24 Oct 2025Updated: May 2026
Moving abroad — whether for employment, business, or permanent settlement — triggers a specific set of tax and financial compliance obligations in India that most people underestimate. The common assumption is that once you leave India, your Indian tax obligations largely end. That is incorrect. What changes is the scope of your India tax liability; what does not change is the obligation to manage Indian assets, accounts, and income correctly under Indian law and FEMA.
Here is what you need to address before and after an overseas move.
Step 1: Understand When Your Residential Status Changes
Your Indian tax liability is determined by your residential status under Section 6 of the Income Tax Act — not by your visa, passport, or domicile.
You become a Non-Resident (NR) for a financial year if you are present in India for fewer than 182 days during that year. The count starts from 1 April and ends on 31 March. The day of departure counts as a day in India; the day of arrival abroad does not.
As an NR, you are taxed only on income that accrues or arises in India, or is received in India. Your foreign salary, overseas bank interest, and foreign investments are outside India's tax net.
The transition year — the year you leave — requires careful counting. If you left in, say, October 2025, you were in India for more than 182 days in FY 2025–26 (April to March), so you remain a Resident for that year and your global income (including the foreign salary earned from October onwards) is taxable in India. This surprises many first-year NRIs.
Step 2: Convert Bank Accounts and Investments to NRI-Compliant Status
Under FEMA, an Indian resident who becomes a non-resident must convert their existing savings accounts to Non-Resident (Ordinary) accounts — NRO accounts — within a reasonable time. Continuing to operate a regular savings account as an NRI is a FEMA violation.
NRO account: For India-sourced income (rent, interest, dividends, pension). Interest is taxable in India; TDS at 30% is deducted. Repatriation of principal is subject to documentary conditions and the USD 1 million annual cap.
NRE account: For remitting and parking foreign earnings in India. Principal and interest are both fully repatriable. Interest on NRE deposits is exempt from Indian income tax. Funds in NRE accounts must be sourced from foreign earnings — you cannot transfer from NRO to NRE freely without following the RBI repatriation procedure.
FCNR (B) account: Foreign currency fixed deposits — held in foreign currency (USD, GBP, EUR, etc.) with Indian banks. No exchange rate risk. Interest exempt from Indian tax. Useful for NRIs who want to maintain fixed deposits in India without rupee exposure.
Mutual fund and demat account folios must also be updated to NRI status. Equity investments are managed under the Portfolio Investment Scheme (PIS) through a designated bank. Failure to update status means transactions may not be processed correctly and can create compliance issues with the broker and the exchange.
Step 3: Address Indian Property
If you own residential or commercial property in India, you may continue to hold it as an NRI. Rental income from Indian property is taxable in India and must be reported in your ITR (ITR-2). The tenant is required to deduct TDS at 30% if you are an NRI landlord — Section 195. If the tenant is unaware and does not deduct, the liability remains on you.
If you plan to sell the property after becoming an NRI, the buyer must deduct TDS on the full sale consideration at 12.5% (LTCG rate) plus surcharge. A Lower Deduction Certificate under Section 197 is strongly advisable before any property sale to avoid excess TDS.
Step 4: LRS and Outward Remittances
Before you leave India, if you intend to remit funds abroad — to build an emergency fund overseas, fund education, or make overseas investments — the Liberalised Remittance Scheme (LRS) allows up to USD 250,000 per individual per financial year for permitted purposes. Once you are an NRI, outward remittances from NRO accounts are subject to the separate FEMA repatriation framework (USD 1 million cap per year from property sale proceeds; current income like rent and dividends can be repatriated freely after tax compliance).
Step 5: ITR Filing — Do Not Stop
Many new NRIs stop filing Indian ITRs on the assumption that they have no Indian income. This is incorrect if you have:
- NRO account interest (taxable; TDS deducted at 30% but ITR still required to reconcile and potentially claim refund under DTAA)
- Rental income from Indian property
- Capital gains from mutual fund redemptions or share sales
- Any other India-sourced income
Even where total India income is below the exemption limit and no tax is payable, filing an ITR creates a compliance record that is useful when you need to repatriate funds, apply for an NRI home loan, or respond to any department query.
DTAA — Avoid Double Taxation
India has Double Tax Avoidance Agreements with 95+ countries. If you are paying tax on Indian income in your country of residence as well as in India, the DTAA provides relief — either through an exemption, a reduced withholding rate, or a foreign tax credit. To claim DTAA benefits in India, you need a Tax Residency Certificate (TRC) from your country of residence and must file Form 10F on the Indian Income Tax portal.
For country-specific NRI tax guides — covering the UAE, USA, UK, Canada, Australia, Singapore, and Gulf — visit NRI Blueprint. The NRI Tax Blueprint 2025 covers the full financial checklist for Indians moving abroad, including FEMA, banking, property, and tax planning in detail.
Regi Tom Antony And Associates advises individuals planning overseas moves on residential status, NRO/NRE account conversion, FEMA compliance, LRS, ITR filing, and DTAA claims. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.