NRI tax, banking and FEMA: staying compliant and moving money

Two tests of residence

For income tax, residence is counted in days: broadly 182 days in India in the tax year makes you resident, with special rules for visiting citizens whose Indian income exceeds fifteen lakh rupees and for citizens not taxed anywhere else. For exchange control, you become a person resident outside India from the day you leave for work, business or an indefinite stay. It is entirely possible to be non-resident under one law and resident under the other in the year of departure or return, and each has consequences for bank accounts, investments and tax returns.

India's income tax statute was replaced with effect from 1 April 2026 by the Income-tax Act, 2025, which simplifies language and renumbers provisions while keeping the substance. Earlier years remain under the 1961 Act, so both will be in use for some time.

Indian income and how it is taxed

Rent, interest on NRO deposits, dividends, capital gains and Indian salary are taxable for non-residents; interest on NRE and FCNR deposits is exempt. The payer deducts tax before paying you, often at thirty per cent or more, and a return is how you claim treaty rates, deductions and refunds. When the tax department's data does not match a return, or finds none, a notice follows: see income tax notices and appeals and the guide on what to do first.

Selling property: the largest tax event

For most families the single biggest Indian tax event is the sale of a house or land. The buyer must deduct tax at non-resident rates, by default on the full price, unless you hold a lower deduction certificate. Long-term gains are taxed at 12.5 per cent without indexation, with exemptions for reinvestment. Planning before the agreement is signed keeps the money in your hands instead of in a refund queue: see TDS and capital gains and the step-by-step guide to selling.

Moving money out of India

NRE and FCNR balances move freely. Everything that originates in India, including sale proceeds, inheritance and rent, sits in the NRO account and can be remitted up to one million US dollars per financial year on a chartered accountant's certificate. Banks check the source and the tax position closely. See repatriation of funds. Inherited shares and unclaimed dividends have their own recovery route, described under shares transmission and IEPF.

Exchange control compliance

Typical contraventions are unintentional: a resident savings account left running, a plot of farm land bought through a relative, an informal loan. They are civil defaults that can be compounded with the Reserve Bank, and are far better regularised before a bank or the Enforcement Directorate raises them. See FEMA compliance and notices. Those investing in a business should also read business setup in India for the reporting that foreign investment triggers.

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