Form 41 introduced in Income Tax Act, 2025 to replace existing Form 10F to claim the Treaty Benefit by Non-residents or Foreign Companies in India
NRI taxation covers how India taxes people who live abroad but still have money, property or investments here. The rules are different from what applies to residents, and most of the confusion comes down to one thing: India doesn't tax you on who you are, it taxes you on where your income arises and what your residential status is for that particular year.
For an NRI, only income earned or received in India is taxable here. Your salary in Dubai, your 401(k) in the US, your rental flat in London, none of that enters the Indian tax net while you're a non-resident. But the fixed deposit in Mumbai, the flat you rent out in Gurgaon, the shares you hold in an Indian company, all of that does.
Where it gets messy is the overlap. You might be paying tax abroad on the same income India wants to tax, or you might have TDS deducted here at rates far higher than what you actually owe. That's usually the point where people start looking for an NRI tax consultant rather than muddling through it themselves.
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Everything starts here. Get your residential status wrong and every calculation downstream is wrong too. It's determined fresh each financial year, based purely on how many days you physically spent in India, not on your passport, your citizenship or where you feel you belong.
You're a resident if you spent 182 days or more in India during the financial year. There's also a second route: 60 days or more in the year, combined with 365 days or more across the four preceding years. For Indian citizens leaving for employment abroad or working on Indian ships, that 60-day threshold stretches to 182 days, which is the relief most genuine expats rely on.
Fail both of those tests and you're a non-resident for that year. Simple as that. Your foreign income stays outside India's reach, and only your Indian-sourced income gets taxed.
This is the in-between status, and it's genuinely useful. You qualify as RNOR if you've been a non-resident in India for 9 out of the 10 preceding years, or if your stay in India across the preceding 7 years totals 729 days or less. RNORs are taxed roughly like non-residents, meaning foreign income generally stays untaxed, which makes this a valuable window for anyone moving back.
Added in 2020, this one catches a specific situation: an Indian citizen with Indian income above 15 lakh who isn't liable to tax in any other country because of domicile or residence. If that's you, India treats you as a resident even if you never set foot here. It was aimed at people parked in zero-tax jurisdictions, and it surprises a fair number of people the first time they hear about it.
Because it decides the entire scope of what India can tax. A resident is taxed on worldwide income. A non-resident is taxed only on Indian income. An RNOR sits close to the non-resident position. The gap between these is often several lakh rupees in tax, which is why we spend real time on this before touching anything else.
| Aspect | Resident | RNOR | Non-Resident (NRI) |
|---|---|---|---|
| Indian income | Taxable | Taxable | Taxable |
| Foreign income | Taxable | Generally not taxable | Not taxable |
| Foreign assets reporting | Required in ITR | Generally not required | Not required |
| Typical situation | Living in India | Recently returned NRI | Living abroad |
| Planning window | Limited | Valuable, usually 2 to 3 years | Ongoing |
The RNOR column is the one worth staring at. For someone returning to India after years abroad, those two or three RNOR years are often the last chance to restructure foreign assets before worldwide taxation kicks in.
If it arises in India, accrues in India, or is received in India, it's taxable. Here's how that plays out across the income types NRIs actually deal with:
Salary is taxable in India if the services were rendered here, or if it's received in India. Work entirely abroad and get paid abroad? Not taxable. But salary credited directly to an Indian account can be taxable even for work done overseas, which trips people up more often than you'd think.
Rent from Indian property is taxable, full stop. You do get the standard 30% deduction on net annual value, plus a deduction for municipal taxes paid and for interest on a home loan. Tenants are supposed to deduct TDS before paying you, though in practice plenty don't realise this.
Interest on NRO deposits and savings accounts is taxable. Interest on NRE and FCNR accounts is exempt while you hold NRI status. That single distinction drives a lot of how NRIs structure their Indian banking.
Dividends from Indian companies are taxable in your hands, with TDS deducted at source. DTAA relief often brings the effective rate down, but you have to actually claim it rather than assume it applies automatically.
Gains from selling Indian property, shares, mutual funds or other capital assets are taxable here regardless of where you live. The rate depends on the asset type and holding period, and this is where the biggest tax bills usually show up.
If you run a business or profession with a presence in India, income attributable to that Indian operation is taxable here. Consultancy billed to Indian clients can also fall in, depending on where the work was performed.
Returns from Indian mutual funds, bonds, PMS arrangements and similar instruments are taxable, and each carries its own rate and TDS treatment. There's no single "investment income" rate, which is partly why NRI portfolios get complicated fast.
If your Indian income crosses the basic exemption limit, you're required to file. But the more common reason NRIs file is to claim a refund. TDS on NRI income is deducted at flat rates that ignore your actual slab, your deductions and your DTAA position, so plenty of people have paid far more than they owe and never claimed it back.
Most NRIs file ITR-2, which covers salary, house property, capital gains and other income. If you have business or professional income in India, it's ITR-3. NRIs can't use ITR-1, so if someone's told you otherwise, that's wrong.
Rental income goes under house property, after the 30% standard deduction, municipal taxes and home loan interest. Where a tenant has deducted TDS, that credit needs matching against your computed liability, and there's very often a refund sitting there.
Property and securities sales both get reported here, with holding period and acquisition cost driving the calculation. If you're claiming an exemption under Section 54 or 54EC, that gets disclosed in the return too, along with proof that the reinvestment actually happened.
Mutual funds, shares, bonds and deposits all need reporting with their respective gain or income treatment. Where a DTAA gives you a lower rate on dividends or interest, the return is where you claim it, supported by your Tax Residency Certificate.
This is where a lot of the actual value sits. We pull your Form 26AS and AIS, match every deduction against what you genuinely owe, and claim back the difference. For NRIs selling property, where TDS gets deducted on the full sale value rather than the gain, refunds can run into serious money.
Property is where most NRIs meet the Indian tax system properly for the first time, and usually at the worst possible moment, mid-sale, with a buyer waiting.
Taxed under house property, with the 30% standard deduction and interest deduction available. Tenants paying rent to an NRI are required to deduct TDS under Section 195, which many don't know, creating compliance problems for both sides later.
Any sale of Indian property triggers Indian capital gains tax, whether you're here or not, and whether or not you're also taxed on it abroad. DTAA relief usually comes in through a foreign tax credit rather than by exempting the gain.
Hold the property more than 24 months and it's a long-term capital gain; less than that and it's short-term, taxed at slab rates. Rates and indexation rules for long-term gains changed in 2024, so please have the current position confirmed before you plan a sale around a number you read somewhere.
Here's the one that catches everyone. When an NRI sells property, the buyer must deduct TDS on the entire sale consideration, not just the gain. On a 2 crore sale where your actual gain is 30 lakh, that difference is enormous, and it's your money sitting with the department until you file and claim it.
Which is exactly why you apply for a certificate under Section 197 before the sale, not after. It gets the deduction brought down to something close to your real liability, so the cash stays with you rather than locked up for a year. Getting this in motion early is probably the single most useful thing we do for NRIs selling property.
Section 54 covers reinvestment in another residential property, Section 54F applies when you've sold a non-residential asset and buy a house, and Section 54EC allows investment in specified bonds within six months. Each has its own timelines and conditions, and missing a deadline usually means losing the exemption entirely.
Getting the money out involves its own set of rules, covered further down under repatriation, including the annual limits and the Form 15CA and 15CB requirement.
A Double Taxation Avoidance Agreement is a treaty between India and another country that stops the same income being taxed twice. India has these with most countries where NRIs actually live, the UAE, US, UK, Singapore, Canada, Australia and many more.
You can't claim treaty benefits without a TRC from the country you're resident in, usually along with Form 10F. This is the document people most often don't have ready when they need it, and without it the concessional rates simply don't apply.
Where both countries tax the same income, the treaty lets you credit tax paid in one against liability in the other. Claiming this in India requires Form 67, filed within the prescribed timeline, and it's a commonly missed step.
It isn't automatic. You have to actively claim it, with the TRC, Form 10F and supporting documentation in place, and in some cases submit these to the payer so the lower rate is applied at the TDS stage rather than clawed back through a refund later.
Treaties vary, sometimes a lot. The India-UAE treaty works differently from the India-US one, particularly on capital gains and interest. Which treaty applies, and what it actually gives you, depends on where you're resident, so this part is worth handling specifically rather than generically.
While you're a non-resident or RNOR, foreign accounts are outside India's tax and reporting net. Become an ordinary resident and both taxation and disclosure obligations kick in.
Same principle. Foreign shares, funds and retirement accounts stay outside the Indian net during NRI and RNOR years, and enter it once you become a resident, at which point income from them becomes taxable here.
Property abroad isn't taxable in India while you're an NRI. After you become an ordinary resident, rental income and eventual capital gains from it become taxable in India, with treaty relief for tax paid abroad.
Once foreign income does become taxable in India, FTC is what stops you paying twice. It needs Form 67 and proof of the foreign tax paid, and the credit is generally limited to the Indian tax on that income.
Ordinary residents must disclose foreign assets in Schedule FA of the return. The penalties for not doing so are steep, and this catches returning NRIs who assume nothing changed just because their money never moved.
These three accounts get treated very differently, and knowing which is which saves real tax:
Interest on NRE accounts is exempt from Indian tax while you hold NRI status, and the balance is freely repatriable. This is usually the account NRIs park foreign earnings in.
NRO interest is fully taxable, with TDS deducted at source. It's the account for Indian-sourced income like rent, dividends and pension, and repatriation from it is capped annually and needs documentation.
FCNR deposits are held in foreign currency, interest is exempt during NRI status, and you avoid rupee exchange risk entirely. Popular with people who don't want currency movement eating into returns.
Equity and debt funds are taxed differently, and the rules shifted in recent years, particularly for debt funds. Holding period determines whether gains are short or long term, and TDS applies to NRI redemptions at source, unlike for residents.
Listed equity gains attract STCG or LTCG depending on holding period, with LTCG above the threshold taxable. Dividends are taxable in your hands, with DTAA relief available where the treaty provides for it.
NRO deposit interest is taxable with TDS at 30% plus surcharge and cess, which is often higher than your actual liability. NRE and FCNR deposit interest stays exempt. This gap alone is worth reviewing if you're holding significant deposits.
Rental income and capital gains both taxable, as covered earlier, and property remains one of the more compliance-heavy assets an NRI can hold in India.
Across all of these, the asset type and holding period determine the rate. Rates have changed more than once in recent years, so any planning built on an old number needs rechecking against the current law.
Tax is only half of it. FEMA governs what you're actually allowed to do with money and assets in India, and it runs on a separate track from the Income Tax Act.
NRIs can invest in most Indian instruments, shares, mutual funds, deposits, with some restrictions. Agricultural land, plantation property and farmhouses can't be purchased by NRIs, though they can be inherited.
Buying and selling residential and commercial property is permitted, subject to how the purchase was funded and what that means for repatriating proceeds later. The funding route matters more than people expect.
FEMA sets the limits and conditions on moving money out of India. Funds in NRE accounts move freely; NRO funds are capped and conditional.
Moving money between these accounts, and the documentation each transfer needs, is a routine source of confusion. Getting the account structure right from the start avoids most of it.
Repatriation is generally permitted up to prescribed annual limits, with conditions depending on how the property was originally acquired and funded. Property bought with NRE funds usually repatriates more easily than property inherited or bought with rupee funds.
Rent is repatriable from your NRO account after tax has been paid, supported by the right certification.
Repatriation from NRO accounts is capped at USD 1 million per financial year, subject to documentation and tax clearance. Within that limit it's routine; it just needs the paperwork done correctly.
Almost every repatriation needs Form 15CA, and in most cases a Form 15CB certificate from a chartered accountant confirming that taxes have been properly paid. Banks won't process the transfer without these, which is usually when people call us.
Coming back permanently is the single biggest planning event in an NRI's tax life, and the window to do something about it is short.
Time your return well and you can get two or three RNOR years where foreign income stays outside the Indian net. Time it badly, arriving a few weeks earlier than necessary, and you can lose an entire year of that benefit. The day count genuinely matters here.
Use the RNOR period to sort out foreign holdings, because once you're an ordinary resident, everything becomes taxable and reportable in India. Restructuring after that point is harder and more expensive.
Pensions, dividends, rental income from abroad, all of it enters the Indian tax net once RNOR ends. Knowing exactly when that happens lets you sequence withdrawals and sales sensibly.
NRE and FCNR accounts lose their exempt status once you become a resident, and need converting to resident accounts. FCNR deposits can often run to maturity under specific conditions, which is worth checking before you convert anything prematurely.
Day counts, travel timing and the resulting status. Planning this ahead of the financial year rather than reconstructing it afterwards is where most of the value is.
Getting TRC and Form 10F in place before income arises, so treaty rates apply at source rather than through a refund claim twelve months later.
Timing a sale, structuring it, and lining up Section 54, 54F or 54EC reinvestment within the deadlines. Also getting the lower TDS certificate moving before the sale rather than after.
Structuring Indian holdings across account types and instruments so the tax treatment works with your position rather than against it.
Sequencing transfers across financial years within the annual limits, with 15CA and 15CB handled cleanly so nothing stalls at the bank.
Nothing exotic here, but having it ready saves a lot of back-and-forth:
We start with day counts and travel history, because status decides everything downstream. This takes an hour and prevents most of the mistakes we see in returns other people have filed.
Then we map out what you actually hold in Indiaâproperty, deposits, shares, fundsâand what income each of those threw off during the year.
Next, we work out your Indian liability and check what the applicable treaty gives you, whether that's a lower rate at source or a credit for foreign tax paid.
We compute the actual liability against what's already been deducted. This is usually where clients find out they've overpaid, sometimes substantially.
We file the correct form with everything disclosed properlyâcapital gains, exemptions claimed, treaty positions, foreign tax credit where relevant.
If there's a refund, we track it. If a notice turns up, we handle the representation before the tax authorities rather than sending you a copy and wishing you luck.
Most NRI situations aren't one-and-done. Property gets sold, people return to India, portfolios change, and we'd rather be involved before those decisions than after.
You probably need one if you're selling Indian property and want to avoid TDS being deducted on the full sale value. Or if you've had TDS deducted for years and never claimed a refund. Or if you're planning to move back to India and want to make the RNOR window actually count for something.
Also worth it if you're holding income across NRE, NRO and FCNR accounts and aren't sure which interest is taxable, or if you're paying tax in two countries on the same income without claiming treaty relief. And certainly if a notice has already landed from the Income Tax Department.
If your only Indian connection is a small savings account, you can probably manage alone. Beyond that, the tax at stake usually exceeds the cost of advice by a wide margin.
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Our experts are here to guide you every step of the way.
It's the set of rules governing how India taxes non-residents on income arising or received in India, including rent, interest, dividends, capital gains and Indian salary.
Someone who fails both residency tests for the financial year: fewer than 182 days in India, and not meeting the 60-day-plus-365-day condition.
Purely by physical days spent in India during the financial year and the preceding four years. Citizenship and passport have nothing to do with it.
Residents are taxed on worldwide income, NRIs only on Indian income, and RNORs are taxed close to the NRI position, generally without foreign income being taxed.
Yes, where Indian income exceeds the basic exemption limit, and it's usually worth filing anyway to claim back excess TDS.
Usually ITR-2, or ITR-3 if there's business or professional income. NRIs can't use ITR-1.
No. Foreign income is outside the Indian tax net for NRIs, and generally for RNORs too, until you become an ordinary resident.
Under house property, after a 30% standard deduction, municipal taxes and home loan interest, with TDS deductible by the tenant.
Based on holding period and cost of acquisition, with long-term treatment beyond 24 months. Rates changed recently, so confirm the current position before planning a sale.
It's a treaty preventing double taxation. To claim it you need a Tax Residency Certificate and Form 10F, and Form 67 where you're claiming a foreign tax credit.
NRO interest is taxable with TDS at source; NRE and FCNR interest is exempt while you hold NRI status.
Yes, by filing a return and reconciling TDS against actual liability. On property sales especially, refunds are often substantial.
The separate framework governing what NRIs can invest in, how property can be held, and how funds can be moved out of India.
NRE funds move freely. NRO repatriation is capped at USD 1 million per financial year and needs Form 15CA and usually Form 15CB.
By getting residential status and treaty positions right, securing lower TDS certificates before a sale, claiming refunds, handling notices, and planning the return to India properly. Contact us at www.vidhuduggalandco.com
Avoid unnecessary tax, penalties, and compliance issues.
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