NRI Taxation: Decoding Tax Implications for NRIs

The RNOR issue is worth understanding, especially for people who have recently moved back and forth between India and another country.

NRI and RNOR aren't interchangeable terms.

RNOR means Resident but Not Ordinarily Resident. The Income Tax Department says the RNOR criteria continue under the Income Tax Act, 2025. Among the tests, an individual can qualify where they were non-resident in nine out of the ten preceding years or stayed in India for 729 days or less during the preceding seven years.

That status can affect the tax treatment of foreign income, so someone returning to India shouldn't automatically assume that becoming “resident” means all worldwide income is immediately treated in the same way as a long-term resident.

The other important thing is the April 2026 transition.

The Income Tax Department says residential status for tax years beginning before April 1, 2026 continues to be determined under the 1961 Act. The Income Tax Act, 2025 applies to tax years beginning on or after April 1, 2026.

So I would be careful with articles claiming that all NRI taxation rules suddenly changed on April 1, 2026.

I had a similar question because I receive income in both India and Canada.

One distinction that helped me was between NRO and NRE interest.

NRO interest is generally taxable in India. Eligible interest earned on an NRE account can be exempt where the applicable FEMA/RBI conditions are satisfied. The Income Tax Department has specifically confirmed that the NRE-interest exemption continues under the Income Tax Act, 2025.

I also wouldn't assume that foreign salary automatically becomes taxable in India just because you are an Indian citizen. Residential status matters, as does the nature and source of the income.

The DTAA can also become relevant if you're resident for tax purposes in another country. But I wouldn't assume that a treaty simply means “no Indian tax.” It depends on the particular income and the treaty provisions.

One practical thing: keep your Indian tax documents separate from your foreign tax documents. I maintain bank statements, TDS certificates, rental records and investment statements for India and then separately keep my Canadian tax records.

That makes it much easier to check whether the same income is being considered in both countries.

The way I eventually understood NRI taxation was to stop thinking of “NRI” as a tax rate and instead look at residential status + type of income + source of income.

I live in the U.K. and have an apartment in India. My rental income is taxable in India, and I also have interest income from my NRO account.

The Income Tax Department says an individual's residential status has to be determined for the relevant tax year. For FY 2025-26, the basic tests include 182 days in India or the applicable 60-day-plus-365-day test.

Once I established that I was non-resident, I looked at each Indian income separately.

My NRO interest was taxable in India. My rental income also had to be reported. When I sold some Indian investments, I had to separately consider the capital-gains provisions.

I also learned not to assume that TDS means the tax matter is finished. TDS is simply tax collected during the year. Depending on the circumstances, an ITR may still be required or useful for reconciling the tax and claiming any eligible refund.

For me, keeping separate records for Indian bank interest, rent, investments and TDS made the filing process much easier.