Navigating taxation as a Non-Resident Indian (NRI) can feel like decoding a puzzle with ever-evolving pieces. From FATCA compliance to understanding the benefits of DTAA, staying tax-compliant both in India and abroad requires clear guidance. In this blog post, we simplify the key concepts, address recent changes (as of 2025), and provide actionable insights to help NRIs manage their tax obligations effectively.

Understanding NRI Status and Taxability

What Qualifies as NRI Under Indian Tax Laws?

An individual is treated as an NRI for tax purposes if:

• They spend less than 182 days in India during the financial year.
• Or, they are not present in India for 60 days or more in the financial year and 365 days or more in the preceding four years.

Recent updates in 2021 and reaffirmed in 2025 budget guidelines tightened these rules further for Indian citizens with high income abroad.

How Is NRI Income Taxed in India?

Only the income that is earned or accrued in India is taxable for NRIs under Indian law. Examples include:

• Rental income from property in India
• Interest earned on NRO accounts
• Capital gains from Indian securities

Foreign income, such as salary earned abroad or rental income from overseas property, is not taxable in India.

FATCA: What It Means for NRIs

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a U.S. federal law that requires U.S. taxpayers, including NRIs who are U.S. citizens or green card holders, to report foreign financial assets. It also obligates Indian financial institutions to report U.S. account holders to the IRS.

FATCA’s Impact on Indian Financial Accounts

NRIs who are U.S. persons must:

• Submit self-declaration forms (Form W-9 or equivalent)
• Ensure their Indian bank accounts are FATCA compliant

Failure to comply can lead to account freezes and reporting issues, both in India and in the U.S.

DTAA: Double Taxation Avoidance Agreement

What Is DTAA?

The DTAA is a tax treaty between India and over 90 countries that ensures taxpayers do not pay tax on the same income in two countries. It provides methods like:

• Tax credit method
• Exemption method
• Reduced tax rates on dividends, interest, and royalties

How to Avail DTAA Benefits

To claim DTAA benefits, NRIs must:

• Submit a Tax Residency Certificate (TRC) from their resident country
• File Form 10F and provide relevant documentation

Banks and investment institutions often deduct TDS (Tax Deducted at Source) at higher rates without these documents.

Recent Taxation Changes Affecting NRIs (2024–2025)

High-Value Remittance Reporting

Under the Liberalised Remittance Scheme (LRS), remittances above Rs. 7 lakh are subject to 20% TCS (Tax Collected at Source). However, exceptions apply:

• Educational remittances with loan support incur only 0.5% TCS
• Medical or family maintenance remittances may be exempted or taxed at reduced rates

Deemed Residency Provision

Indians earning more than Rs. 15 lakh from Indian sources but not liable to tax in any other country may now be considered “deemed residents” and taxed accordingly in India.

Online Disclosure Requirements

The 2025 Finance Act emphasizes digital transparency:

• Mandatory online filing of foreign asset declarations
• Revised Form 26AS to reflect global income disclosures

Practical Tax Planning for NRIs

Optimize Investments in India

Use NRE accounts for tax-free interest earnings and invest in:

• Tax-free bonds
• Equity Mutual Funds with LTCG exemptions (up to Rs. 1 lakh)

File Taxes in Both Countries Strategically

Consider:

• Using Form 1116 (U.S.) or equivalent to claim foreign tax credits
• Matching your Indian tax filing calendar with deadlines abroad

Seek Professional Guidance

NRIs face multi-jurisdictional tax laws. A qualified CA or international tax advisor can:

• Help navigate compliance issues
• Maximize treaty benefits
• Avoid penalties for misreporting

Conclusion

Taxation for NRIs need not be intimidating. By understanding the foundational principles like FATCA, DTAA, and recent regulatory changes, you can ensure compliance and peace of mind. Staying informed and working with professionals are key to managing your tax responsibilities across borders.

FAQs

1. Do NRIs have to file taxes in India if they have no income in India?
No, only income earned or accrued in India needs to be reported and taxed in India.

2. Can I claim a refund if TDS is deducted unnecessarily in India?
Yes. File your Income Tax Return (ITR) and claim the refund with proper documentation.

3. How do I avoid double taxation on my Indian income?
Use DTAA provisions with your resident country. Submit TRC, Form 10F, and claim tax credits.

4. What happens if I don’t comply with FATCA regulations?
You risk account suspension, penalties, and being reported to the IRS or equivalent authority.

5. Is rental income from Indian property taxable for NRIs?
Yes, and TDS is deducted at source. However, standard deductions (like 30%) still apply.