28 Aug 2025Updated: May 2026
The Income-tax Act, 2025 received Presidential assent on 22 August 2025 and came into force from 1 April 2026, replacing the Income-tax Act, 1961. For NRIs, the structural change is significant — the new Act consolidates 536 sections across 23 chapters, simplifies language, and in several areas tightens the compliance and disclosure framework. Understanding what has changed and what has been carried forward is critical for NRIs with income, property, or investments in India.
Residential Status Under the Income-tax Act, 2025
The residential status provisions — which determine whether an NRI's global income is taxable in India — have been substantially carried forward from the 1961 Act but with cleaner drafting. The key tests remain:
An individual is a tax resident of India if they are present in India for 182 days or more during the tax year, or if they were present for 60 days or more during the tax year AND 365 days or more during the preceding four years. The deemed residency rule — which applied to Indian citizens earning above ₹15 lakh from Indian sources who were not taxable anywhere else — continues under the 2025 Act.
For NRIs returning to India, the RNOR (Resident but Not Ordinarily Resident) status continues to provide a transition period during which foreign income remains exempt from Indian tax. The RNOR conditions — being a non-resident for 9 of the preceding 10 years, or being in India for 729 days or fewer in the preceding 7 years — are retained.
TDS on NRI Income: Key Rates Under the 2025 Framework
TDS obligations on payments to NRIs are carried forward with updated cross-references. The key rates relevant to most NRIs:
Property sale proceeds: TDS at 12.5% on LTCG (more than 24 months) or applicable slab rate on STCG, under the equivalent of the former Section 195. Lower Deduction Certificates (LDCs) continue to be available where actual tax liability is lower than the TDS computed on full consideration.
Rental income: TDS at 30% on gross rent paid to NRI landlords — no threshold exemption applies (unlike the ₹2.4 lakh threshold for resident landlords under Section 194-IB).
Interest on NRO accounts: TDS at 30% plus surcharge and cess. Interest on NRE and FCNR(B) accounts remains exempt.
Foreign Asset and Income Disclosure
The Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) disclosure requirements are retained under the 2025 Act. NRIs who become tax residents — including RNOR — must disclose foreign assets and foreign income in their ITR. Failure to disclose attracts prosecution and penalty under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which remains a separate law alongside the income tax framework.
DTAA Positions Under the New Act
The 2025 Act retains the supremacy of tax treaty provisions — where a DTAA provides more favourable treatment, the treaty position prevails over domestic law. For NRIs in treaty countries (UAE, USA, UK, Canada, Singapore, etc.), DTAA-based positions on dividend income, capital gains, and professional fees continue to be available, subject to proper documentation including the Tax Residency Certificate (TRC) from the country of residence and Form 10F.
FEMA and Repatriation: No Changes
FEMA and RBI's repatriation rules fall outside the Income-tax Act and are not affected by the 2025 Act. The USD 1 million annual repatriation cap from NRO accounts, Form 15CA/CB requirements for overseas remittances, and the NRE/NRO account framework continue unchanged.
Action Points for NRIs in FY 2026-27
NRIs with Indian income should confirm their ITR filing obligation under the 2025 Act's residency provisions, verify that TDS has been correctly deducted on Indian income, check DTAA applicability if income has been subjected to full TDS without treaty relief, obtain LDC before any property sale to avoid excess TDS, file ITR to claim refunds and disclose foreign assets/income where applicable, and ensure Form 15CA/CB is in place before any overseas remittance from an NRO account.
For a comprehensive guide to NRI taxation under the current Indian framework, including worked examples, DTAA positions, and FEMA rules, refer to NRI Tax Blueprint 2025 by CA Regi Tom Antony — available on Amazon. For all NRI tax and compliance resources, visit nriblueprint.com.
Regi Tom Antony And Associates provides NRI tax advisory, ITR filing, TDS compliance, Form 15CA/CB certification, and FEMA advisory for NRIs across the globe. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.