Which Tax Regime Is Better for NRIs?

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.

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.