Tax Planning for NRIs with Indian Income: Complete Guide to Salary, Property, and Investments

Many NRIs have a strong financial footprint in India – property, FDs, NRE/NRO accounts, mutual funds – but are unsure how all of it is taxed once they move abroad. I’ve seen cases where NRIs overpay tax out of caution, and others where they under-report simply because nobody explained the rules clearly.

In this guide, I’ll focus on NRIs who have Indian income – salary, rent, interest, capital gains – and explain how residential status works, how different income streams are taxed, and what basic planning steps you can take to avoid double taxation and compliance headaches.

Step 1: Understand Residential Status (It Drives Everything)

Indian tax rules depend heavily on whether you are:

• Resident
• Resident but Not Ordinarily Resident (RNOR)
• Non-Resident (NRI for tax purposes)

Residential status is based primarily on days spent in India in the relevant financial year and preceding years (subject to detailed rules). At a high level:

• NRIs are taxed only on income that is received in India or accrues/arises in India
• Global income is generally not taxable in India for NRIs (but may be in their country of residence)

Because the exact rules can be complex and change over time, it’s important to:

• Determine your status each year based on number of days and ties to India
• Use that status consistently when planning your taxes and filing returns

Step 2: Know Which Indian Incomes Are Taxable for NRIs

For non-residents, commonly taxable Indian incomes include:

• Salary for services rendered in India
• Rent from property located in India
• Interest on NRO accounts and FDs (NRE interest is typically exempt in India, subject to conditions)
• Capital gains from sale of property, shares, mutual funds, etc. in India
• Certain other incomes deemed to accrue or arise in India

Each category has its own tax rate, TDS, and planning possibilities.

Step 3: Salary and Professional Income

If you are an NRI but still draw salary from an Indian entity:

• Salary for services rendered in India is generally taxable in India
• TDS will usually be deducted by the employer
• DTAA (Double Taxation Avoidance Agreement) with your country of residence may allow:
• Credit for Indian tax paid, or
• In some cases, exclusive taxing rights in one country

This is an area where you should:

• Coordinate with both your Indian employer’s payroll team and a tax advisor in your country of residence
• Ensure you are not taxed twice on the same income without relief

Step 4: Rental Income from Indian Property

If you own property in India and rent it out:

• Rental income is taxable in India under “Income from House Property”
• You can usually:
• Deduct municipal taxes actually paid
• Claim a standard deduction (for example, 30% of net annual value)
• Deduct home loan interest, subject to current rules

TDS:

• Tenants may be required to deduct TDS when paying rent to an NRI landlord at higher rates than for residents
• This TDS will appear in your Form 26AS and AIS and can be claimed as credit while filing your Indian return

Step 5: Interest on NRE/NRO Accounts and FDs

Broadly:

• NRE account interest is usually exempt from Indian tax as long as you qualify as NRI under applicable rules
• NRO account interest is taxable in India at slab rates, and banks typically deduct TDS (often at 30% for NRIs)

Planning points:

• Use NRE accounts for funds that can legitimately enjoy exemption
• Use NRO accounts for Indian-source income that is taxable in India and may need repatriation subject to rules
• Keep clear records of what is principal vs interest when repatriating

Step 6: Capital Gains for NRIs

When NRIs sell:

• Indian property – capital gains are taxable in India (STCG/LTCG, indexation, and special TDS rates apply)
• Listed shares and equity mutual funds – similar rules as for residents, but with specific TDS for NRIs
• Debt mutual funds, bonds, etc. – taxed under capital gains with corresponding periods and rates

Planning:

• For property, Sections 54, 54F, 54EC may offer exemptions if you reinvest in certain assets within defined timelines
• For shares and mutual funds, consider:
• Holding period for LTCG rates
• Using capital losses to offset gains within rules

Again, DTAA with your resident country can affect how overall tax looks after foreign tax credits.

Step 7: Using DTAA and Avoiding Double Taxation

If India and your resident country have a Double Taxation Avoidance Agreement:

• Income taxed in India may get credit in your country of residence
• Some DTAAs give exclusive taxing rights for certain income types

Practical steps:

• Collect proper TDS certificates and proof of Indian tax paid
• Share these with your foreign tax advisor to claim credit there
• Ensure names/PAN/passport details are consistent across documents

Step 8: Basic NRI Tax Planning Checklist

• [ ] Determine your residential status correctly at the start of each year
• [ ] Structure Indian bank accounts sensibly (NRE vs NRO)
• [ ] Keep property and loan documentation organized (sale deeds, interest certificates, rent agreements)
• [ ] Track TDS on rent, interest, and capital gains via 26AS and AIS
• [ ] File your Indian ITR on time if required (especially if TDS>tax liability or capital gains exist)
• [ ] Coordinate with a tax advisor in your country of residence for DTAA credit

Using Our Calculators

For Indian tax planning:

• Use the Income Tax Calculator and NRI Taxation Calculator to estimate your Indian tax liability on salary, rent, and investments
• Use the Capital Gains Tax Calculator when planning property or equity redemptions

Final Thoughts

NRI tax planning sits at the intersection of Indian law, foreign tax rules, and practical realities like TDS and bank processes. The goal is not to get too clever, but to stay compliant, avoid double taxation, and use available reliefs sensibly.

If you organize your Indian income streams, keep documentation in order, and run your numbers through calculators before big transactions, you’ll avoid most unpleasant surprises. For cross-border situations and large amounts, always involve professionals in both countries early.

Disclaimer: NRI taxation and DTAA application are complex areas and subject to frequent legal changes. This guide is for high-level educational purposes only. Always consult a chartered accountant familiar with NRI issues and a qualified tax advisor in your country of residence before making major financial decisions.