How NRI tax is worked out
- Slab rates apply to salary, rent, interest and short-term gains on non-equity assets. New regime: nil up to ₹4 lakh, then 5% to 30% (30% above ₹24 lakh). Old regime: nil up to ₹2.5 lakh, 5%, 20%, then 30% above ₹10 lakh. NRIs don’t get the higher exemption for senior citizens.
- No rebate: the section 87A rebate that makes income up to ₹12 lakh tax-free for residents is not available to NRIs.
- Capital gains at special rates: 20% on short-term gains from listed shares and equity funds, 12.5% on long-term gains (above ₹1.25 lakh a year for listed equity). NRIs can’t set the basic exemption limit against these gains.
- Surcharge above ₹50 lakh of income (10%), ₹1 crore (15%), ₹2 crore (25%); capped at 15% on capital gains. Cess 4% on top.
- TDS on NRO interest is 30% plus cess, and property buyers deduct on the whole sale price, so many NRIs pay far more than their real tax and should file for a refund.
Example
An NRI with ₹5 lakh of NRO interest suffers TDS of about ₹1.56 lakh (31.2%). Actual tax under the new regime: ₹5,200. Filing a return gets back about ₹1.5 lakh.
Full rules: NRI income tax slabs 2026-27 · NRI taxation guide · TDS when an NRI sells property.
Frequently asked questions
How much tax does an NRI pay in India?
Under the new regime, NRIs pay nil on the first ₹4 lakh of slab income, then 5% to 30%, with no ₹12 lakh rebate. Capital gains are taxed at special rates: 20% on short-term gains from listed shares and 12.5% on long-term gains. Add surcharge on high incomes and 4% cess.
Do NRIs get the ₹12 lakh tax-free limit?
No. The section 87A rebate is only for residents, so an NRI with ₹12 lakh of Indian income pays tax on it (about ₹62,400 under the new regime, including cess).
Can an NRI choose the old tax regime?
Yes. NRIs can choose the old regime and claim deductions such as 80C and 80D. It helps mainly when deductions are large; the calculator compares both.
Why do NRIs get income tax refunds?
Banks deduct 30% plus cess on NRO interest and property buyers deduct TDS on the whole sale price, often far more than the real tax. Filing an Indian return gets the excess back.