NR and Expat Taxation in India
India follows a residential-based taxation system, meaning tax liability is determined based on an individual’s residency status rather than citizenship. Non-Residents (NRs) and Expats earning income in India must comply with Indian tax laws and file returns accordingly.
Who is Considered an NR or Expat
for Tax Purposes?
As per the Income Tax Act, 1961, an individual’s residency status is determined based on the number of days spent in India:
Resident​
Spent 182 days or more in India during a financial year (or 60 days in a year & 365 days in the last 4 years, subject to conditions).
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Non Resident
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Spent less than 182 days in India during a financial year.
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Resident But Not Ordinarily Resident
Individuals who meet the residence criteria but have been a non-resident in 9 out of the last 10 financial years or spent less than 729 days in India in the last 7 years.
Taxability of NR and Expat Income
Income is taxed in India based on the source of earnings:
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Taxable Income in India (for NRs & Expats):
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Salary received in India
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Income from a business controlled in India
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Rental income from property in India
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Capital gains from asset transfers in India
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Interest earned from Indian bank deposits (NRO Account)
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Exempt Income (for NRs):
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Interest on NRE (Non-Resident External) and FCNR accounts
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Income from foreign sources (if NR status is maintained)
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Process for Filing NR and Expat Tax Returns
FILE YOUR TAX RETURN TO AVOID PENALTY
Filing tax returns as an NR or Expat involves the following steps:
Step 1: Determine Residency Status
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Check the number of days stayed in India as per Section 6 of the Income Tax Act.
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If an individual qualifies as NR or RNOR, taxation rules will vary.
Step 2: Gather Required Documents
To file tax returns, the following documents are required:
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PAN (Permanent Account Number)
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Aadhaar (if applicable)
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Bank Statements (Indian and foreign bank accounts)
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Salary Slips (for expats working in India)
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Rental Income Proof (if applicable)
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TDS Certificates (Form 16 / Form 16A)
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Capital Gains Statements
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Foreign Tax Credit Documents (if relief under DTAA is claimed)
Step 3: Compute Taxable Income
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Calculate total income earned in India.
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Apply exemptions and deductions (if eligible).
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Check for Double Taxation Avoidance Agreements (DTAA) benefits.
Step 4: File Income Tax Return (ITR-2 / ITR-3)
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Log in to the Income Tax e-Filing Portal.
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Select the appropriate ITR Form (ITR-2 or ITR-3).
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Fill in income details, deductions, and TDS credits.
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E-verify the return using Aadhaar OTP, Net Banking, or Digital Signature Certificate (DSC).
Step 5: Pay Tax Dues (If Any)
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If there is any additional tax payable, it must be paid online via the Income Tax e-filing portal.
Step 6: Claim Refund (If Applicable)
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If excess TDS has been deducted, a refund can be claimed while filing returns.
Compliance Requirements for NR and Expats
NRs and Expats must adhere to several compliance norms:
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Advance Tax Payments (if tax liability exceeds ₹10,000 in a financial year)
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TDS on Rental Income (if property is rented in India)
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DTAA Relief Applications (to avoid double taxation)
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FEMA Regulations (for foreign transactions)
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Disclosure of Foreign Assets (if holding assets outside India)
Timeline for Filing Tax Returns
Activity | Deadline (FY 2024-25) |
|---|---|
Belated Return | 31st December 2025 |
Revised Return (if needed) | 31st December 2025 |
Filing of ITR for NRs & Expats | 31st July 2025 |
Common Mistakes to Avoid
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Not determining residency status correctly.
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Missing out on DTAA benefits.
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Not reporting foreign income/assets.
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Failing to claim deductions (e.g., Section 80C, 80D).
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Late filing leading to penalties (₹1,000 to ₹10,000).
Frequently asked questions
