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CBDT & Income Tax Act 1961 Compliant (FY 2025–26)

NRI Taxation & ITR Filing 2026 Complete Guide

Authoritative handbook on Section 6(1) tax residency, 182-day/120-day rules, RNOR status transition, Section 195 TDS, DTAA double tax relief, and filing Form ITR-2.

Interactive NRI Tax Residency Evaluator

Calculate your tax residency classification under Section 6(1) of the Income Tax Act for FY 2025–26 (Assessment Year 2026–27).

Current financial year physical count
Cumulative days over last 4 financial years

1. Section 6(1) Tax Residency Framework

Tax residency in India is determined strictly by physical presence during the financial year (April 1 to March 31). Citizenship or visa status does not grant automatic tax exemption.

Key Residency Rules at a Glance
  • 182-Day Standard Rule: An individual spending 182 days or more in India is a Resident. Spending less than 182 days generally qualifies as non-resident for crew members and Indian citizens leaving for overseas employment.
  • 120-Day Deemed RNOR Rule (2020 Amendment): An Indian citizen or Person of Indian Origin (PIO) visiting India whose total Indian income (other than foreign sources) exceeds ₹15 Lakhs will become an RNOR if physical stay is 120 days to 181 days.
  • Section 6(1A) Deemed Resident: An Indian citizen with Indian taxable income > ₹15 Lakhs who is not liable to tax in any other country (e.g., resident of zero-tax countries like UAE) is deemed an RNOR in India.

2. Scope of Taxable Income for NRIs

Type of Income SourceNRI Tax StatusTDS Rate (Section 195)
Rental Income from Property in IndiaTaxable in India (30% standard deduction allowed)30% + Surcharge + 4% Cess
Capital Gains on Indian Real Estate / SharesTaxable in India (LTCG / STCG rules apply)20% LTCG / 20% STCG
Interest on NRO Bank Savings & FDsTaxable in India30% + Cess (or lower DTAA rate, e.g. 10-15%)
Interest on NRE & FCNR Accounts100% Tax-Exempt in India0% TDS
Salary Earned & Received Outside IndiaExempt in IndiaNil

3. Claiming DTAA Benefits & Form 67 Tax Credit

If an NRI pays tax on Indian rental income, dividends, or capital gains in India, they can claim a Tax Credit (Foreign Tax Credit) in their country of residence (e.g. IRS Form 1116 in the US or HMRC Foreign Tax Credit Relief in the UK) under Article 24/25 of the Double Taxation Avoidance Agreement (DTAA).

Frequently Asked Questions

Under Section 6(1) of the Indian Income Tax Act 1961, an individual is an NRI if they spend fewer than 182 days in India during the financial year (April 1 to March 31). For Indian citizens/PIOs visiting India whose total Indian-sourced income exceeds ₹15 Lakhs, the physical stay threshold is reduced from 182 days to 120 days under the RNOR category.

No. Salary credited to a foreign bank account for services rendered outside India is completely non-taxable in India for an NRI. However, if the salary is directly remitted into an Indian NRO/savings account by an Indian employer, it may attract tax unless claimed under Double Taxation Avoidance Agreements (DTAA).

NRIs must file Form ITR-2 if they have capital gains, rental income, or dividend income in India. If the NRI has income from a business or profession in India, Form ITR-3 must be filed. NRIs cannot file Form ITR-1 (Sahaj).

Under the Double Taxation Avoidance Agreement (DTAA) between India and countries like the USA, UK, UAE, Canada, and Australia, NRIs can claim a Tax Credit (Foreign Tax Credit via Form 67) in their country of residence for taxes paid in India, avoiding double taxation on the same income.
Official Authorities & Sources
Income Tax India e-Filing Portal CBDT DTAA Treaties Directory Reserve Bank of India (FEMA Rules)