NRI Tax Rules in India: Residency, DTAA & ITR (2026)
Whether an Indian citizen working in Qatar, Dubai, London, or Toronto owes tax in India depends entirely on one number — days of physical presence in India during the financial year — combined with the nature of each income stream. Most NRI tax problems arise from misjudging residency on the day count, operating the wrong bank account type, or forgetting that DTAA relief is not automatic. This guide walks through the rules that matter for the 95% of working NRIs.
Residency under Section 6
The Income Tax Act defines four categories — Resident (ROR), Not Ordinarily Resident (NOR), Non-Resident Indian (NRI), and the relatively new "Deemed Resident" introduced in Budget 2020.
The basic day-count test
You are a Resident in India if you meet either condition during a financial year:
- 182 days or more in India during the year, OR
- 60 days or more in India during the year and 365 days or more in the preceding 4 years
For Indian citizens leaving India for employment or crew of an Indian ship, the 60-day rule is relaxed to 182 days. For Indian citizens/PIOs visiting India with total Indian income above Rs. 15 lakh, the 60-day test tightens to 120 days.
Deemed Resident (since FY 2020-21)
Section 6(1A) treats an Indian citizen as "Deemed Resident" (specifically, Resident but Not Ordinarily Resident) if total Indian-source income exceeds Rs. 15 lakh and they are not taxable in any other country because of domicile, residence or any similar criterion. This rule targeted HNIs "shopping" for zero-tax domiciles; ordinary Gulf salaried expats are typically unaffected because only Indian-source income is counted.
What income is taxable in India?
| Income type | NRI | Resident (ROR) |
|---|---|---|
| Salary earned abroad | Not taxable in India | Taxable |
| Salary earned in India | Taxable | Taxable |
| Rent from Indian property | Taxable | Taxable |
| Interest on NRE / FCNR account | Exempt | N/A (cannot hold NRE/FCNR) |
| Interest on NRO account | Taxable @ 30% TDS | N/A |
| Dividends from Indian companies | Taxable @ 20% TDS | Taxable (slab) |
| Capital gains from Indian securities | Taxable | Taxable |
| Foreign bank interest | Not taxable | Taxable |
NRE vs NRO accounts — the one decision that costs lakhs
NRE (Non-Resident External): Maintained in INR but funded only from foreign earnings. Principal and interest are both fully tax-exempt in India and freely repatriable. This is the default Gulf expat account.
NRO (Non-Resident Ordinary): For Indian-source income like rental, dividends, or old investments. Interest is taxable at 30% TDS. Repatriation is allowed up to USD 1 million per financial year with Form 15CA/CB formalities.
FCNR (Foreign Currency Non-Resident): Fixed deposit maintained in foreign currency (USD, GBP, EUR, JPY, etc.). Interest is tax-exempt in India and there is no currency conversion risk on maturity.
Do not continue to route your Gulf salary into your old resident SB account after NRI status kicks in — FEMA requires conversion to NRO, and ignoring this creates bank-account freezes and compliance headaches years later.
DTAA and how to actually claim it
India has Double Taxation Avoidance Agreements with 90+ countries including UAE, Qatar, Kuwait, Saudi Arabia, USA, UK, Singapore, and Australia. DTAA either exempts an income in one country entirely or allows you to credit tax paid abroad against Indian tax payable on the same income.
To claim DTAA benefit, you typically need:
- Tax Residency Certificate (TRC) from the foreign tax authority
- Form 10F filed on the Indian income tax portal
- PAN — without which most DTAA benefits cannot be claimed
- Supporting proof of tax paid abroad (Form W-2 equivalent)
TCS on foreign remittance (LRS)
Resident Indians remitting money abroad under the Liberalised Remittance Scheme (LRS) face 20% TCS above Rs. 7 lakh/year, with lower 5% applicable to education and medical remittances funded by loan. TCS paid is adjustable against final tax liability when filing ITR, but it is a cash-flow hit for travel, investments, and gifts sent abroad.
NRIs sending money to India do not face Indian TCS — the remittance is inward and governed by the source country.
ITR obligations for NRIs
Filing is mandatory for an NRI if any of these apply during the year:
- Total Indian income exceeds basic exemption limit (Rs. 3 lakh under New Regime)
- TDS has been deducted and you want a refund
- You want to claim a DTAA benefit
- You have sold Indian property or mutual fund units
- You want to carry forward a capital loss
Use ITR-2 (not ITR-1) as an NRI. Pre-validate your bank account and ensure the foreign address is correctly captured — refund cheques to old Indian addresses are a common reason lakhs of rupees are "lost" for years.
Year of return planning
When you eventually return to India for good, time the return so that you qualify as RNOR (Resident but Not Ordinarily Resident) for the first 2-3 years. During RNOR status, foreign salary and foreign investment income remain tax-free in India — giving you a window to close foreign 401(k)/pension accounts, sell ESOPs, and repatriate savings without Indian tax. Missing this window has cost returning expats Rs. 5-20 lakh in unnecessary tax.
Plan your Gulf-to-India transition
Read our complete Qatar expat guide for salary, EOSB, banking and residency detail.
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Primary sources used to write and fact-check this guide. Updated when official notifications change.
Last reviewed by the AboutAll.in editorial team in April 2026. See our methodology for the full research process.
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