Tax for NRIs with income in India
As an NRI you are taxed in India only on income that arises here — rent, capital gains, interest on an NRO account — but the mechanics are harsher than for a resident: TDS on a property sale by an NRI is deducted on the whole sale value rather than on the gain, at 20% plus surcharge, unless you obtain a lower-deduction certificate under section 197 first. ITR-1 is not available to you at all, whatever your income looks like.
This page is for you if
- You live outside India and have rental income, interest or capital gains here
- You are selling property in India and the buyer is asking about TDS
- You hold NRO and NRE accounts and are unsure which interest is taxable
- You want to claim relief under a double taxation avoidance agreement
- You have moved abroad this year and are unsure of your residential status
- You need to repatriate funds and have been asked for Form 15CA and 15CB
What is different
The parts that are only true of you
Property sale TDS is on the sale value, not the gain
When a resident sells, the buyer deducts 1% of the consideration. When an NRI sells, section 195 requires deduction on the whole sale value at 20% plus surcharge and cess for a long-term gain. On a ₹1 crore sale that is over ₹20 lakh withheld against a liability that may be a fraction of it — recoverable only by filing a return and waiting.
A section 197 certificate is the fix, and it must come first
An application to the assessing officer under section 197 produces a certificate authorising deduction at a lower rate, computed on the actual expected gain. It takes weeks and it has to be obtained before the sale completes. Almost every NRI who ends up with a very large refund claim is one who did not know this existed.
NRE and NRO are taxed completely differently
Interest on an NRE account is exempt under section 10(4)(ii) while you remain a non-resident. Interest on an NRO account is fully taxable and TDS is deducted at 30% plus surcharge. Which account the money sits in changes the tax outcome, and it is a decision made when the account is opened rather than at filing.
ITR-1 and ITR-4 are closed to you
Both are resident-only forms. An NRI with nothing but a single rental property in India still files ITR-2, and a return filed on ITR-1 in the year of relocation is defective for that reason alone — a common and avoidable way to receive a section 139(9) notice.
Treaty relief needs paperwork you gather abroad
A double taxation avoidance agreement can reduce the rate on interest, dividends and royalties, but claiming it requires a Tax Residency Certificate from your country of residence plus Form 10F. Both take time to obtain, and neither can be produced retrospectively for a deduction already made.
How we work
What an engagement actually looks like for you
For a property sale, we start with the section 197 certificate
Under section 195 the buyer must deduct on the whole sale value at 20% plus surcharge, not on the gain. On a ₹1 crore sale that is over ₹20 lakh withheld against a liability that may be a fraction of it. A certificate under section 197, applied for before the sale completes, authorises deduction at a rate computed on the real expected gain.
It takes weeks, and it cannot be obtained retrospectively. This is the single most valuable thing to get right in an NRI property sale, and almost every very large NRI refund claim we see is one where nobody knew the certificate existed.
We establish your residential status before anything else
Residential status under section 6 is decided by days present in India, and in a year of relocation it can change without anyone noticing. It determines what is taxable, which form you may file, and whether treaty relief is available at all.
A return filed on ITR-1 in the year someone became non-resident is defective for that reason alone, which is a common and entirely avoidable way to receive a section 139(9) notice.
We handle repatriation paperwork alongside the filing
Form 15CA from you and Form 15CB from a chartered accountant are what your bank will ask for before remitting funds abroad. They are straightforward when the underlying tax position is documented and awkward when it is not.
Treaty relief needs a Tax Residency Certificate from your country of residence and Form 10F, both furnished before the deduction rather than after — so we ask for them early rather than at filing time.
What usually goes wrong
- Completing a property sale without a section 197 certificate, and having 20%+ of the sale value withheld
- Filing on ITR-1, which is not available to a non-resident
- Assuming NRO interest is exempt because NRE interest is
- Claiming treaty relief without a Tax Residency Certificate and Form 10F
- Not filing at all because tax was deducted, and leaving a large refund unclaimed
- Getting residential status wrong in the year of relocation, when the day count changes mid-year