I’m an NRI living in the US and preparing my Indian income tax return for FY 2025-26 / AY 2026-27. I’m confused about whether I should choose the old tax regime or new tax regime for my Indian income.
Most of my income in India is from bank interest, rental income and some investments. I don't have an Indian salary, so I'm not sure whether the usual advice about choosing a tax regime applies in the same way to NRIs.
I’ve seen that the new tax regime is now the default, but the old regime still allows various deductions. I have some LIC premiums and housing-loan principal repayments, so Section 80C could be relevant to me.
At the same time, the new regime has lower slab rates and a higher basic exemption threshold. The Income Tax Department's current AY 2026-27 guidance specifically provides separate slab information for non-resident individuals.
I'm trying to figure out which regime would actually be better rather than simply choosing the default.
For other NRIs:
I'm mainly looking for real experiences and things I should compare before filing. I understand the answer will depend on individual income and deductions.
I chose the new regime because my Indian income isn't very complicated and I didn't have enough eligible deductions to make the old regime worthwhile.
For AY 2026-27, the new regime has slabs starting with no tax up to ₹4 lakh, followed by 5%, 10%, 15%, 20%, 25% and 30% slabs as income increases. The Income Tax Department lists these rates specifically for non-resident individuals as well.
But be careful with the ₹12 lakh rebate information you may see online. The new-regime Section 87A rebate is for resident individuals, so an NRI shouldn't assume that the resident taxpayer rebate automatically applies to them.
That's one reason I'd use an NRI-specific tax calculation rather than a generic Indian income-tax calculator.
Also, if you're relying on Section 80C, remember that the new regime generally doesn't allow that deduction. The department's FAQ specifically says deductions such as 80C are not available under the new regime, subject to the limited exceptions provided under Section 115BAC.
I don't think there's a single regime that's automatically better for every NRI.
I compared both regimes for my own return because I had Indian rental income and some eligible deductions. The new regime initially looked attractive because of the lower rates and wider slabs, but once I included the deductions available to me under the old regime, the difference wasn't as obvious.
The Income Tax Department itself says the choice between the two regimes varies from person to person and recommends comparing the tax liability under both before deciding.
One major difference is deductions. Under the new regime, most Chapter VI-A deductions, including Section 80C, aren't available. The old regime allows various deductions and exemptions.
So if you're an NRI with substantial 80C investments, eligible insurance payments or other deductions, I'd calculate both instead of assuming the new regime is better.
For someone with mostly interest income and very few deductions, the new regime may come out ahead. But that's just a general observation, not a rule for every NRI.
Share Your Thoughts and Connect with Others.
I noticed that TDS appears to have been deducted twice on the same income, and I am not sure whether this is an actual duplicate deduction or just a reporting...
I’m an Indian citizen living in Dubai and became a non-resident for Indian tax purposes several years ago. I recently sold an apartment I owned in Pune, and I was...
I am an NRI and I am planning to sell a property in India. I was told that the buyer may have to deduct a significant amount of TDS from...
I am an NRI and had TDS deducted from my income in India during the financial year. The amount deducted is quite high compared with the tax I expect to...
I am an NRI and had a fairly large amount of TDS deducted from income in India during the financial year. After calculating my actual tax liability, it looks like...
I moved abroad several years ago and have been filing my Indian tax returns as a non-resident. This year, however, I spent more time in India because of family and...
I am an NRI and receive rental income from a property in India. I currently live and pay taxes in another country, and I am confused about whether I will...
I’m an NRI living and working outside India, and I receive some income from India. I’m trying to understand how the DTAA (Double Taxation Avoidance Agreement) works because I may...
I moved from India to the UK for work last year and have been using the same Indian savings account that I had before moving abroad. I recently found out...
I missed the income-tax return filing deadline this year and only realised it after checking my tax records. I am an NRI and have some income in India, including bank...
Let Savetaxs guide you to the perfect solution for all your queries.
Another thing I'd look at is the type of income rather than just the total amount.
For example, if you have Indian rental income, the tax calculation may include deductions that are different from simply claiming 80C. If you have a home loan, the treatment can also depend on whether the property is self-occupied or let out.
The current Income Tax Department guidance says that under the new regime, interest under Section 24(b) for a let-out house property can be deducted from house-property income, subject to the applicable rules.
So if you're an NRI with rental property, don't decide based only on your LIC or investment deductions.
I'd prepare two calculations:
Old regime: taxable income after applicable deductions/exemptions.
New regime: taxable income using the new-regime rates and only the deductions permitted under that regime.
Then compare the final tax, surcharge and cess rather than comparing only the headline slab rates.