According to Clear Tax reports, not all income earned by NRIs is taxable in India. Only sources that are based in India or fall under the purview of Indian tax laws are subject to taxation. This includes capital gains from Indian assets, interest from Indian held bank accounts, salary or income earned for services in India, rent generated from Indian property, and income generated from a business set-up in India. Notably, while interest earned from a Non-Resident Ordinary (NRO) account is subject to tax, interest from Non-Resident External (NRE) or Foreign Currency Non-Resident (FCNR) accounts are not taxable. However, recent developments show that Schedule FA disclosure is mandatory for all Resident and Ordinarily Resident (ROR) taxpayers, while NRIs are generally exempt from foreign asset reporting requirements.
As reported by Clear Tax, under the old tax regime, tax is applicable for income of ₹2.5 lakh and above; while under the new tax regime, this limit is ₹4 lakh. Income tax returns (ITR) must be filed by July 31, 2026. For salary to be considered as earned in India, the NRI must render services in the country for pay, with the important distinction that even if services are rendered abroad, if the pay originates from India, it is considered taxable. Government employees rendering services outside India face taxation with few exceptions for ambassadors and diplomats. The Foreign Assets of Small Taxpayers Disclosure Scheme 2026 offers a structured way to clean up gaps for those who realize their exposure late, even after transitioning to NRI status.
FCNR accounts offer a convenient solution for NRIs to preserve foreign income value while earning returns. These accounts accept major currencies such as USD, EUR, and GBP and operate without currency conversion, helping avoid exchange rate fluctuations. NRI accounts operate digitally through bank portals or mobile apps, making remote management convenient. However, some crucial actions may require physical intervention, for which you can appoint a Power of Attorney (PoA) to handle important formalities on your behalf. All three NRI account types - NRO, NRE, and FCNR - operate digitally through the bank's portal or banking app, enabling seamless remote management.
According to Clear Tax guidelines, NRIs can claim deductions under Section 80C for up to ₹1.5 lakh invested in government savings schemes such as PPF, EPF, NPS. House property income deductions are similar to residents, including 30% standard deduction on rent, deduction on interest for home loan under section 24, and additional deductions under sections 80EE and 80EEA. Section 80D covers health insurance premiums up to ₹25,000 for self, spouse, and dependent children, plus ₹25,000 for parents. Section 80E allows deduction of interest paid on education loans for self, spouse, children or legal ward with no limit, but only for maximum of eight years. Section 80G covers donations for social causes, and Section 80TTA provides deduction for savings bank account interest up to ₹10,000. ITR-2 is suitable for salary, property, capital gains, and foreign assets; ITR-3 for business/professional income; ITR-5 for NRI firms; and ITR-6 for NRI companies.
As reported by Clear Tax, NRI status is determined by guidelines that state not resided in India for 182 days or more in a financial year, or not lived in the country at least 60 days in the current year and a total of 365 days over the past four years. NRIs are allowed to claim same property related deductions as Indian residents for property in the country, with tax applied according to tax slab and TDS deducted under Section 194-IB beyond the income limit. For remittances from tenants, submission of forms 15CA and 15CB is mandated. However, NRIs are not required to disclose foreign bank accounts, overseas investments, or foreign income in Indian tax returns just because those assets exist, though they must file ITR if earning income in India. The Foreign Assets of Small Taxpayers Disclosure Scheme 2026 can apply even to people who are now NRIs if the assets or income relate to a time when they were residents.
