If you live in Dubai, Abu Dhabi, London, New York, Toronto, or Riyadh — but still own property in Kerala, earn rent, hold an NRO account, or plan to sell land — Indian tax rules still apply to you. Getting your residency status wrong in 2026 can result in your entire worldwide income becoming taxable in India.
As an NRI, only your India-sourced income is taxable in India — rent, NRO interest, property capital gains, and Indian salary. Your Gulf salary, UK rental, or US income stays outside Indian tax while you remain a non-resident.
Am I an NRI for Indian Tax Purposes?
Your tax status depends on how many days you physically stay in India during a financial year (April 1 to March 31), not your citizenship, visa, or OCI card.
You are an NRI if none of these apply:
- You stayed in India for 182 days or more in the financial year, OR
- You stayed 60+ days in the year AND 365+ days across the previous four years combined.
If neither condition applies, only your India-sourced income is taxable.
The 120-Day Rule (High-Income NRIs)
If your India-sourced income exceeds ₹15 lakh, you become resident if you are in India for 120 days or more in that year and 365+ days across the preceding four years. Many Kerala NRIs with rent, NRO interest, and capital gains cross this threshold without realising it.
Deemed Residency — Watch This If You Are in UAE or Bahrain
If your India-sourced income exceeds ₹15 lakh and you are not liable to tax in any other country (e.g. UAE, Bahrain with no personal tax), India can deem you a resident and tax your worldwide income. Get CA advice if this applies.
Residential Status Categories
| Status | Who Qualifies | What Gets Taxed in India |
|---|---|---|
| NRI (Non-Resident) | Does not meet 182-day or 60-day tests | India-sourced income only |
| RNOR | Was NRI in 9 of 10 preceding years, or in India ≤729 days across last 7 years | India-sourced income only; foreign income mostly excluded |
| ROR (Full Resident) | Settled back in India | Worldwide income taxable |
What Income Is Taxable in India for NRIs?
Rental income from Kerala property · NRO account interest (at 30%) · Capital gains from selling India property or shares · Salary earned/received in India · Indian pension
Foreign salary · NRE account interest (fully exempt) · FCNR deposit interest (fully exempt) · Any foreign income while you remain non-resident
RNOR — The Most Important Status for Returning NRIs
If you plan to return to Kerala permanently in the next one to three years, understand RNOR status now. During RNOR years, your Gulf salary, UK rental, and US dividends are generally not taxable in India. Once you become full ROR, worldwide income gets taxed. Plan your return carefully and count your days.
You qualify as RNOR if you are physically resident but either: were NRI in 9 of the last 10 financial years, or spent 729 days or less in India across the last seven years.
DTAA — How Double Tax Relief Works
India has DTAAs with over 90 countries including UAE, UK, USA, Saudi Arabia, Qatar, Kuwait, Oman, and Bahrain. To claim relief you need two documents:
- TRC (Tax Residency Certificate) — from UAE Ministry of Finance, HMRC (UK), or IRS (USA).
- Form 10F — self-declaration filed on India's e-filing portal.
| Country | DTAA? | Key Relief |
|---|---|---|
| 🇦🇪 UAE | Yes | Property income, capital gains; watch deemed residency rule |
| 🇬🇧 UK | Yes | Dividends, interest, rental income — reduced rates |
| 🇺🇸 USA | Yes | Capital gains, dividends, interest |
| 🇸🇦 Saudi Arabia | Yes | Interest and dividend relief |
| 🇶🇦 Qatar | Yes | Interest income relief |
| 🇰🇼 Kuwait | Yes | General income relief |
| 🇴🇲 Oman | Yes | General income relief |
| 🇧🇭 Bahrain | Yes | General income relief |
Rental Income From Kerala Property
Your tenant must deduct TDS at 31.2% from rent and deposit it with the government. As the NRI landlord, ensure your tenant is aware. File an Indian ITR each year to declare the income, claim deductions (30% standard deduction, property tax, home loan interest), and use TRC and Form 10F for DTAA relief.
Rental income in an NRO account can be repatriated up to USD 1 million per year after taxes.
Property Sale and Capital Gains
| Holding Period | Type | Tax Rate |
|---|---|---|
| 24 months or less | STCG (Short-Term) | Slab rate (up to 30%) |
| More than 24 months | LTCG (Long-Term) | 12.5% flat — no indexation from July 23, 2024 |
TDS is deducted on the full sale value, not just the gain. File an ITR to claim excess TDS back as a refund.
Exemptions Available
- Section 54: Reinvest LTCG from residential property into another residential property.
- Section 54EC: Invest LTCG (up to ₹50 lakh) in specified bonds within 6 months of sale.
- Section 54F: Reinvest LTCG from any capital asset into a residential property.
From 1 October 2026, buyers purchasing property from NRIs no longer need a TAN. TDS can be deducted and paid via a PAN-based challan (Form 26QB) on the income tax portal — simpler for both buyer and NRI seller.
NRO vs NRE vs FCNR Accounts
| Account | Tax on Interest | Repatriation | Best For |
|---|---|---|---|
| NRE | Fully exempt | Freely repatriable | Gulf salary, UK/US income remitted to India |
| NRO | 30% + surcharge + cess | USD 1 million/year after tax | Indian rent, pension, dividends |
| FCNR | Fully exempt | Freely repatriable | Keeping foreign currency in India |
Do not keep an ordinary resident savings account after becoming an NRI. It must be converted to NRO or NRE. Failure to convert is a FEMA violation.
ITR Filing — When NRIs Must File
- India-sourced income exceeds ₹2.5 lakh in a financial year
- Capital gains from property or share sales in India
- To claim excess TDS as a refund
Use ITR-2. Do not fill Schedule FA (foreign assets) — that is only for full ROR residents and filling it as an NRI can flag incorrect residency status.
Budget 2026 Summary for NRIs
| Change | Details | When |
|---|---|---|
| No TAN for property buyers | PAN-based challan (Form 26QB) replaces TAN requirement | 1 Oct 2026 |
| TCS on remittances reduced | Education/medical TCS cut from 5% to 2% | Budget 2026 |
| Foreign Assets Disclosure Scheme | 6-month window to voluntarily disclose overseas assets, reduced penalties | Budget 2026 |
| 5-year overseas income exemption | NRI professionals visiting India may qualify for exemption on certain overseas income | Budget 2026 |
Practical Checklist Before March 31
- Count India days — stay under 182 (or 120 if income exceeds ₹15 lakh).
- Convert any resident savings account to NRO or NRE.
- Collect TRC from your country of residence.
- File Form 10F on the e-filing portal.
- Ensure your tenant deducts TDS on rent.
- File ITR-2 if India income exceeds ₹2.5 lakh or capital gains exist.
- Do not fill Schedule FA as an NRI.
- Use Form 67 + TRC + Form 10F to claim DTAA credit.