NRI Income Tax in India: Residential Status, What's Taxable, and How to File (2026)
If your ITR-1 or ITR-2 for FY 2025-26 isn't filed yet, the deadline is July 31, 2026 — worth mentioning up front, since everything below only matters once you know which return actually applies to you. And that starts with a question most NRIs answer incorrectly: residential status in India isn't about your passport, your visa, or how long you've "lived" abroad in casual conversation. It's a specific day-count calculation, and it decides whether India taxes just your Indian income or everything you earn worldwide.
The Residential Status Tests
You're a resident of India for a financial year if either of these applies:
- You were physically present in India for 182 days or more during the financial year, or
- You were present for 60 days or more during the financial year, and 365 days or more across the preceding 4 financial years combined
If neither applies, you're a Non-Resident (NRI) for that year. Miss both thresholds and your Indian tax exposure narrows considerably.
The 60-day test has a stricter version for high earners. If you're an Indian citizen or Person of Indian Origin visiting India, and your total income from Indian sources (excluding foreign income) exceeds ₹15 lakh in the year, the 60-day threshold in test #2 tightens to just 120 days instead of 60. This exists specifically to stop high-income individuals from engineering non-resident status through short, frequent India visits while still drawing significant Indian income.
RNOR: The Transitional Status Most People Forget About
Between full resident and full NRI sits RNOR — Resident but Not Ordinarily Resident. You land here if either:
- You were an NRI in 9 of the preceding 10 financial years, or
- You were physically present in India for 729 days or fewer across the preceding 7 financial years
RNOR status matters most right when you're moving back to India after years abroad — it typically gives you a grace period (often a year or two) where your foreign income stays untaxed in India even though you're technically resident again, before full resident taxation kicks in. It's also worth knowing that Indian citizens who aren't taxed in any other country, and earn ₹15 lakh or more from Indian sources, are treated as "deemed residents" under a separate provision — and deemed residents are automatically classified as RNOR, not full residents, in that year.
What's Actually Taxable, Based on Your Status
This is the entire point of getting your status right:
| Status | What India Taxes |
|---|---|
| Resident | Worldwide income — everything, regardless of where it's earned |
| RNOR | Indian-sourced income, plus income from a business controlled from India |
| NRI | Only Indian-sourced income |
An NRI's US salary, US 401(k) growth, or US brokerage gains aren't taxable in India at all. What is taxable, regardless of your status, is anything India-sourced: NRO account interest, rental income from Indian property, capital gains on Indian mutual funds or stocks, and salary for services actually rendered in India.
The Section 87A Trap Almost No NRI Knows About
Here's a detail that catches people who've read general Indian tax news and assumed it applies to them: under the new tax regime, resident individuals pay effectively zero tax up to ₹12 lakh of taxable income, thanks to the Section 87A rebate. NRIs are not eligible for Section 87A at all. An NRI's actual nil-tax point is just the basic exemption slab itself, ₹4 lakh under the new regime, with normal slab rates applying on every rupee above that. If you're an NRI who saw "no tax up to ₹12 lakh" in the news and assumed your Indian-sourced income up to that level was safe, it isn't — you owe tax on Indian income above ₹4 lakh, at the regular slab rates, exactly as if the ₹12 lakh rebate didn't exist for you.
Common India-Sourced Income NRIs Need to Report
- NRO account interest — taxable, generally with TDS already deducted at source (see our NRE vs NRO FD guide for how this works)
- Rental income from property owned in India
- Capital gains on Indian mutual funds, stocks, or real estate
- Salary or professional income for services physically performed in India, even briefly
- Dividends from Indian companies
NRE account interest, by contrast, stays tax-free in India regardless of your status, as covered in the NRE/NRO comparison — it's one of the few categories where the tax-free treatment holds even after you're back to being a resident, as long as the account itself remains structured as NRE.
Filing Requirements and the AY 2026-27 Deadline
For FY 2025-26 (Assessment Year 2026-27):
- July 31, 2026 — deadline for individuals with salary, pension, one house property, or capital gains income (ITR-1 or ITR-2), which covers most NRIs with Indian investment or rental income
- August 31, 2026 — deadline for non-audit business/professional income filers (ITR-3 or ITR-4), extended by a full month under the Finance Act, 2026
- December 31, 2026 — belated filing is still possible after the deadline, but with applicable late fees and interest, and it forfeits your ability to carry forward certain losses
You need to file an Indian return if your total India-sourced income exceeds the basic exemption limit (₹4 lakh under the new regime), even if you're a full NRI with no other India presence that year. Owning Indian property, holding NRO deposits, or having any Indian-sourced income above that threshold is usually enough to trigger a filing requirement on its own.
FAQ
Do I need to file an Indian tax return if my only India income is NRE interest? No — since NRE interest is fully tax-exempt and doesn't count toward taxable income, having only NRE interest with no other India-sourced income generally means no filing requirement, though it's worth double-checking if you have other minor India income sources too.
Does my US income affect my Indian tax slab or rate on Indian income? No, not for a genuine NRI — India only taxes your Indian-sourced income, and your Indian tax liability is computed purely on that amount and those slabs, independent of what you earn in the US.
Can I claim the Section 87A rebate if I become a resident again after moving back to India? Yes — once you cross back into resident status (after any applicable RNOR transition period), the standard resident rebate rules, including Section 87A, apply to you like any other resident taxpayer.
What happens if I get my residential status wrong and file incorrectly? You may end up over-reporting income (paying tax on foreign income India shouldn't have taxed) or under-reporting (missing India-sourced income that was actually taxable), both of which can trigger notices or reassessment. Given how consequential the status determination is, it's worth confirming your specific day counts with a CA rather than assuming.
Is capital gains tax on selling Indian property different for NRIs? The tax rates themselves are generally similar to what residents pay, but NRIs face TDS deducted at the point of sale by the buyer, often at a higher rate than what a resident seller would have withheld, with the option to claim a refund of any excess when filing. This is a large enough topic to deserve its own dedicated guide.
This is educational information based on 2026 Indian tax rules, not tax advice — residential status determination has enough edge cases (mid-year status changes, deemed residency, treaty relief under DTAA) that it's worth confirming your specific position with a CA experienced in NRI taxation, especially close to a filing deadline.