If you're an NRI (Non-Resident Indian), figuring out your income tax responsibilities in India can feel confusing. As an NRI (Non-Resident Indian), your income earned both in and outside India is treated differently under the Income Tax Act. You may also be eligible for tax saving investments and other benefits just like resident Indians.

Once you understand how India’s tax system treats NRIs, you can manage your finances more confidently by making smart tax-saving investments. Let’s break down everything you need to know in simple terms.

Who is Considered an NRI for Tax Purposes?

For tax purposes, you're considered an NRI if:

• You stayed outside India for 183 days or more during the financial year.
• You have spent less than 60 days in India this year and less than 365 days in the four years prior.
• You were in India for less than 365 days in the previous four years.

This classification is important because your residential status determines which income is taxable in India and which isn’t.

For example, you moved to Dubai in August 2024. You didn’t return to India for more than 60 days until March 2025. Thus, you would likely qualify as an NRI for the financial year 2024–25.

What Type of Income is Taxable for NRIs in India?

Only the money you make or receive in India is subject to taxation as an NRI. This includes:

• Salary earned in India.
• Rental income from property in India.
• Capital gains from Indian shares or mutual funds.
• Fixed deposit interest in Indian banks (if NRO account).
• Dividends received from Indian companies (fully taxable since FY 2020–21).

Let’s say you earn a salary in Dubai, but you have a house in Mumbai that you rent out. Then, that rental income is taxable in India.

Which Income is Exempt from NRIs?

You can enjoy tax-free investments and income under certain conditions:

• Foreign salary or income earned abroad.
• Interest on NRE (Non-Resident External) and FCNR accounts.
• Agricultural income earned within India is exempt from tax under Section 10(1) of the Income Tax Act.

However, always double-check the source of the income and whether it has a connection with India. If yes, it could still be taxed.

TDS (Tax Deducted at Source) Rules for NRIs

Here’s where it gets a little tricky.

If you’re an NRI, taxes are usually deducted at the source (TDS) before you even receive the money. For example:

• Rental income – TDS is 31.2%.
• Sale of property, long-term gains: 20% (plus surcharge and cess).

Sale of property, short-term gains: as per slab.

• Interest on NRO accounts – TDS is also 31.2%.

Can an NRI claim Tax Deductions & Benefits?

Yes, as an NRI, you can still claim tax benefits on life insurance under Section 80C and Section 10(10D) of the Income Tax Act, just like any resident Indian. Here are some options include:

Under Section 80C

You can claim up to ₹1.5 lakh through:

• ELSS (Equity Linked Saving Schemes) – Tax-saving mutual funds.
• Life insurance premiums.
• Principal repayment of home loans.
• Tuition fees are paid for children in India.
• Contribution to Public Provident Fund (only if the account was opened before becoming an NRI).

Example: If you invest ₹1 lakh in ELSS and pay ₹50,000 in life insurance premiums, your total deduction is ₹1.5 lakh under 80C.

Double Taxation Avoidance Agreement (DTAA) Explained

The DTAA protects NRIs from being taxed twice — in India and the country they live in. India has signed DTAAs with over 85 countries, including the USA, UK, UAE, Canada, Australia, and more.

Say you live in the UK and pay taxes there. If there’s a DTAA between India and the UK, and you have income from an online insurance maturity benefit in India, you may be able to claim credit or get an exemption under the agreement.

Always consult a tax advisor to make sure you’re not losing money to double taxation.

New Tax Compliance Rules That Every NRI Must Know

• Tax residency rules (182-day and 60/120-day rules) remain unchanged but must be reviewed annually.
• High-income NRIs (over ₹15 lakh Indian income) are classified as RNOR if they stay 120+ days in India; only Indian income is taxed.
• Increased scrutiny of foreign-earned income and stricter reporting requirements.
• Enhanced tax recovery powers for authorities on Indian assets.
• Capital gains exemptions are available for reinvestment in specified assets.
• New presumptive taxation regime for NRIs providing services to Indian electronics manufacturing companies.

Final Thoughts

With proper planning, you can reduce tax liabilities and build wealth using tools like online life insurance policy, term insurance policy, and other tax-free investments.

Need help choosing the right plan? Get expert advice before committing to a policy and choose the one that best fits your goals. Let your money work for you while you live life abroad.