6 May 2024

Updated: May 2026

Financial Planning for NRIs in India: A Complete 2026 Guide

For Non-Resident Indians (NRIs), financial planning in India involves a multi-layered set of decisions — balancing FEMA compliance, DTAA benefits, Indian tax obligations, and investment goals — all while managing life across two jurisdictions. At Regi Tom Antony And Associates, NRI financial planning is a core practice area. This guide covers the essential pillars every NRI should address.

1. Understanding Your Residential Status — The Foundation of Everything

Your residential status under the Income Tax Act, 1961 determines what income is taxable in India and at what rate. For FY2025–26:

• Non-Resident (NR): Only India-sourced income (rent, capital gains on Indian assets, business income from India) is taxable in India
• Resident and Ordinarily Resident (ROR): Global income taxable in India
• Resident but Not Ordinarily Resident (RNOR): Transitional status for returning NRIs — foreign income generally not taxable for up to 2–3 years

Deemed residency (Section 6(1A)): An Indian citizen with India-sourced income exceeding ₹15 lakh in a year who is not taxable in any other country may be deemed resident. If you are an NRI with high India-sourced income, confirm your status with a CA.

2. NRI Bank Accounts — Which to Hold and Why

NRIs can hold three types of bank accounts in India under FEMA:

• NRE (Non-Resident External) Account: Funded from foreign earnings. Principal and interest are freely repatriable. Interest is tax-free in India under Section 10(4). Best for parking foreign remittances.
• NRO (Non-Resident Ordinary) Account: Receives India-sourced income (rent, dividends, pension). Interest taxable at 30% TDS. Repatriation limited to USD 1 million per financial year (with CA certificate in Form 15CB and Form 15CA).
• FCNR(B) (Foreign Currency Non-Resident Bank) Account: Fixed deposits in foreign currency (USD, GBP, EUR, etc.). Protects against rupee depreciation. Interest tax-free in India. Fully repatriable.

Strategy: Hold liquid foreign savings in NRE/FCNR; India-earned income flows through NRO.

3. Investment Options for NRIs in India

Equity and Mutual Funds

NRIs can invest in Indian equities and mutual funds subject to FEMA regulations:

• Portfolio Investment Scheme (PIS): Required for secondary market equity purchases. A designated NRE/NRO bank account is linked to a PIS permission from the RBI (granted through your bank).
• Mutual funds: Most Indian AMCs accept NRI investments from all geographies except the US and Canada (due to FATCA compliance complexity — check with individual AMCs). NRE account investments yield tax-free returns; NRO account investments are subject to Indian tax.
• Capital gains tax (post Finance (No. 2) Act, 2024): LTCG on listed equity at 12.5% (threshold ₹1.25 lakh/year); STCG at 20%. These rates apply equally to NRIs.

Real Estate

NRIs can purchase residential and commercial property in India without RBI approval (agricultural land, plantation property, and farmhouses are prohibited). Key considerations:

• Purchase funds should flow through NRE/NRO accounts — do not use foreign currency cash or foreign bank transfers directly
• Rental income flows through NRO account and is taxable in India after standard deduction of 30% under Section 24(a)
• Property sale proceeds: LTCG at 12.5% (property held >24 months); TDS by buyer at 12.5% + surcharge under Section 195
• Section 54/54F exemptions available to NRIs for reinvestment in another residential property in India

Fixed Deposits and Debt

NRE Fixed Deposits offer tax-free, repatriable returns and are among the best risk-adjusted options for NRIs with rupee needs. Current NRE FD rates (FY2026) range from 6.5%–7.5% for major banks on 1–3 year tenors — compare this against US/UK savings rates net of tax.

4. Tax Planning for NRIs — Key Provisions

Double Taxation Avoidance Agreements (DTAAs)

India has DTAAs with 95+ countries. Key benefits: reduced TDS rates on dividends (often 10–15% vs. 20% standard rate), reduced rates on royalties and fees, and relief from double taxation via tax credit or exemption in the country of residence. Always check the DTAA between India and your country of residence before assuming standard Indian TDS rates apply.

ITR Filing Obligation

NRIs must file an ITR in India if:

• Gross income from India sources exceeds the basic exemption limit (₹2.5 lakh under old regime; ₹3 lakh under new regime)
• They have capital gains from Indian assets (even if within exemption limit — TDS credit requires ITR)
• They wish to claim refund of excess TDS deducted
• They have brought forward losses to carry forward

Schedule FA — Foreign Asset Disclosure

If you were resident in India in any prior year and held foreign assets, they must be disclosed in Schedule FA of the ITR. Returning NRIs who become resident must disclose all foreign assets from the first year of becoming ROR. Penalties under the Black Money Act, 2015 are severe — ₹10 lakh per assessment year plus 30% tax and 90% penalty on undisclosed foreign assets.

5. Succession and Estate Planning for NRIs

NRI estate planning has cross-border complexity:

• A will executed in India governs Indian assets. A will executed abroad may be valid in India if properly apostilled and registered.
• For married NRIs, joint property with a spouse or nominee designation in bank/demat accounts can avoid probate for Indian assets.
• Power of Attorney (PoA) is essential for NRIs to manage Indian property, bank accounts, and legal matters remotely. A General PoA for property matters should be registered and notarised per Indian requirements.
• NRI-owned property without a valid nomination or will can result in lengthy legal proceedings under the Indian Succession Act or Hindu Succession Act depending on religion and property type.

For comprehensive NRI succession and estate planning, refer to NRI Tax Blueprint 2025 by CA Regi Tom Antony — available on Amazon.

6. Repatriation of Funds from India

NRIs frequently need to move money out of India. Key rules under FEMA:

• NRE account: Fully repatriable without limit or documentation
• NRO account: Up to USD 1 million per financial year (net of applicable taxes) with Form 15CA (self-declaration) and Form 15CB (CA certificate) for amounts above ₹5 lakh
• Property sale proceeds: Repatriable up to USD 1 million per year with 15CA/15CB; held in NRO account post-sale
• Inheritance: Repatriation of inherited assets follows specific RBI guidelines — consult a CA for large inheritances

For end-to-end NRI financial planning, tax advisory, and compliance, visit www.nriblueprint.com.

Frequently Asked Questions

Can NRIs claim deductions under Section 80C in India?

Yes. NRIs can claim Section 80C deductions (up to ₹1.5 lakh) on qualifying investments made in India — including ELSS mutual funds, PPF contributions (if the account was opened before becoming NRI), life insurance premiums on Indian policies, and principal repayment on home loans in India. However, NRIs cannot open new PPF accounts after becoming NRI, and existing PPF accounts cannot be extended beyond maturity.

Is NRI rental income from India taxable?

Yes. Rental income from Indian property is taxable in India for NRIs. After a standard deduction of 30% (Section 24(a)) and deduction of municipal taxes paid, the net income is added to total income and taxed at slab rates. The tenant must deduct TDS at 31.2% (30% + 4% cess) under Section 194-IB if monthly rent exceeds ₹50,000. NRIs should file an ITR to reconcile TDS and actual liability, and to claim refund if excess TDS was deducted.

What is Form 15CA and 15CB for NRIs?

Form 15CA is a self-declaration by the remitter (person sending money abroad) confirming tax compliance on the remittance. Form 15CB is a certificate issued by a Chartered Accountant verifying that applicable taxes have been paid or that the remittance is not chargeable to tax in India. Together they are required for most foreign remittances from NRO accounts above ₹5 lakh, and are filed on the Income Tax portal before the bank processes the transfer.