NRI Taxation 2025: What Income Is Taxable in India and What’s Not?

In an increasingly globalised world, many Indians choose to live and work abroad, but they still maintain financial ties with India. Whether it’s through real estate, investments, or family businesses, understanding NRI taxation is crucial for managing your wealth smartly and staying compliant. With new regulations and tax updates for FY 2025, this guide breaks down what income is taxable for NRIs in India, what is exempt, and how you can make informed financial decisions.

Understanding Who Qualifies as an NRI

Before diving into the specifics of NRI taxation, it's important to clarify who is considered a Non-Resident Indian under Indian tax laws.

Residency Criteria for NRIs (FY 2025)

According to the Income Tax Act of India, you are an NRI if:

• You were in India for less than 182 days during the financial year

  OR

• You were in India for less than 60 days in the financial year AND less than 365 days in the past four financial years.

However, recent amendments include additional checks, especially for high-income earners, such as deemed residency and taxation for stateless individuals, which we’ll touch on later.

Income That Is Taxable for NRIs in India

As per Indian tax law, only income that is earned or accrued in India is taxable for NRIs. Here’s a closer look at what falls into this category:

1. Income from Salary (if received in India)

If you're working for an Indian company and receiving salary in an Indian bank account, it is taxable in India even if you're located overseas.

2. Income from Property in India

If you own residential or commercial property in India and earn rental income, that income is taxable. The property can also attract capital gains tax if sold.

3. Capital Gains from Indian Assets (As of July 2025)

Whether it's shares, mutual funds, or real estate, any capital gains made on the sale of Indian assets are taxable in India.

• Shares & Equity-Oriented Mutual Funds (Listed)

Short-Term Capital Gains (STCG) - Holding Period: 12 months or less

For listed equity shares and equity-oriented mutual funds (where STT is paid), STCG is taxed at a flat rate of 20% (plus applicable surcharge and cess). This rate became effective from July 23, 2024, replacing the previous 15%. There is no slab rate application for this specific type of STCG, nor is there a ₹1.25 lakh threshold for STCG.

Long-Term Capital Gains (LTCG) - Holding Period: More than 12 months

LTCG on listed equity shares and equity-oriented mutual funds is indeed taxed at 12.5% (plus applicable surcharge and cess). However, this tax applies only to gains exceeding ₹1.25 lakh in a financial year. Gains up to ₹1.25 lakh are exempt. This rate became effective from July 23, 2024, replacing the previous 10%.

• Unlisted Shares (e.g., from startups)

Short-Term Capital Gains (STCG) - Holding Period: 24 months or less

STCG on unlisted shares is taxed at the NRI's applicable income tax slab rates (which can go up to 30% plus surcharge and cess).

Long-Term Capital Gains (LTCG) - Holding Period: More than 24 months

LTCG on unlisted shares is taxed at a flat rate of 12.5% (plus applicable surcharge and cess). Importantly, no indexation benefit is available for NRIs on unlisted shares. This rate is effective from July 23, 2024, replacing the previous 10%.

• Real Estate (Immovable Property)

Short-Term Capital Gains (STCG) - Holding Period: 24 months or less

STCG on immovable property is taxed at the NRI's applicable income tax slab rates (which can go up to 30% plus surcharge and cess).

Long-Term Capital Gains (LTCG) - Holding Period: More than 24 months

LTCG on immovable property is taxed at 12.5% (plus applicable surcharge and cess), without indexation benefit for transfers made on or after July 23, 2024.

Transitional Rule: If the property was acquired before July 23, 2024, and sold after this date, the taxpayer (NRI) has the option to choose between the older rate of 20% with indexation or the new rate of 12.5% without indexation, whichever is more beneficial.

• Debt Mutual Funds, Gold, Bonds, etc.

Short-Term Capital Gains (STCG) - Holding Period: 24 months or less (for most, but some debt funds acquired after April 1, 2023, are taxed at slab rates regardless of holding period).

STCG is generally taxed at the NRI's applicable income tax slab rates.

Long-Term Capital Gains (LTCG) - Holding Period: More than 24 months (for most)

LTCG for these assets (if held for more than 24 months, or 36 months for certain older debt funds) is taxed at 12.5% (plus applicable surcharge and cess) without indexation benefit for transfers made on or after July 23, 2024. (Similar transitional rules might apply for assets acquired before this date).

4. Interest Income from NRO Accounts

Interest earned on an NRO (Non-Resident Ordinary) account is taxable at 30% (plus surcharge and cess).

5. Dividend Income

Earlier, dividends were tax-free in the hands of the recipient. But now, dividends received from Indian companies are taxable at your applicable slab rate.

Income That Is Not Taxable in India

1. Foreign Income

Any income you earn outside India, such as salary, business income, or rental income from overseas property, is not taxable in India as long as you qualify as an NRI.

2. Interest on FCNR and NRE Accounts

Interest earned on NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts is fully exempt from tax in India, provided you maintain your NRI status.

3. Gifts Received from Relatives

NRIs receiving money from relatives (as defined by tax law) are exempt from tax up to ₹50,000 in a financial year. Any amount above this, if from non-relatives, becomes taxable.

Important Changes for FY 2025 Every NRI Should Know

1. Deemed Residency Rule for High-Income NRIs

If you are not taxed in any other country and your Indian income exceeds ₹15 lakh, you may be treated as a resident but not ordinarily resident (RNOR), meaning your global income still remains exempt, but scrutiny increases.

2. New Tax Reporting Obligations

The Indian government is increasingly focusing on cross-border tax compliance. You may be required to disclose foreign assets and bank accounts, even if they’re tax-exempt in India.

3. TDS on Property Transactions Involving NRIs

If you sell property in India, the buyer must deduct TDS at 12.5% (LTCG - without indexation benefit) or 30% (STCG). Advance planning is key to avoid cash flow issues.

What NRIs Should Do in 2025?

Here are a few steps to take in light of the new NRI taxation updates:

• Review your residential status annually based on travel and income

• Plan your investments, consider NRE and FCNR deposits for tax-free growth

• Consult a tax advisor if your income situation is complex or includes assets in multiple countries

• Ensure timely filing of your ITR to avoid penalties and stay compliant

Final Thoughts

NRI taxation in 2025 is evolving with India’s push for better compliance and global transparency. While it may feel complex, being proactive and staying informed will help you manage your finances with confidence. Understanding what income is taxable in India and what is not allows you to make smarter decisions and avoid surprises.

Whether you are an NRI salaried professional in Dubai or a high-net-worth investor in London, your financial strategy should include a solid understanding of your tax obligations in India.

FAQs About NRI Taxation

Q: Is income from mutual funds in India taxable for NRIs?

Yes. The gains from mutual funds are taxable depending on the type of fund (equity or debt) and the holding period. Also, TDS is applicable at source.

Q: Can I claim double taxation relief?

Yes. If India has a Double Taxation Avoidance Agreement (DTAA) with your country of residence, you can claim relief to avoid paying tax twice on the same income.

Q: Do I need to file an income tax return in India?

If your total taxable income in India exceeds ₹2.5 lakh, you must file an ITR even if you are an NRI.