NRI Income Tax in India: What Income is Taxable?

Introduction

For Non-Resident Indians (NRIs), taxation in India applies only to income that is earned or received within the country. Income generated outside India is generally not subject to Indian tax laws.

Taxable Income for NRIs in India:

Salary earned in India or for services performed in India is taxable
Rental income from property located in India is taxable
Capital gains from the sale of Indian assets such as shares or real estate are taxable
Interest income from NRO accounts is taxable, while interest earned on NRE and FCNR accounts is tax-free

How to Determine NRI Residential Status for Income Tax in India

Before calculating your tax liability, it is essential to determine your residential status under Indian tax laws. This status decides whether your global income or only Indian income will be taxed in India.

Basic Conditions for Residential Status:

You will be considered a resident in India for a financial year if you meet any one of the following conditions:

You stay in India for 182 days or more during the financial year, OR
You stay in India for 60 days or more in the current year and 365 days or more in the preceding 4 years

Types of Residential Status:

Individuals are further classified into the following categories:

Resident and Ordinarily Resident (ROR)
Resident but Not Ordinarily Resident (RNOR)

Is Foreign Income of NRIs Taxable in India? Explained

The taxability of an NRI’s income in India depends on their residential status as per income tax rules.

If you qualify as a resident, your global income (earned in India and abroad) is taxable in India.
If your status is Non-Resident Indian (NRI), only the income earned or received in India is taxable.

Income earned outside India is not taxable in India for NRIs.

Examples of Income Taxable in India for NRIs:

Salary received in India or for services rendered in India
Rental income from property located in India
Capital gains from the sale of assets situated in India
Interest income from fixed deposits or savings bank accounts in India

Salary Income for NRIs: Taxability in India Explained

For NRIs, salary income is considered taxable in India if the services are rendered within India. The place where the salary is received does not affect its taxability.

Key Rules for Salary Taxation:

Salary is taxable in India if services are performed in India, regardless of where it is received
Salary received in India is taxable, even if the services are rendered outside India
If you are an Indian citizen working for the Government of India, your salary is taxable in India even when services are rendered abroad

Exception:

Income earned by diplomats and ambassadors is exempt from tax in India

Example:

Ajay worked in China for an Indian company for three years. He initially planned to receive his salary in India to support his family and repay a home loan. However, since salary received in India could be taxed under Indian laws, he chose to receive it in China instead.

Income from House Property for NRIs: Taxability in India

Income earned from a property located in India is taxable in the hands of a Non-Resident Indian (NRI), even if the rental income is received outside India.

The tax treatment and deductions available for house property income remain the same for both residents and non-residents. This income is taxed as per applicable income tax slab rates.

Key Points:

Rental income from property situated in India is fully taxable in India
Tenants are required to deduct TDS on rent payments, even if the amount is below the threshold under Section 194-IB
For payments made to NRI landlords, tenants may also need to submit Form 15CA and Form 15CB, wherever applicable, during remittance

Example:

Nandini owns a house in Goa and has rented it out while living in Bangkok. Even though the rent is directly credited to her foreign bank account, the income from this property remains taxable in India as the property is located within the country.

Income from Other Sources for NRIs: Tax Rules Explained

For NRIs, income earned from certain financial assets in India is taxable under the head “Income from Other Sources.”

Key Tax Rules:

Interest earned on fixed deposits and savings accounts in India is taxable
Interest on NRO accounts is fully taxable in India
Interest on NRE and FCNR accounts is completely tax-free

Understanding these rules helps NRIs manage their bank accounts efficiently and plan their investments in a tax-effective manner.

NRO, NRE, and FCNR Account Taxation for NRIs Explained

As per FEMA guidelines, Non-Resident Indians (NRIs) are not permitted to maintain regular resident savings accounts in India. Instead, foreign income must be managed through NRE or NRO accounts.

Once an individual attains NRI status, their existing savings account must be converted into an NRO (Non-Resident Ordinary) account. However, a resident savings account cannot be directly converted into an NRE (Non-Resident External) account.

These account types help NRIs manage income earned in India and abroad while complying with Indian banking and tax regulations.

NRO Account (Non-Resident Ordinary Account): Meaning & Purpose

An NRO (Non-Resident Ordinary) account is used by NRIs to manage income earned in India. It helps in handling funds generated from Indian sources such as rent, interest, pension, gifts, dividends, and proceeds from the sale of immovable property in India.

This account ensures smooth management of Indian income while complying with NRI banking and tax regulations.

NRE Account (Non-Resident External): Meaning & Features

An NRE (Non-Resident External) account is designed for NRIs to manage their foreign earnings in India. Funds are deposited in foreign currency and automatically converted into Indian Rupees at the prevailing exchange rates.

This account is mainly used to transfer and hold income earned outside India while allowing easy repatriation of both principal and interest.

About the Author

Dakesh

Dakesh translates complex legal regulations into clear, actionable guidance, helping entrepreneurs stay compliant while building sustainable, scalable businesses with confidence.

May 6, 2026