Moving out of India does not necessarily mean leaving the Indian tax system behind.

An NRI may be living in Dubai, London, Singapore, or the US and still have income connected to India. It could be rent from an Indian property, interest from an NRO account, dividends from Indian shares, or gains from selling a house or investments in India.

The situation is slightly different for expatriates working in India. An expat may be employed by a foreign company and receive salary in an overseas bank account, but that alone does not decide whether the income is taxable in India.

This is why NRI and expat taxation in India needs to be looked at based on the individual’s residential status, source of income, and the nature of the transaction.

Some of the questions that usually come up are:

What income of an NRI is taxable in India?
What are the NRI tax rates in India?
Is rental income from Indian property taxable?
Is NRO interest taxable?
Is NRE interest exempt?
What happens when an NRI sells Indian property or shares?
Does an expat working in India have to pay Indian income tax?
Can an NRI claim DTAA benefits?
When does an NRI need to file an income tax return?

Let’s look at these questions from a practical perspective.

Do NRIs and Expats Have to Pay Tax in India?

Yes, depending on their circumstances.

Being an NRI does not make all income tax-free in India. For a non-resident, Indian tax generally applies to income that is received or deemed to be received in India or income that accrues, arises, or is deemed to accrue or arise in India, subject to the applicable provisions and tax treaties.

For example, an NRI living in Dubai could still have an Indian tax liability if they:

Receive rent from a property in Gurgaon
Earn interest from an NRO bank account
Receive dividends from Indian companies
Sell shares or mutual funds in India
Sell a property located in India

An expatriate working in India also cannot determine their tax liability simply by looking at where their employer is incorporated or where their salary is credited.

The first thing to establish is residential status. The next step is to identify which income has an Indian tax connection.

What Are the NRI Tax Rates in India?

There is no single tax rate specifically called the “NRI tax rate.”

For income that is taxable under normal individual slab rates, the applicable rate depends on the taxable income and the tax regime. Certain types of income, such as specified capital gains and dividends, may instead be taxed at separate rates.

NRI Income Tax Slabs for AY 2026–27

For AY 2026–27, the applicable slab rates for non-resident individuals below 60 years are:

Taxable Income	Old Tax Regime	New Tax Regime
Up to ₹2.5 lakh	Nil	Up to ₹4 lakh: Nil
₹2.5 lakh to ₹5 lakh	5%	₹4 lakh to ₹8 lakh: 5%
₹5 lakh to ₹10 lakh	₹12,500 + 20% above ₹5 lakh	₹8 lakh to ₹12 lakh: ₹20,000 + 10% above ₹8 lakh
Above ₹10 lakh	₹1,12,500 + 30% above ₹10 lakh	₹12 lakh to ₹16 lakh: ₹60,000 + 15% above ₹12 lakh
—	—	₹16 lakh to ₹20 lakh: ₹1,20,000 + 20% above ₹16 lakh
—	—	₹20 lakh to ₹24 lakh: ₹2,00,000 + 25% above ₹20 lakh
—	—	Above ₹24 lakh: ₹3,00,000 + 30% above ₹24 lakh

A 4% health and education cess applies on income tax, plus surcharge wherever applicable. Surcharge can also apply depending on the level and nature of income.

NRI Income Tax: How Different Types of Income Are Taxed

For an NRI, the tax treatment can change significantly depending on where the income comes from.

Income Source	General Tax Treatment
Salary for services performed in India	Generally taxable at applicable individual rates, subject to specific provisions
Rent from Indian property	Taxable under house-property provisions after eligible deductions
NRO account interest	Generally taxable at applicable rates
NRE account interest	Generally exempt if statutory conditions are satisfied
FCNR interest	Generally exempt if applicable conditions are satisfied
Dividends from Indian companies	Generally 20% under applicable domestic provisions, subject to DTAA and conditions
Specified short-term capital gains on listed equity/equity-oriented investments	Generally 20% under Section 111A
Specified long-term capital gains on equity/equity-oriented investments	Generally 12.5% on gains exceeding the applicable ₹1.25 lakh threshold under Section 112A
Other long-term capital gains, including many property transactions	Generally 12.5%, subject to the asset and applicable provisions
Business income connected with India	Generally taxable at applicable rates, depending on the nature of income
Foreign income with no Indian tax connection	Generally not taxable in India for a non-resident, subject to applicable provisions

These are broad domestic tax treatments. The actual tax payable can change because of deductions, surcharge, cess, special provisions, and DTAA benefits.

How Is an Expat Working in India Taxed?

This is one area where simply looking at the location of the employer can lead to the wrong conclusion.

Imagine Sarah, an employee of a German company, is sent to India for an eight-month assignment. Her German employer continues to pay her salary into her German bank account.

Does the overseas salary payment automatically mean that Sarah has no Indian tax liability?

Not necessarily.

The fact that she is performing her employment services in India can be relevant when determining Indian taxability. Her residential status, employment arrangement, assignment structure, and the India-Germany DTAA would also need to be examined.

An expat working in India should therefore look at:

Number of days spent in India
Where the employment services are actually performed
Salary and other employment benefits
Length of the assignment
Foreign employer and Indian entity arrangements
Residential status
Applicable DTAA provisions
Foreign tax paid
Indian TDS
Income tax return requirements

For expatriates, the tax question is therefore broader than simply asking, “Where does my salary get credited?”

Is NRI Rental Income Taxable in India?

Yes. If an NRI owns property in India and earns rent from it, that rental income can be taxable in India.

For example, suppose an NRI living in Dubai owns an apartment in Gurgaon and receives ₹60,000 per month as rent.

That gives annual rent of ₹7.2 lakh. However, the NRI does not simply calculate tax on the entire ₹7.2 lakh as if it were salary.

Rental income is generally considered under the house-property provisions. Eligible deductions are taken into account before arriving at the taxable house-property income.

The resulting taxable income is then considered for the applicable tax treatment.

What About TDS on Rent Paid to an NRI?

This is another point that often gets missed.

Rent paid to a non-resident can attract specific TDS requirements. The tenant should therefore not assume that the TDS process is identical to the one applicable when paying rent to a resident landlord.

If you are an NRI receiving rent from an Indian property, it is worth checking the TDS position along with the income-tax calculation.

NRO vs NRE vs FCNR: What Happens to the Interest?

The type of bank account makes a significant difference to NRI taxation.

NRO Account Interest

Interest earned on an NRO account is generally taxable in India and may be subject to TDS.

NRE Account Interest

Interest earned on an NRE account can be exempt when the statutory conditions are satisfied.

FCNR Account Interest

Interest on qualifying FCNR deposits can also receive tax-exempt treatment, subject to the applicable conditions.

This means an NRI should not simply club all bank interest together and apply the same tax treatment.

NRO, NRE, and FCNR accounts can have different tax consequences.

What Is the Capital Gains Tax for NRIs?

Selling an Indian asset can create a capital gains tax liability for an NRI. This could include the sale of:

Residential or commercial property in India
Shares of an Indian company
Equity mutual funds
Other securities or investments

The first question is whether the gain is short-term or long-term under the rules applicable to that particular asset.

For certain listed equity investments, specified short-term capital gains covered by Section 111A are generally taxed at 20%.

Certain long-term capital gains covered by Sections 112 and 112A are generally taxed at 12.5%, subject to the applicable conditions and thresholds.

Property sales require a separate calculation based on factors such as the type of property, acquisition date, sale date, and the provisions applicable to that transaction.

TDS on Sale of Property by an NRI

Property sales by NRIs also need attention from a TDS perspective.

The buyer may have withholding obligations when purchasing property from a non-resident. Therefore, an NRI planning to sell an Indian property should ideally understand the capital gains calculation and TDS implications before the transaction is completed.

This can also help avoid a situation where a large amount is deducted as TDS and the taxpayer only starts looking into the tax position afterwards.

Are Dividends Received by an NRI Taxable?

Yes. Dividends received from Indian companies can be taxable in India.

For non-residents, dividends covered by the relevant provisions can generally be taxed at 20% under domestic law, subject to applicable conditions and a potentially lower rate where a DTAA applies.

TDS can also be deducted from dividend payments.

For an NRI holding Indian shares, therefore, it is useful to look at both:

The dividend received
The tax already deducted from that dividend

The final tax position should then be reconciled with the individual’s return and any applicable treaty benefit.

Can an NRI Be Taxed in Both India and Another Country?

Yes. This is where international taxation becomes more complicated.

Consider an individual who lives in the UK but owns a rental property in India. India may tax the rental income because the property is located in India. The UK may also have tax rules that apply to the individual’s worldwide income depending on their status there.

This can potentially result in the same income being considered in both countries.

A Double Taxation Avoidance Agreement (DTAA) can help determine how the two countries divide taxing rights or provide relief from double taxation.

However, DTAA does not simply mean that an NRI does not have to pay tax. The taxpayer may need to establish:

Whether the income is taxable in India
Whether it is also taxable in the other country
Which DTAA article applies
Whether the treaty provides a lower rate
Whether foreign tax credit or another form of relief is available
What supporting documents are required

For tax years covered by the Income Tax Act, 2025, the Income Tax Department provides Form 41 for non-residents claiming relief under a DTAA. The prescribed information includes details such as the foreign Tax Identification Number and relevant residence documentation.

Does an NRI Need to File an Income Tax Return in India?

Not every NRI will have the same ITR filing requirement. The requirement depends on the individual’s income, the nature of that income, and the applicable filing conditions.

For AY 2026–27, an eligible individual without income under the head “Profits and Gains of Business or Profession” may generally use ITR-2.

Where the individual has relevant business or professional income, ITR-3 may apply.

Before filing an NRI income tax return, it is useful to reconcile:

Rental income
Bank interest
Dividends
Capital gains
Salary or assignment income
TDS certificates
Form 26AS
Annual Information Statement (AIS)
Foreign tax paid
Tax Residency Certificate, where relevant
DTAA claims
Foreign tax credit, where applicable

The correct ITR form should be selected based on the nature of income, rather than simply because the taxpayer is an NRI.

Common NRI and Expat Taxation Mistakes

Assuming That Living Abroad Means No Indian Tax

An NRI can continue to have Indian tax obligations because of property, investments, interest, dividends, or other India-connected income.

Applying a Flat 30% Tax to All Income

Indian individual taxation is progressive for income covered by slab rates. Other categories of income can have separate rates.

Treating NRO and NRE Interest in the Same Way

The tax treatment can be different depending on the type of account.

Ignoring TDS

TDS can become important when an NRI receives rent, sells property, or receives certain investment income.

Assuming DTAA Means Zero Tax

A tax treaty can provide relief, but the specific treaty article, eligibility, and documentation matter.

Looking at Property Tax Only After the Sale

For an NRI selling Indian property, checking capital gains and TDS implications before the transaction can prevent avoidable surprises.

Choosing an ITR Form Based Only on NRI Status

The appropriate ITR depends on the nature of income and other filing conditions.

When Should an NRI or Expat Consult a Tax Professional?

Professional tax advice can be particularly useful when an individual has income or assets in more than one country.

You may want to get your position reviewed if you:

Recently moved out of India
Recently returned to India
Spend substantial time in India
Earn income from both India and another country
Own rental property in India
Plan to sell Indian property
Hold Indian shares or mutual funds
Receive salary from a foreign employer while working in India
Have NRO, NRE, or FCNR accounts
Need to claim DTAA benefits
Want to claim foreign tax credit
Are unsure about TDS
Have received an income-tax notice

In these situations, the important question is not simply “How much tax will I pay?”

It is:

Which income is taxable in India, which rate applies, what deductions or treaty benefits are available, and what compliance needs to be completed?

Getting these points right before filing a return or completing a major transaction can make a significant difference.

How Vidhu Duggal & Company Can Help With NRI and Expat Taxation

For NRIs and expatriates, tax planning can involve several moving parts at the same time. Residential status, Indian-source income, rental property, investments, capital gains, TDS, and DTAA provisions may all affect the final tax position.

Vidhu Duggal & Company works with clients on Indian tax and cross-border compliance matters by first understanding their individual circumstances, income sources, residency, and transactions.

This allows the tax position to be looked at as a whole rather than treating each income source separately.

For an NRI or expat who is unsure about Indian taxability, TDS, return filing, or DTAA relief, getting the position reviewed before filing or entering into a major transaction can help clarify the next steps.

If you have Indian income or assets while living or working abroad, speak with Vidhu Duggal & Company to review your NRI or expat tax requirements.

FAQs About NRI and Expat Taxation

Do NRIs Pay Income Tax in India?

Yes. An NRI can be liable to Indian income tax on income received or deemed to be received in India or income that accrues, arises, or is deemed to accrue or arise in India, subject to the applicable provisions and treaty relief.

What Is the NRI Tax Rate in India?

There is no single NRI tax rate. For AY 2026–27, normal slab rates for non-resident individuals can go up to 30%, depending on taxable income and the applicable regime. Dividends and certain capital gains can be taxed at separate rates.

Is Rental Income of an NRI Taxable in India?

Yes. Rent received from property located in India can be taxable. The taxable house-property income is calculated after applying the relevant provisions and eligible deductions.

TDS requirements can also apply when rent is paid to a non-resident.

Is NRO Interest Taxable for an NRI?

Generally, yes. Interest earned on an NRO account is taxable in India and may also be subject to TDS.

Is NRE Interest Taxable in India?

Interest on an NRE account can be exempt when the statutory conditions are satisfied.

What Is the Capital Gains Tax Rate for an NRI?

The rate depends on the asset and the nature of the gain.

Specified short-term capital gains under Section 111A are generally taxed at 20%. Several categories of long-term capital gains under Sections 112 and 112A are generally taxed at 12.5%, subject to the applicable conditions and thresholds.

Does an Expat Working in India Have to Pay Tax in India?

An expatriate working in India can have Indian tax obligations, including on salary connected with services performed in India.

Residential status, employment arrangements, and the applicable DTAA need to be considered.

Can NRIs Claim DTAA Benefits?

Yes, where the relevant treaty applies and its conditions are satisfied.

The taxpayer may need to provide prescribed documentation and meet the relevant compliance requirements.

Which ITR Should an NRI File?

For AY 2026–27, an NRI may generally need to file ITR-2 or ITR-3, depending on the nature of income.

An individual with relevant business or professional income may need ITR-3, while an eligible individual without such income may generally use ITR-2.

Final Takeaway

NRI and expat taxation in India is not determined simply by where you live.

The tax treatment depends on the nature of your income, where that income arises, your residential status, the applicable domestic tax provisions, and whether a tax treaty provides relief.

For one NRI, the main issue may be rental income from an Indian property. For another, it could be NRO interest, dividends, or capital gains from Indian investments.

An expatriate working in India may have an entirely different set of questions around salary, residential status, and DTAA.

Normal taxable income can be subject to progressive slab rates of up to 30%, while certain dividends and capital gains have separate tax rates.

If your financial affairs involve both India and another country, it is worth reviewing the tax position before filing your return, receiving a significant payment, or selling an Indian asset.

The objective is not just to find out how much tax you have to pay. It is to understand what is taxable, which rate applies, what relief may be available, and what compliance you need to complete.