Your residential status under Sections 6 of the Income-tax Act drives the scope of taxation, applicable rates and even your bank-account type. Misclassifying yourself is the single most common cross-border filing mistake.
| Attribute | NRI | Resident |
|---|---|---|
| Scope of tax | Indian-source income only | Worldwide income |
| Basic exemption (old regime) | ₹2.5 lakh (no senior-citizen benefit) | ₹2.5L / 3L / 5L by age |
| Section 87A rebate | Not available | Available |
| Standard deduction on rent (Sec 24) | 30% allowed | 30% allowed |
| Bank accounts | NRE / NRO / FCNR only | Resident savings + RFC after return |
| TDS on property sale | 20% on LTCG / 30% on STCG (Sec 195) | 1% (Sec 194-IA) above ₹50L |
| TDS on interest (Indian bank) | 30% on NRO (Sec 195) | 10% (Sec 194A) |
| Treaty (DTAA) access | Yes, with TRC + Form 10F | Only on foreign income |
| FEMA-driven investment restrictions | Yes (PIS, restricted instruments) | None for domestic instruments |
Our recommendation
If you straddle the residency line, plan property sales and large interest withdrawals in years where you are NRI to use the lower flat rates plus DTAA relief (subject to TRC). The 120-day rule (Indian-income > ₹15L) is the most common trap — every visiting NRI with sizeable Indian income should track days carefully.
FAQs
Can I file an ITR as an NRI?
Yes, ITR-2 or ITR-3 as applicable. Filing is mandatory if Indian-source income > ₹2.5L, or if you want to claim a refund of excess TDS, or carry forward capital losses.
Do NRIs need a TRC to claim DTAA?
Yes. From AY 2023-24 onwards, a Tax Residency Certificate from the foreign country plus a self-declaration in Form 10F (filed electronically) is mandatory to access any DTAA benefit.
Run your own numbers
Last updated: 15 Apr 2026