If you’re an Indian living abroad, one of the most common questions is: “Do I still need to pay income tax in India?” The answer depends on your residential status and whether you earn any income in India.
With frequent updates in tax rules, especially under the new tax regime, it’s important for Non-Resident Indians (NRIs) to know what’s taxable, what’s exempt, and when NRI tax filing becomes mandatory.
Let’s simplify the rules for NRI income tax in 2025 so you know exactly where you stand.
Do NRIs have to pay income tax in 2025?
The short answer is: Yes, NRIs have to pay tax in India, but only on income earned or received in India.
Here’s how it works:
- Foreign income
- Salary or business income earned outside India is not taxable for NRIs.
- If your salary is credited abroad (say, in a US or UAE bank account), India has no tax claim on it.
- Salary or business income earned outside India is not taxable for NRIs.
- Income earned in India
- Income from rent, fixed deposits, savings accounts, dividends, or capital gains in India is taxable.
- Example: If you own a house in India and earn ₹25,000 monthly rent, that rental income is taxable in India.
- Income from rent, fixed deposits, savings accounts, dividends, or capital gains in India is taxable.
- Tax rates
- NRIs are taxed at the same slab rates as resident Indians, whether under the old or new tax regime.
- However, NRIs cannot claim some popular deductions/exemptions like resident Indians (e.g., standard deduction on salary is not available if salary is received abroad).
- NRIs are taxed at the same slab rates as resident Indians, whether under the old or new tax regime.
- Double Taxation Avoidance Agreement (DTAA)
- To prevent paying tax twice, NRIs can benefit from DTAA.
- Example: If you pay tax on rental income in India, you may get a credit in your country of residence.
- To prevent paying tax twice, NRIs can benefit from DTAA.
👉 In short: NRI income tax applies only to income sourced from India. Global income is outside India’s tax net for NRIs.
What types of income are taxable for NRIs in India?
For NRI income tax, only income earned or received in India is taxable. Here are the key categories:
- Salary income in India
- If your salary is paid by an Indian company or credited to an Indian account, it is taxable.
- Example: Working on an international project but receiving salary into an Indian bank account = taxable.
- If your salary is paid by an Indian company or credited to an Indian account, it is taxable.
- House property income
- Rent received from a property in India is taxable.
- NRIs are also eligible for the standard 30% deduction on rental income.
- Rent received from a property in India is taxable.
- Capital gains
- Gains from the sale of shares, mutual funds, or property in India are taxable.
- Tax rate depends on whether the gain is short-term or long-term.
- Gains from the sale of shares, mutual funds, or property in India are taxable.
- Interest income
- Interest on NRO accounts is taxable.
- Interest on NRE and FCNR accounts is tax-free.
- Interest on NRO accounts is taxable.
- Dividends
Dividend income from Indian companies is taxable in India.
👉 To summarise: NRI taxable income = Indian-sourced income (salary in India, rent, capital gains, NRO interest, dividends).
When is NRI tax filing mandatory?
Just like resident Indians, NRIs also need to file an Income Tax Return (ITR) if their income in India crosses certain thresholds.
Here are the key rules for NRI tax filing in 2025:
- Basic exemption limit
- NRIs are taxed according to the same slabs as residents.
- For FY 2025–26, income up to ₹12 lakh (₹12.75 lakh salaried with standard deduction) is tax-free under the new regime.
- NRIs are taxed according to the same slabs as residents.
- Compulsory filing cases
- If your gross total income in India exceeds the exemption limit, filing ITR is mandatory.
- Even if income is below the limit, NRIs may still need to file ITR if:
- They have long-term capital gains,
- They want to claim a refund (TDS refund),
- They want to carry forward capital losses.
- They have long-term capital gains,
- If your gross total income in India exceeds the exemption limit, filing ITR is mandatory.
- Form for NRI tax filing
- NRIs generally use ITR-2 (if they don’t have business income).
- ITR-3 is used if the NRI has business/professional income in India.
- NRIs generally use ITR-2 (if they don’t have business income).
👉 In short: NRI tax filing is mandatory if your Indian income crosses the basic exemption limit or if you want to claim refunds/carry forward losses.
What are the income tax slab rates applicable to NRIs in 2025?
NRIs are taxed at the same slab rates as resident Indians, but they do not enjoy all the same exemptions. Here’s how it works for FY 2025–26:
✅ New Tax Regime (default option in 2025–26)
| Annual Income | Tax Rate |
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
👉 With the Section 87A rebate, NRIs with taxable income up to ₹12 lakh (₹12.75 lakh for salaried with standard deduction) don’t pay any tax under the new regime.
✅ Old Tax Regime (optional)
| Annual Income | Tax Rate |
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
👉 NRIs can opt for the old regime if they want to claim deductions like 80C, 80D, 80G, and HRA.
⚠️ Important:
- NRIs cannot claim the rebate under Section 87A in the old regime.
- They also don’t get some resident-specific benefits like agricultural income exemption.
How can NRIs avoid double taxation?
Many NRIs are worried about being taxed both in India and in their country of residence. To address this, India has signed Double Taxation Avoidance Agreements (DTAA) with over 90 countries.
Here’s how NRIs can use DTAA to their advantage:
- Exemption method
- If income is taxed in India, it may be fully exempt in the other country.
- Example: Rental income taxed in India may not be taxed again abroad.
- If income is taxed in India, it may be fully exempt in the other country.
- Tax credit method
- If you pay tax in India, you can claim a credit in your resident country for the tax already paid.
- Example: If you pay 10% tax in India but your resident country has a 20% tax rate, you only pay the balance 10% abroad.
- If you pay tax in India, you can claim a credit in your resident country for the tax already paid.
- TDS relief
- For incomes like rent or capital gains, tax is deducted at source (TDS).
- Using DTAA, you can avoid higher TDS rates by submitting tax residency certificates (TRC) to your bank or payer.
- For incomes like rent or capital gains, tax is deducted at source (TDS).
👉 In short: DTAA ensures NRIs are not taxed twice on the same income, but you must file the right forms and claim benefits during NRI tax filing.
Conclusion
For NRIs, understanding income tax rules in India is all about knowing what counts as taxable income.
- Foreign income earned abroad is not taxable in India.
- Income earned in India, such as rent, capital gains, NRO interest, or dividends, is taxable at the same slab rates as resident Indians.
- NRIs must complete NRI tax filing if their Indian income exceeds the basic exemption limit, or if they want to claim TDS refunds or carry forward losses.
- With the new tax regime, income up to ₹12–12.75 lakh is tax-free (including rebate and standard deduction).
💡 The takeaway: NRIs should carefully evaluate their income sources in India, choose the suitable tax regime, and make use of DTAA to avoid double taxation.
FAQs on NRI Income Tax
1. Do NRIs have to pay tax in India in 2025?
Yes. NRIs must pay tax on income earned or received in India, such as rent, capital gains, NRO account interest, or dividends.
2. Is foreign income taxable for NRIs in India?
No. Income earned and received abroad is not taxable in India for NRIs.
3. What is the income tax slab for NRIs in FY 2025–26?
Same as residents:
- New regime: Nil up to ₹12–12.75 lakh (with rebate), then 5%–30%.
- Old regime: 5%, 20%, 30% slabs above ₹2.5 lakh.
4. Is NRI tax filing mandatory?
Yes, if Indian income exceeds the exemption limit, or if you want to claim a refund or carry forward capital losses.
5. Which ITR form should NRIs use?
Most NRIs use ITR-2 (if no business income). Use ITR-3 if you have business or professional income in India.
6. Do NRIs get deductions like 80C and 80D?
Yes, but only if they opt for the old regime. Under the new regime, most deductions are not available.
7. How can NRIs avoid double taxation?
By using the DTAA (Double Taxation Avoidance Agreement). You can either get tax credit abroad for tax paid in India or exemption depending on the treaty.
8. Is interest on NRE accounts taxable for NRIs?
No. Interest on NRE and FCNR accounts is tax-free. Only NRO account interest is taxable.
