Moving to India? An NRI’s guide to tax implications

Returning to India as a Non-Resident Indian (NRI) involves navigating a complex landscape of NRI tax obligations and financial planning. Whether you’re relocating permanently or temporarily, understanding the NRI tax in India and leveraging the right banking solutions can ease your transition.

This guide outlines essential tax considerations and explains how IDFC FIRST Bank NRI Banking Services can support your financial planning goals.

Determining residential status
 

Your tax liability in India depends on your residential status under the Income Tax Act, 1961. For the financial year 2024–25, your status is determined as follows:

1. Resident: In the case of individuals, the person is a resident of India if:

a. He/she spends 182 days or more in India during the financial year or 

b. He/she spends 365 days or more in total in the preceding four years other than the current financial year and spends 60 days or more during the current financial year

Note: In point (b) above, 

a. If an individual is a citizen of India and leaves during the current financial year as a member of the crew of an Indian ship, or for the purposes of employment outside India, for the words "60 days", mentioned in point (b) above, the words "182 days" had been substituted

b. If an individual is a citizen of India or a person of Indian origin who, being outside India, comes on a visit to India, for the words "60 days", mentioned in point (b) above, the words "182 days" had been substituted

c. If an individual is a citizen of India or a person of Indian origin who, being outside India, comes on a visit to India, having total income, other than the income from foreign sources, exceeding ₹15 lakhs during the current financial year, for the words "60 days", mentioned in point (b) above, the words "120 days" had been substituted

2. Non-resident: A person who is not a "Resident" as per above. 

3. Deemed resident: A person who is not covered under the definition of resident and a citizen of India, having a total income, other than the income from foreign sources, exceeding ₹15 lakhs during the current financial year shall be deemed to be resident in India if he/she is not liable to tax in any other country or territory by reason of his/her domicile or residence or any other criteria of similar nature.

4. Not ordinarily resident:

a. An individual who has been a non-resident in India in 9 out of the 10 previous years preceding that year or has during the 7 previous years preceding that year been in India for a period of, or periods amounting in all to, 729 days or less

b. A citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding ₹15 lakhs during the year, who has been in India for a period or periods amounting in all to 120 days or more but less than 182 days; or

c. A citizen of India who is deemed to be a resident of India

5. Remarks:

a. Residential status differs with regard to the nature of the person, such as HUF, company, etc.

b. Both the Day of Arrival into India and the Day of Departure from India are counted as the days of stay in India

c. Residents are taxed on their global income, while non-residents are taxed only on their income earned or received in India

d. Person not ordinarily resident in India, the income which accrues or arises to him outside India shall not be taxable in India unless it is derived from a business controlled in or a profession set up in India

Tip: Track your days in India and consult a tax advisor to confirm your status, as it significantly impacts your NRI tax obligations.

Taxable Income for NRIs
 

Income tax for NRIs is only applicable for funds that were accrued or received in India. Common taxable incomes include:

a. Rental income: Income from property in India is subject to NRI tax, with Tax Deducted at Source (TDS) applied by the payer.

b. Dividends and capital gains: Dividends from Indian companies and gains from selling assets (e.g., property, shares) are taxable.

c. Interest income: Interest on Non-Resident Ordinary (NRO) accounts is taxable with TDS, while Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) account interest is tax-exempt as long as you maintain the status of a Non-Resident Indian or a Resident and Not Ordinarily Resident.

Tip: Maintain clear records of your Indian income sources during financial planning and review TDS certificates (Form 16A) to claim credits during tax filing.

Double Taxation Avoidance Agreements (DTAAs)

India has DTAAs with countries like the UAE, USA, and UK to prevent double taxation on income taxed in both India and your country of residence. To claim DTAA benefits:

a. Submit online filled Form 10F and a Tax Residency Certificate (TRC) from your country of residence

b. Ensure your Indian payers apply the tax rate which is beneficial as per DTAA or Income Tax Act

Tip: Check the specific DTAA with your country of residence on the Income Tax Department’s website and consult a tax advisor to optimise benefits as part of your financial planning.

Tax Deducted at Source (TDS) for NRIs
 

Under Section 195 of the Income Tax Act, TDS is mandatory on payments to NRIs, such as:

a. Property sales: TDS at 20–30% (depending on the asset type) on the sale value, with no threshold limit.

b. Rental payments: TDS at 30% on rent paid to NRIs.

c. Other payments: Professional fees or dividends may also attract TDS.

Tip: Ensure payers deduct TDS correctly and issue Form 16A. You can claim a refund for excess TDS during tax filing if applicable.

Recent tax changes
 

The Union Budget 2025 introduced changes impacting NRIs, including:

a. TCS exemption limit: The Tax Collected at Source (TCS) exemption limit on Liberalised Remittance Scheme (LRS) remittances increased from ₹7 lakh to ₹10 lakh, easing financial planning for NRIs sending money abroad.

b. Simplified tax filing: Enhanced digital platforms for tax filing and TDS reconciliation, making compliance easier.

Tip: Stay updated on budget announcements via the Income Tax Department’s website or a tax advisor to leverage new provisions.

Banking solutions for NRIs
 

Choosing the right banking partner can simplify tax compliance and financial planning. IDFC FIRST Bank offers tailored NRI accounts to meet your needs:

a. NRE account: Tax-exempt interest (up to 7.00% p.a.), fully repatriable funds, and ideal for parking overseas income.

b. NRO account: Manage Indian-sourced income (e.g., rent, dividends) with repatriation up to USD 1 million per financial year.

c. FCNR account: Tax-exempt, foreign currency deposits with competitive interest rates, protecting against currency fluctuations.

Additional benefits include paperless account opening via video KYC, seamless UPI-powered payments, and dedicated relationship managers to assist with investments and tax compliance.

Tip: Open an NRI account with IDFC FIRST Bank to streamline fund transfers, improve financial planning, and maximise returns. Visit www.idfcfirstbank.com/personal-banking/nri-banking for details.

Overcoming NRI challenges
 

Moving to India involves more than just taxes. Common challenges include repatriating funds, managing investments, and reintegrating culturally. IDFC FIRST Bank supports you with:

a. Digital banking: Instant account opening, mobile banking, and UPI integration for hassle-free transactions.

b. Financial planning: High interest rates (up to 7.00% p.a. on NRE accounts) and investment options like mutual funds or fixed deposits.

c. Personalised support: Dedicated relationship managers to guide you through tax compliance, repatriation (up to USD 1 million/year for NRO accounts), and relocation.

Tip: Leverage IDFC FIRST Bank’s resources to address both financial and lifestyle challenges, ensuring a smooth transition to India.

Take the next step

Returning to India is an exciting journey, but it requires careful tax and financial planning. Compare NRI banking options, review your residential status, and consult a tax advisor to ensure compliance with Indian tax laws.

IDFC FIRST Bank’s NRI banking solutions make it easy to manage your finances with competitive rates, digital convenience, and expert support.

Start your journey today! Visit www.idfcfirstbank.com/personal-banking/nri-banking to open an NRI account or contact our team for personalised assistance.