Best Tax Planning for NRIs In India

Income tax planning for NRIs is different in India. I am sharing some important information that can be helpful for you

  • Who is an NRI – for Tax Purpose
  • Tax Planning for NRI
  • Taxable income for NRIs
  • Tax-free income for NRIs
  • DTAA Simplified
  • NRI Tax Planning Tips
  • Download Tax Planning for NRIs PDF guide from the bottom of this post

Definition of a Non-Resident Indian (NRI) 

An Indian is considered as a non-resident when he/she has stayed less than 182 days of the current financial year in India or if the person has been in India for less than 60 days in the current financial year and has been in India for less than 365 days in the last 4 years. The following flowchart helps to determine easily whether a person is an NRI-

Tax Planning for NRIs

Must-ReadTax Treatment on NRI/PIO Fixed Deposits

Income Tax Planning for NRIs

The taxation rules in India are different for NRIs. Here is some information for an NRI to plan his taxes better-

The following income of an NRI is taxable 

  • Income earned, accrued, or to be earned or accrued via salary in India.
  • Capital gains received or deemed to be accrued from the transfer of property/ real estate or other capital investments in India.
  • Interest earned or income from capital gains of short-term investments and securities.

The following income of an NRI is non-taxable 

  • Interest earned from NRE accounts.
  • Allowances or Perquisites paid by the Government of India to an NRI for his/her services outside India.
  • Long-term capital gains from the sale of equity shares or units of equity funds but such transactions are subject to securities transaction
  • Interest on certain savings certificates and bonds subscribed to using the foreign exchange.

Note – this is tax-free in India but may be taxed in the country where you are currently residing.

One Blunder – It’s not Legal for NRIs to Hold Resident Savings Account

Information on DTAA 

DTAA stands for Double Taxation Avoidance Agreement. It is an agreement created to ensure that people do not pay tax more than once on the same income earned. It might happen that you have not fulfilled the conditions to be an NRI and have earned income in 2 countries say India and United States. You will have to pay taxes on income earned and investment income in the US and India. You can avoid double taxation by any of these three methods –

  1. Showing tax payment in one country and getting exempt from the second country.
  2. Deducting tax paid from total income across all countries and then paying tax in the country that you are staying on the balance amount.
  3. Getting credit for tax paid in the country currently staying for income earned in a different country and deducting that amount in the country where it was earned.

If you are getting credit for tax paid in the source country, you should ensure that you have a Tax Residency Certificate (TRC).

Currently, India has DTAA in place with 84 countries. DTAA is a mechanism to reduce your tax burden. It is not a tool for tax evasion. You should understand the rules clearly before opting for it.

ReadUse DTAA as Tax Planning for NRIs Tool

NRI Tax Planning Tips

  1. Tax Filing – As an NRI, if your income is above Rs. 2,50,000 in India, you have to file tax returns. The tax slabs applicable to NRIs are the same as residents. If you have to claim a tax refund, you have to file a tax return. If you have a capital loss to be set off against capital gains. to lower your actual tax liability, you have to file a tax return. In the ITR form, you have to select the residential status as ‘NRI’ to file tax returns. You can check tax deducted at the source by downloading Form 26AS where all details of tax collected are mentioned. Not filing income tax returns can result in interest and penalty.
  2. Moving back to India – If you are an NRI planning to move back to India, you should consider assuming Resident but not ordinarily resident (RNOR) status. You can get this status if –

You have been an NRI in 9 of the last 10 financial years


                   You have lived in India for 2 years or less in the last 7 financial years

You will get the benefit of exemptions given to NRIs for 2 years post your return. If you continue to stay in India after that, you will be treated as a resident and taxation rules of for resident Indians will be applicable to you.

  1. Property-related tax matters – As an NRI, you can own, buy and sell assets outside India provided you conduct these transactions as an NRI without tax implications in India. You can also inherit property from an NRI. But if you plan to sell these assets after becoming a resident, there can be capital gains tax liability under the taxation laws in India. It might be better to sell off the assets as an NRI to plan taxes better.
  1. Reduce Tax Liability – You can reduce tax liability by gifting assets to adult children and parents. If there are tax-free bonds issued, you can invest in them. You can create a HUF to take advantage of separate exemption limits allowed for HUF. If you do not plan to return soon to India, you should convert some of your NRO deposits to NRE deposits to reduce tax payable. After these 2 years, returning NRIs are treated as resident individuals.
  2. All you want to Know about TDS for NRIs

Examples to understand Tax Planning for NRIs 

  1. Avinash is an NRI. He has a house in Delhi. He wants to sell it and buy a house in the United States. Are the capital gains taxable?

Long-term capital gains got from selling a residential house are exempt from tax if the individual has within a period of one year before or two years after the date of sale, or within a period of 3 years constructed, one residential house in India. Since Avinash wants to buy property outside India, he will not get a tax exemption.

  1. Neha has been living and working in Singapore for the last 8 years. She gifts a car to her parents who are residents in India. Is the gift taxable?

The car is a gift to a relative and therefore not taxable for Neha or for her parents.

  1. Mr. Dubey has been working in Dubai for many years now. He has invested in many fixed deposits in India. Is the interest earned taxable?

The taxability depends on the type of account-

– Interest on a non-resident ordinary (NRO) account

– Interest on resident accounts is fully taxable

– Interest earned on NRE accounts is non-taxable

– Interest earned from deposits in the FCNR account is exempt from tax.

It is important to plan your investments and tax even if you are an NRI. It will help to reduce your tax burden and steer away from problems of tax evasion. You can manage your wealth and income better when you convert your status to Resident Indian.

Note – we are not tax planning experts – the “Tax Planning for NRIs” post is based on our interaction with the clients & basic reading.

Please add your experiences & challenges while tax planning in the comment section – I think that will be helpful for other TFL readers.

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Tax Planning for NRIs
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Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice & TFL Guide Blog in 2009. "The Financial Literates" is a dream & mission to make Indians Financial Literate.


  1. There are people of Indian Origin who have become citizens of foreign country like USA, IK or Canada. At some point of time they would like to come back and settle in India without giving up the citizenship of foreign country. If you can prepare a guide for them that will be very useful.

  2. Hi
    My friend living in Dubai is a NRI since 1990. He has ordinary and NRE account (but not NRO A/C). However his local income in India from interest, dividends etc..was never reached to taxable as per prevailing years limits. He has several stocks, MF etc…Now he wants to regularise his holdings by transferring the assets to NRO/NRE A/C and wants to links all stocks with that for transactions. Please let me know what are the financial and legal implications and how can this be done?

  3. Hi,

    I am USA return and again going to USA. can you please suggest good investment option in the India that can avoid tax in india and USA both.

  4. Nice Blog TFLguide. My name is Sankar and I’m living in Canada. I want to purchase a few acres of land in Chennai. Will Indian government provide loan for lands? Do you have any blog on NRI investment options? Please let me know.

  5. Sir,
    Exceptions to Procedural Requirements of 15CA and 15CB
    In my view and in the views of many experts including CAs,tax experts and many individual bank officials for transfer of funds from NRO Account to own NRE form 15 CA/15CB is not required . But for some reasons banks invariably asks for submission of such certificates .The bank takes this position and justifies that they do not want take any risk of any time of audit objection.
    In this respect my views are as under:-
    1. In case nature of remittances which part of exhaustive list of 33 .form 15CA and 15CB are not required whereas banks invariably insist for submission of these certificates in all cases by NRI to his own NRE account or outward remittance in his own account or any other remittance covered under exceptions provided in the rule.

    2.In case of transfer of funds from NRO to NRE account of the same NRI which Part of Form 15CA to be submitted as Part A, B, or C are required when remittance is taxable and D is required when remittance is not taxable and not covered in exception List of 33? . Remittance from NRO to own NRE account is not taxable and is covered in list of 33 under Nature of Payment/Purpose code S-1301 Remittance by non-resident towards family maintenance and savings.

    3. Form 15CA and or 15CB have no relevance/reference/examination of to sources of funds in NRO account and tax thereon.

    4. Form 15CA :- PART A B and C To be filled up if the remittance is chargeable to tax————-

    Part D To be filled up if the remittance is not chargeable to tax —–( other than payments referred in the rule 37BB(3) by the person referred in rule 37BB(2)

    And therefore when remittance is (a) not chargeable to tax or (b) covered under exception list of 33 submission for Form 15CA and CB are not required..

    5.Form 15CB

    Certificate 15CB from CA states

    “ I/we have examined the agreement (wherever applicable) between Mr./Ms./M/s ………………………. (Remitters) and Mr./Ms./M/s ……………………………………………. (Beneficiary) requiring the above remittance as well as the relevant documents and books of account required for ascertaining the nature of remittance and for determining the rate of deduction of tax at source as per provisions of Chapter -XVII-B”

    Content and information in 15CB are relating to taxability and TDS on Remittance.

    This for has no reference/relevance to examination of sources of funds and taxes thereon. The examination is for ascertaining the nature of remittance and for determining the rate of deduction of tax at source as per provisions of Chapter -XVII-“

    You would like to have considered correct position

    Thanking you,
    A L Chaudhary

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