Non-Resident Indians (NRIs) often face unique challenges when filing income tax returns in India due to their cross-border income streams and tax regulations. At Savetaxs, we understand these complexities and offer expert support to ensure you comply with Indian tax laws while optimizing your tax liabilities. This detailed guide covers essential information about NRI income tax for FY 2025-26 and how the Double Taxation Avoidance Agreement (DTAA) can help NRIs avoid paying tax twice on the same income.
Understanding NRI Income Tax for FY 2025-26
For the financial year 2025-26, NRIs have the option to choose between the old tax regime and the new tax regime introduced under Section 115BAC. While the old regime allows several exemptions and deductions, the new regime offers lower tax rates but fewer deductions. NRIs are taxed on income earned or received in India, which includes:
- Salary income earned in India, regardless of whether it is credited to Indian or foreign accounts
- Capital gains arising from the sale of assets such as property, shares, or securities in India
- Rental income from properties located in India
- Interest income from NRO and NRE bank accounts (interest on NRE accounts is exempt from tax; NRO interest is taxable)
- Dividend income from Indian companies
The basic exemption limit for NRIs under the old regime is ₹2.5 lakh, while under the new regime it has been raised to ₹4 lakh. If your total taxable income from Indian sources exceeds these amounts, you are required to file an Income Tax Return (ITR), commonly using forms ITR-2 or ITR-3 depending on your income sources. Timely filing is crucial to avoid penalties and to claim refunds from excess Tax Deducted at Source (TDS).
Income Tax Slabs for NRIs (FY 2025-26)
| Income Range (₹) | Old Regime Tax Rate | New Regime Tax Rate |
|---|---|---|
| Up to 2,50,000 | Nil | Up to 4,00,000 – Nil |
| 2,50,001 to 5,00,000 | 5% | 4,00,001 to 8,00,000 – 5% |
| 5,00,001 to 10,00,000 | 20% | 8,00,001 to 12,00,000 – 10% |
| Above 10,00,000 | 30% | 12,00,001 to 16,00,000 – 15% and higher slabs thereafter |
What is DTAA and How Does It Benefit NRIs?
The Double Taxation Avoidance Agreement (DTAA) is a treaty between India and other countries that prevents NRIs from paying tax twice on the same income in both their country of residence and India. DTAA allows NRIs to either exempt certain income from taxation in India or claim credit for taxes paid abroad, thereby reducing their overall tax burden.
Income types commonly covered by DTAA benefits include salary, interest, dividends, royalties, and pensions. For example, interest income earned on NRE accounts is exempt from tax in India, and capital gains from foreign investments may be taxed only in the country of residence, subject to the DTAA terms.
How to Claim DTAA Benefits
To avail DTAA benefits, NRIs need to comply with certain documentation and procedural requirements:
- Obtain a Tax Residency Certificate (TRC) from the tax authorities of the country where you reside. This certifies your tax residency status.
- Submit Form 10F along with the TRC while filing your Income Tax Return in India. This form requires additional information that supports your claim for DTAA.
- Provide a self-declaration to the deductor to avail lower rates of TDS under DTAA provisions.
Claiming DTAA benefits effectively minimizes withholding tax and avoids double taxation, optimizing your overall tax liability.
Important Filing Considerations for NRIs
- NRIs must file accurate and timely returns if their income exceeds exemption limits or if tax has been deducted at source seeking refund.
- Rental income is taxable after allowing standard deductions such as 30% for repairs and maintenance.
- Capital gains on property sales are taxable, with long-term gains taxed at 20% after indexation benefits and short-term gains taxed as per slab rates.
- NRIs must report interest income from NRO accounts fully, as it is taxable, while interest from NRE deposits is exempt.
- Tax Deducted at Source (TDS) is applicable on several types of income for NRIs at varying rates, which may be reduced by availing DTAA benefits.
Why Choose Savetaxs for Your NRI Tax Filing?
At Savetaxs, we offer specialized services designed to simplify your NRI income tax filing:
- Filing ITR-2 and ITR-3 with accurate reporting of salaried income, capital gains, and rental income.
- Assistance with reporting and tax planning for NRO and NRE bank interest.
- Guidance on claiming refunds from excess TDS and timely filing to avoid notices under Section 139(9).
- Expertise in applying DTAA benefits to reduce overall tax outgo.
- Personalized consultations with experienced Chartered Accountants via email and calls, ensuring 1-on-1 attention to your needs.
Our team helps NRIs stay compliant while optimizing their taxes, making complex cross-border tax matters manageable.
Conclusion
Navigating Indian income tax laws and DTAA provisions can be daunting for NRIs, but with expert support from Savetaxs, you can ensure full compliance, minimize tax liability, and claim all eligible benefits. Whether it’s understanding the tax slabs, filing accurate returns, or leveraging DTAA advantages, Savetaxs is your trusted partner for NRI tax matters in FY 2025-26.
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