India's Financial Guide for NRIs

Managing finances as a Non-Resident Indian is fundamentally different from domestic financial planning. NRIs operate across two or more tax jurisdictions, navigate complex foreign exchange regulations under FEMA, and must comply with reporting requirements in both India and their country of residence. A single misstep — such as not converting a resident savings account to NRO after leaving India — can trigger FEMA penalties of up to three times the amount involved.

The Indian regulatory framework for NRIs is governed primarily by three pillars: the Foreign Exchange Management Act (FEMA) 1999 administered by the RBI, the Income Tax Act 1961 administered by the CBDT, and bilateral DTAA treaties with over 90 countries. Each pillar has its own set of rules that interact in sometimes counterintuitive ways. For example, interest on an NRE Fixed Deposit is tax-free in India, but many NRIs do not realise they may need to declare this interest in their country of residence (especially in the US, Canada, and Australia which tax worldwide income).

Investment options for NRIs are both broader and narrower than for residents. NRIs can invest in Indian equities through the Portfolio Investment Scheme (PIS), buy mutual funds (with KYC and FATCA compliance), invest in NPS, and purchase residential and commercial real estate. However, they cannot open new PPF accounts, buy agricultural land, or purchase Kisan Vikas Patra. US-based NRIs face the additional complexity of PFIC rules on Indian mutual funds, making direct equity a more tax-efficient choice.

Real estate transactions involving NRIs carry higher TDS rates, repatriation restrictions, and Power of Attorney complexities. Selling property requires the buyer to deduct TDS at 12.5% to 30% of the entire sale consideration (not just the capital gain), often resulting in excess TDS that must be claimed back through filing. The repatriation of sale proceeds is limited by the original source of funds and the USD 1 million annual NRO cap.

Oquilia's NRI Hub brings together all these dimensions — banking, investments, taxation, and real estate — in one structured, data-backed platform. Every guide includes applicable rules, gotcha alerts for common pitfalls, and calculators to model your specific scenario. We reference source regulations (FEMA sections, IT Act provisions, RBI circulars) so you can verify and make informed decisions.

A Double Taxation Avoidance Agreement (DTAA) is a bilateral treaty between India and another country that prevents the same income from being taxed in both jurisdictions. India has signed DTAAs with over 90 countries, and each treaty specifies reduced withholding tax rates on interest, dividends, royalties, and capital gains. Without DTAA benefits, NRIs face Indian TDS at the domestic rate of 30% plus surcharge and cess on most income types.

Worked Example: US-India DTAA on Interest Income

Under the India-US DTAA (Article 11), interest income earned by a US tax resident from Indian sources (such as NRO Fixed Deposit interest) can be taxed in India at a maximum rate of 15% instead of the domestic rate of 30%. For an NRI in the US earning INR 5,00,000 in NRO FD interest annually, this translates to a TDS of INR 75,000 (at 15% under DTAA) versus INR 1,56,000 (at 31.2% domestic rate including cess) — a saving of INR 81,000 per year. The tax paid in India at 15% can then be claimed as a Foreign Tax Credit on the US federal return using IRS Form 1116, effectively eliminating double taxation.

Dividend Income Under DTAA

Since the abolition of the Dividend Distribution Tax in 2020, dividend income is taxable in the hands of the recipient at their applicable slab rate (or 20% for NRIs under Section 115A). Under the India-US DTAA (Article 10), dividends can be taxed at a reduced rate of 15% if the beneficial owner holds less than 10% of the voting stock, or 25% otherwise. Similar reduced rates exist under the India-UK DTAA (10% to 15%), India-UAE DTAA (10%), and India-Singapore DTAA (10% to 15%).

How to Claim DTAA Benefits — TRC and Form 10F

DTAA benefits are not automatic. To claim reduced withholding rates, NRIs must provide the following documents to the Indian deductor (bank, tenant, or buyer) before TDS deduction: (1) a Tax Residency Certificate (TRC) issued by the tax authority of the country of residence (e.g., IRS Letter 6166 for the US, HMRC certificate for the UK), (2) Form 10F filed on the Indian income tax portal providing DTAA-specific details such as the period of residential status, taxpayer identification number, and address in the country of residence, and (3) a self-declaration in the prescribed format confirming beneficial ownership and the absence of a Permanent Establishment in India. Without these documents, the deductor is legally obligated to apply the higher domestic TDS rate.

When filing the Indian ITR, NRIs must report all Indian-source income, claim DTAA relief under Section 90 (for countries with which India has a DTAA) or Section 91 (for unilateral relief), and attach the TRC and Form 10F as supporting documents. The treaty benefit is applied as a tax credit or rate reduction depending on which method (exemption or credit) the specific DTAA follows.

Real estate remains one of the most popular investment avenues for NRIs in India, but it is governed by a complex intersection of FEMA regulations, income tax provisions, and repatriation rules. Getting any of these wrong can result in regulatory penalties, blocked funds, or excess taxation.

What NRIs Can and Cannot Buy Under FEMA

Under FEMA (Acquisition and Transfer of Immovable Property in India) Regulations 2018, NRIs and OCIs can freely purchase any number of residential and commercial properties in India without prior RBI approval. Payment must be made from an NRE, NRO, or FCNR account, or through inward remittance from abroad. However, NRIs cannot purchase agricultural land, plantation property, or farmhouse property in India — these can only be acquired through inheritance or gift from a person resident in India, and even inherited agricultural land cannot be sold to a non-resident.

Power of Attorney Considerations

Since most NRIs cannot be physically present in India for every step of a property transaction, a registered Power of Attorney (POA) is commonly used. The POA must be notarised or apostilled at the Indian consulate or embassy in the country of residence, and it should be specific (not general) — clearly listing the property details, the acts authorised (signing sale deed, collecting possession, appearing before sub-registrar), and the duration of validity. A General Power of Attorney used for property sale is not treated as a valid conveyance by many state registration authorities, and the Supreme Court of India has held that property sales via GPA without a registered sale deed are legally deficient.

TDS on Property Sale and Repatriation

When an NRI sells property in India, the buyer must deduct TDS under Section 195 at 12.5% of the sale consideration for long-term capital gains (holding period exceeding 24 months) and at 30% for short-term capital gains. This is substantially higher than the 1% TDS applicable on property sales between residents. The NRI seller can apply for a lower TDS certificate under Section 197 by filing Form 13 with the jurisdictional Assessing Officer, demonstrating that the actual tax liability is lower than the default TDS rate.

Repatriation of property sale proceeds depends on the original source of funds. If the property was purchased using NRE or FCNR funds (with proper banking trail), up to two residential properties can be repatriated without any cap. If the property was purchased using NRO funds or inherited, repatriation falls under the NRO annual limit of USD 1 million per financial year, and requires Form 15CA (online declaration by the remitter) and Form 15CB (certificate from a Chartered Accountant confirming tax compliance).

Capital Gains Exemptions — Section 54 and 54F

NRIs can avail capital gains exemptions under Section 54 and Section 54F of the Income Tax Act, identical to residents. Under Section 54, long-term capital gains from the sale of a residential property are exempt if the proceeds are reinvested in purchasing or constructing another residential property in India within the prescribed time limits (one year before or two years after sale for purchase, three years for construction). Under Section 54F, long-term capital gains from any asset other than a residential property are exempt if the net sale consideration is invested in a residential property in India within the same time limits. If the NRI is unable to invest before the ITR filing deadline, the capital gains amount must be deposited in a Capital Gains Account Scheme (CGAS) with an authorised bank to preserve the exemption claim.