NRI and OCI taxation

NRIs (Non-Resident Indians) are taxed on India-source income only. OCIs (Overseas Citizens of India) are NRIs for tax purposes. Account types: NRO (Non-Resident Ordinary — for India income, taxable), NRE (Non-Resident External — for foreign-earned funds remitted to India, tax-free interest), FCNR (Foreign Currency Non-Resident — foreign currency deposits, tax-free).

Income taxable in India for NRIs: rental income from Indian property, capital gains on Indian assets, interest on NRO accounts, salary for work performed in India. Not taxable: NRE/FCNR interest, dividends from Indian companies (post-2020 abolished DDT, but TDS at 20% applies to NRIs unless DTAA reduces). TDS rates: rent 31.2%, interest on NRO 30%, capital gains 12.5% LTCG / 20% STCG (post-Budget 2024). Surcharge: 10-37% on income above ₹50L. DTAA (Double Tax Avoidance Agreement): India has DTAAs with 90+ countries; can reduce TDS rates significantly (e.g., 10-15% for many countries). NRIs claim DTAA benefits via Form 10F + tax residency certificate from country of residence.

A practitioner insight: returning NRIs (resuming Indian residency) get RNOR (Resident but Not Ordinarily Resident) status for 2-3 years. During RNOR, foreign income is exempt — a window for repatriating foreign equity, crystallising foreign capital gains, and consolidating wealth into India tax-free. Most returning NRIs miss this window entirely. RIAs and CFPs handling returning clients should map this carefully. Also: estate planning for NRIs requires understanding of "place-of-domicile" rules — India taxes worldwide assets at death only if Indian-domiciled (currently no estate duty, but rules can change).