Your Residential Status Determines Everything
India's tax system is residence-based, not citizenship-based. Your tax liability depends entirely on whether you are classified as:
- NRI (Non-Resident Indian) — present in India fewer than 182 days in the financial year
- RNOR (Resident but Not Ordinarily Resident) — transitional status, taxed like NRI for most foreign income
- Resident — taxed on global income
Tax-Free Income as an NRI
Several income sources are completely exempt from Indian tax for NRIs:
- NRE account interest — fully exempt, no TDS, no declaration needed
- FCNR deposit interest — fully exempt
- Long-term capital gains on equity mutual funds — up to ₹1.25L per year tax-free (FY 2024–25 onwards)
- Overseas income — your foreign salary, business income, or rental income abroad is not taxable in India
DTAA: Your Most Powerful Tax Tool
India has Double Tax Avoidance Agreements (DTAA) with 90+ countries. These treaties prevent you from paying tax twice on the same income. Key benefits:
| Country | NRO Interest TDS (Normal) | With DTAA |
|---|---|---|
| UAE | 30% | 0% (UAE has no income tax) |
| UK | 30% | 15% |
| USA | 30% | 15% |
| Malaysia | 30% | 10% |
| Singapore | 30% | 15% |
| Australia | 30% | 15% |
| Canada | 30% | 25% |
To claim DTAA benefit, submit a Tax Residency Certificate (TRC) from your country of residence to your Indian bank, along with Form 10F. The bank will then deduct TDS at the lower DTAA rate.
Form 15CA and 15CB
When you repatriate money from India (especially large amounts from NRO accounts), you need these forms:
- Form 15CA — a declaration you file online on the Income Tax portal confirming tax has been paid
- Form 15CB — a CA certificate verifying the remittance is legal and taxes are settled. Required for amounts above ₹5 lakh
Filing Indian Tax Returns as an NRI
You must file an Indian tax return (ITR-2) if your India-sourced income exceeds the basic exemption limit (₹2.5L under old regime, ₹3L under new regime). Even if you have no tax liability, filing is good practice and required for loan applications.