How Much Tax Do NRIs Actually Pay in India?

First principle: only Indian income is taxed

Your residential status decides the scope. A resident is taxed on worldwide income; a non-resident is taxed only on income that is received, accrues or arises in India — or is deemed to. In plain terms, if you are an NRI for the year, the salary you earn in Dubai, the dividends from your US brokerage and the rent on your London flat are simply outside India's net. What India can tax is the income with an Indian source, and nothing else.

That single distinction resolves most of the anxiety NRIs carry into a tax conversation. Before you worry about rates at all, draw a line around your Indian income — rent, Indian capital gains, NRO interest, any India-earned salary — and set everything else aside. The rest of this guide is only about what falls inside that line.

The slab rates on ordinary income

Once you have isolated your Indian income, the everyday portion of it — rent, NRO interest, India-earned salary, professional fees — is taxed on the same slab table that applies to residents. The new tax regime is now the default, and its slabs were widened with effect from the 2025-26 year. They run like this:

Two caveats matter for NRIs specifically. First, the basic exemption of Rs 4,00,000 is the same whatever your age — the higher senior-citizen exemptions available to residents do not apply to non-residents. Second, the Section 87A rebate that makes income up to Rs 12,00,000 effectively tax-free for a resident is not available to an NRI. So where a resident earning Rs 8 lakh of ordinary Indian income might pay nothing, an NRI on the same income pays the slab tax in full. The old regime — a Rs 2,50,000 exemption, then 5%, 20% and 30% — is still there if you elect it, but for most NRIs the new regime is the default unless you have large deductions to claim.

Where the slabs don't apply: special flat rates

A large share of NRI income never touches the slab table at all. Capital gains and certain windfalls are taxed at their own fixed rates, set by the type of asset — and several of these were reset in mid-2024, so older guides will quote the wrong numbers. These are the rates that apply now:

TDS: the deduction usually exceeds the bill

Here is what surprises most NRIs. On almost every Indian payment, tax is deducted at source before the money reaches you — and for a non-resident that deduction is made under Section 393(2) (formerly Section 195), often at rates far higher than your eventual liability. The tenant, bank or buyer deducts defensively, because the shortfall is their problem if they get it wrong.

The gap between what is deducted and what you actually owe can be wide. Because property TDS is levied on the whole sale value rather than your gain, and rent TDS on the gross rent rather than the net-of-30%-deduction figure, the amount withheld routinely dwarfs the final tax. You recover the excess in one of two ways: apply in advance for a lower-deduction certificate — Form 128 (formerly Form 13) under Section 395 (formerly Section 197) — so less is withheld at source, or file your income-tax return afterwards and claim the difference as a refund.

A worked example: rent plus capital gains

Put the layers together with a simple case. Meera is an NRI in the UK. In the 2025-26 year her only Indian income is rent from a Pune flat of Rs 6,00,000, and a long-term gain of Rs 3,00,000 on equity mutual funds she has held for several years. Here is roughly what she owes — and, separately, what was actually deducted.

Now compare that with what left her hands during the year. Her tenant deducted TDS on the gross rent at about 31.2% — roughly Rs 1,87,200 — and her fund house deducted tax on the capital gain as well. Against a real liability of about Rs 23,790, well over Rs 1,80,000 was withheld on the rent alone. Meera gets the difference back, but only after she files her return. This is the single most important thing to understand about NRI taxation: the tax deducted is rarely the tax you owe, and the return is where the two are reconciled.

Surcharge and cess sit on top

For higher incomes there is a second storey. A surcharge is added to the tax itself once total income crosses Rs 50 lakh, and a 4% health and education cess is then applied to the whole.

Two reliefs soften this. Surcharge on capital gains under Sections 111A, 112 and 112A, and on dividends, is capped at 15% however high your income — so a large one-off property gain does not drag the top surcharge rate onto it. And the new regime caps the overall top surcharge at 25% rather than the old regime's 37%. The 4% cess, by contrast, applies to every taxpayer on the sum of tax plus surcharge — it is why the headline 12.5% long-term rate is really about 13% in your hands.

DTAA: not paying twice on the same income

If India taxes your Indian income and your country of residence taxes it too, you would be paying twice on the same rupee. The Double Taxation Avoidance Agreement — a treaty India has with 90-plus countries — exists to prevent exactly that. It works in two broad ways: either an income is taxable in only one of the two countries, or you pay in India and claim a credit for that tax against your home-country bill.

For NRIs the everyday value of a DTAA is a lower rate at source. Many treaties cap the tax on interest, dividends and royalties well below India's domestic rates — treaty rates on interest are often 10 to 15%, against a domestic 30% on NRO interest. To claim the treaty rate you need two documents: a Tax Residency Certificate from your country of residence, and a Form 10F filed on the Indian tax portal. Without them, the payer applies the full domestic rate and you are left claiming the relief back in your return.

So, how much do NRIs actually pay?

Add the layers up and the honest answer is a range, not a rate. An NRI with only NRE and FCNR interest may pay nothing at all, because that income is exempt. An NRI living on Indian rent and modest NRO interest pays ordinary slab tax — often in single-digit lakhs or less. An NRI selling property or booking equity gains pays the special rates — 12.5% long-term, 20% short-term on listed equity — plus surcharge and cess where the numbers are large. What almost every NRI shares is the TDS gap: more is deducted than is owed, and the return is where you claim it back. Estimate your tax from the income type, not from a single headline number, and you will land close.

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