands in a foreign bank account. You get a standard 30% deduction on the annual rental value for maintenance before the balance is added to taxable income at slab rates.
Tenants are required to deduct TDS at 31.2% (30% + 4% cess) on rent paid to an NRI landlord, regardless of the rent amount — there's no minimum threshold exemption for NRI landlords the way there is for resident ones. If your actual tax liability is lower, you can apply for a Lower Deduction Certificate under Section 197 so the tenant deducts less upfront, rather than waiting for a refund after filing.
| Account type | Taxable? |
|---|---|
| NRE / FCNR interest | Exempt |
| NRO interest | Fully taxable — 30% TDS deducted from the first rupee |
Gains from selling Indian shares, mutual funds, or property are all taxable, calculated the same way as for residents — sale value minus cost of acquisition, improvement, and transfer expenses:
| Asset | Short-term | Long-term |
|---|---|---|
| Listed shares / equity MFs | 20% (held ≤ 12 months) | 12.5% above ₹1.25 lakh/year (held > 12 months), no indexation |
| Property / other assets | Slab rate (held ≤ 24 months) | 12.5% flat, no indexation (held > 24 months) |
For property specifically, the buyer must deduct TDS on your behalf under Section 393(2) of the new Act (Section 195 under the 1961 Act, same rate carried forward) — 12.5% on long-term gains (or on the full sale value if no Lower Deduction Certificate exists), and up to 30% for short-term gains.
Foreign salary and business income — not taxable unless the business is controlled or set up from India.
NRE and FCNR account interest — fully exempt regardless of amount.
Foreign rental, dividend, or investment income — outside the Indian tax net entirely.
1. Assuming rent below a certain amount is TDS-exempt for NRI landlords. Unlike resident landlords (where a ₹2.4 lakh annual threshold applies for TDS), tenants must deduct TDS on any rent paid to an NRI, from the first rupee.
2. Not applying for a Lower TDS Certificate when actual liability is lower. Letting 31.2% get deducted on rent or 30% on NRO interest when your real tax bracket is lower just means waiting longer for a refund — Form 13/Section 197 fixes this upfront.
3. Thinking salary from an Indian employer is always taxable. What matters is where the work was physically performed, not who's paying — genuinely remote work done entirely outside India isn't taxable even with an Indian employer.
Key Takeaway: NRI taxation follows source, not residency — only India-sourced salary, rent, interest, and capital gains get taxed, at rates and TDS levels generally higher than what residents face on paper (though often refundable). Since many NRIs also owe tax in their country of residence on the same income, the next lesson covers how DTAA prevents you from paying twice. See DTAA - Avoiding Double Taxation.
No — salary is taxable in India only if the services were performed in India. Salary for work done entirely outside India isn't taxable here, regardless of which employer pays it.
Tenants must deduct 31.2% TDS on rent paid to any NRI landlord from the first rupee, with no minimum threshold — resident landlords only face TDS once annual rent crosses ₹2.4 lakh, and often at a lower rate.
Yes — capital gains tax applies based on the holding period from the original owner's purchase date, with the buyer required to deduct TDS on the sale under Section 393(2) of the new Act.
Yes — apply for a Lower Deduction Certificate under Section 197 (via Form 13) with the tax department, which allows tenants, buyers, or banks to deduct TDS at a reduced rate matching your actual liability instead of the standard higher rate.
Disclaimer: This article is for general educational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Figures, rates, and rules mentioned may change over time — verify current details with an official source or a qualified professional before making financial decisions.