Tax for the NRI: what India actually taxes, and the 2026 rule that could catch you

In broad terms, you are a resident for a year if you were in India for 182 days or more in that year - or, alternatively, if you were here for at least 365 days across the preceding four years and at least 60 days in the year in question. Fail both tests and you are a non-resident: taxed only on Indian income. Residents, by contrast, are taxed on their worldwide income. The whole game, for an NRI, is staying on the non-resident side of that day-count.

The 2026 change higher earners must watch

Here is the update that makes this worth re-reading if you last checked years ago. From 1 April 2026, the rules tighten for a specific group: NRIs and people of Indian origin whose Indian income exceeds ₹15 lakh in a year. For them, the alternative "60-day" threshold rises to 120 days - meaning such a person who spends 120 days or more in India in a year, and has been here 365 days or more over the prior four years, can be pulled into Resident-but-Not-Ordinarily-Resident status.

If your Indian income is modest, this does not touch you. But if you draw substantial rent, business income or capital gains from India and also spend long stretches in the country, the margin for a miscalculated visit just narrowed. Count your days deliberately.

RNOR: the returner's grace period

Between "non-resident" and "fully resident" sits a valuable transitional status: Resident but Not Ordinarily Resident (RNOR). When an NRI returns to India for good, they typically qualify as RNOR for up to three financial years, and during that window their foreign income generally stays outside India's tax net, exactly as it did when they were an NRI. It is a deliberate soft landing, and - as our Gulf money guide explains at length - timing your return to make the most of it can be worth a five-figure sum. Return in the wrong month and you can forfeit a year of it.

What India does tax

For an NRI, the taxable list is specific and short. India taxes income that arises or is received in India:

• salary for work actually done in India;
• rent from property you own in India;
• capital gains on Indian assets - property, shares, mutual funds;
• interest from Indian sources, most notably an NRO account.

And, just as importantly, what it does not tax: the interest on your NRE and FCNR accounts is exempt, because those hold foreign earnings. The rule of thumb from earlier in this series holds - foreign money in an NRE account is left alone; India-source income in an NRO account is taxed.

TDS: the deduction you may need to claw back

NRIs meet Indian tax most often not through a bill but through TDS - tax deducted at source. Banks, tenants and buyers are required to withhold tax before paying an NRI, and the rates applied to non-residents are frequently higher, and less forgiving of exemptions, than those for residents. On the sale of a property, in particular, a large slice can be withheld up front.

The money is not necessarily gone. If too much has been deducted relative to your actual liability, you reclaim the excess by filing an Indian income-tax return. Many NRIs simply never file, and quietly leave refunds sitting with the tax department. Filing is the mechanism by which the system's default over-collection gets corrected in your favour.

DTAA: not paying twice

The fear that haunts every cross-border earner is being taxed on the same income in two countries. India's network of Double Taxation Avoidance Agreements exists to prevent exactly that. Where India and your country of residence both have a claim, the DTAA lets you offset what you have paid in one against what you owe in the other, usually through a foreign tax credit. Claiming it requires paperwork - a Tax Residency Certificate from your country of residence, and the right forms - but it is the difference between being taxed once and being taxed twice. For NRIs with real Indian income, understanding the specific treaty between India and their country is not optional.

The NRI's tax checklist

• Count your days. Residential status, not nationality, decides your tax - and for higher Indian earners the threshold drops to 120 days from April 2026.
• Keep foreign and Indian income in the right accounts - NRE/FCNR for foreign earnings (interest tax-free), NRO for India-source income (taxable).
• File a return if TDS was deducted, especially after selling property; that is how you reclaim what was over-withheld.
• Use your DTAA to avoid being taxed twice - get a Tax Residency Certificate and claim the credit.
• Plan your return around the RNOR window, and treat the month you fly home as a tax decision.

None of this makes India's tax system simple. But the shape of it, for the ordinary NRI, is not complicated: India wants a share of what you make in India, and nothing more, provided you keep your status clean and your accounts sorted. The people who get burned are almost never the ones who understood the rules and planned around them. They are the ones who assumed an OCI card or a foreign address made them invisible to the taxman - and discovered, one financial year too late, that the only thing India was ever counting was days.