Last reviewed: 4 September 2026
Quick answer: Your Indian tax obligations depend on residential status (a day-count test, not citizenship), not where you live. NRIs are taxed in India only on India-sourced income — rent, capital gains, interest, and similar — not on income earned and kept abroad. Selling property and repatriating money each carry their own specific rules, covered below.
Most of what makes NRI taxation harder isn’t the tax rate — it’s that residency status, property TDS, and moving money out of India are governed by three different frameworks (the Income Tax Act, the same Act’s TDS provisions, and FEMA) that don’t always align with what a bank or buyer assumes by default. Here’s the factual position on each.
Are you an NRI for tax purposes?
Residential status is decided by a day-count test each financial year — it can change year to year, and it’s separate from your passport or visa status.
| Test | You’re a Resident if… |
|---|---|
| Basic test | You’re in India for 182 days or more in the financial year, or |
| Alternative test | 365+ days across the preceding 4 years and 60+ days in the financial year itself |
| Relaxed test — Indian citizens/PIOs with India income > ₹15 lakh | The “60 days” above becomes 120 days — a deliberate relaxation so a longer visit home doesn’t accidentally trigger residency |
| Deemed resident | An Indian citizen with India-sourced income over ₹15 lakh who isn’t liable to tax in any other country is treated as resident regardless of days spent in India |
| RNOR (a middle status) | You’re Resident, but non-resident in 9 of the preceding 10 years — foreign income generally stays untaxed in India during this window |
These day-count tests sit within the Income Tax Act framework covered in more depth on our Income Tax Act 2025 vs 1961 page — the transition to the new Act doesn’t change the residency concept itself, but it’s worth confirming your specific position each filing year rather than assuming last year’s status still applies.
Selling property in India as an NRI
This is where most NRI sellers lose money unnecessarily — not to tax, but to over-deducted TDS that then takes months to claim back as a refund.
- TDS applies at the time of sale under Section 393(2) of the Income Tax Act, 2025 (Section 195 of the Income-tax Act, 1961) — the buyer is legally responsible for deducting it, not the seller, and gets it wrong more often than not.
- Long-term capital gains are currently taxed at 12.5% (plus applicable surcharge and cess) following Budget 2024’s removal of indexation — TDS should be computed on the actual gain at this rate, not as a flat percentage of the full sale price.
- A Lower (or Nil) Deduction Certificate under Section 395 of the Income Tax Act, 2025 (Section 197 of the Income-tax Act, 1961) is the practical fix — it directs the buyer to deduct TDS closer to your actual tax liability instead of a default blanket rate on the full consideration, avoiding a large refund claim later.
Repatriating money out of India
| Account | Repatriation rule |
|---|---|
| NRE account | Full repatriation allowed — holds income earned outside India |
| NRO account | Up to USD 1 million per financial year, after taxes — holds India-sourced income (rent, dividends, sale proceeds); beyond the cap needs RBI approval |
NRO repatriation needs Form 15CA and Form 15CB (the latter is a Chartered Accountant’s certification that applicable tax has been paid) plus a bank’s Form A2 — this is one of the more concrete, recurring ways a CA is directly involved in an NRI’s transaction, not just at filing time.
Questions we’re asked about NRI taxation
TDS was already deducted on my India income — do I still need to file a return?
Usually yes. TDS is an advance collection, not a final settlement — filing a return is how you claim a refund if too much was deducted (very common on property sales), or confirm nothing further is owed. Skipping the return doesn’t avoid the obligation; it just leaves any over-deduction unclaimed.
Can I repatriate the full sale proceeds of my property abroad?
Up to USD 1 million per financial year through an NRO account, after applicable taxes are paid and documented — this covers most individual property sales. Larger amounts need specific RBI approval, which is worth planning for before the sale closes, not after.
What’s a Lower Deduction Certificate, and do I need one?
It’s an Income Tax Department certificate (under Section 395 of the Income Tax Act, 2025, formerly Section 197 of the Income-tax Act, 1961) directing a buyer to deduct TDS at a rate closer to your actual liability, instead of a higher default rate on the full transaction value. It’s optional, but for most property sales it’s the difference between a small adjustment at filing time and a large refund claim that takes months to process.
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