NRI Tax Planning in India: A Complete Guide for Tax Year 2026-27
At a Glance
| Parameter | Position for Tax Year 2026-27 |
|---|---|
| Definition of NRI | Person who is not a Resident of India for tax purposes |
| Resident test — primary | Stay in India for 182 or more days in the Tax Year |
| Resident test — secondary | Stay 60 days in Tax Year AND 365 days in preceding 4 years |
| Modification for high-income visitors | If Indian income exceeds ₹15 lakh — 60-day rule becomes 120-day rule |
| RNOR status | Continues under IT Act 2025 — NRIs with income ≥ ₹15 lakh in India, who pay no tax elsewhere, classified as RNOR |
| NRI taxable income | Only income earned or received in India |
| Basic exemption — old regime | ₹2.5 lakh |
| Basic exemption — new regime | ₹4 lakh (available to NRIs) |
| Section 87A rebate | NOT available to NRIs |
| DTAA benefit requirement | Tax Residency Certificate (TRC) + Form 10F |
| NRO interest TDS rate | 30% (plus 4% cess = 31.2%) from the first rupee |
| NRE interest | Fully exempt |
| LTCG on property (held > 24 months) | 12.5% without indexation (for sales after 23.07.2024) |
| TDS on NRI property sale | Based on capital gains — not 1% like resident sellers |
Residential Status — The Foundation of NRI Taxation
Everything in NRI taxation flows from residential status. The new tax bill introduced in Parliament on 13 February 2025 has left the tax residency criteria unchanged, bringing relief to NRIs. Concerns had been raised that NRIs who earn ₹15 lakh or more in India and do not pay tax elsewhere could be classified as Residents instead of RNORs. However, under the new bill, such individuals will continue to be classified as RNOR, ensuring that only their Indian-sourced income is taxed in India.
The three residential status categories are:
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