NRI Taxation - Recent Changes and Planning for FY 2025-26

With globalization on the rise and many Indians living, working, or investing abroad, Non-Resident Indians (NRIs) face increasingly complex tax obligations both in India and overseas. The Indian Income Tax Department has ramped up efforts to ensure compliance, particularly when it comes to foreign income, asset disclosures and remittances.
As we enter the Income Tax Return (ITR) filing season for FY 2025-26, it’s crucial for NRIs to stay informed about the latest changes in tax laws, reporting requirements and planning strategies. From updated rules on residency status to stricter foreign asset disclosures and the importance of Form 67 for claiming Foreign Tax Credit, NRIs must navigate their tax responsibilities with care.
In this article, we break down the recent changes in NRI taxation and offer practical planning tips to help you stay compliant and tax-efficient this financial year.

Who Qualifies as an NRI in FY 2025-26?

Before diving into tax rules, it’s crucial to establish residential status, which impacts your tax liability in India. For FY 2025-26, you will be considered an NRI if:

You were in India for less than 182 days in the financial year
You were in India for less than 365 days in the last 4 years and less than 60 days in the current year.

For Indian citizens or PIOs visiting India, the 60-day limit extends to 120 or 182 days based on income levels, per recent amendments.

Recent Changes NRIs Should Know (As of 2025)

Stricter Disclosure Norms in ITR (Schedule FA)

NRIs with any foreign assets or accounts need to disclose them under Schedule FA if they become tax residents. Even partial-year residents must report offshore bank accounts, ESOPs, stocks and properties.

Non-disclosure may attract penalties under the Black Money Act, up to ₹10 lakh per year of default.

Updated TCS Rules on Foreign Remittances

Under the Liberalised Remittance Scheme (LRS):

TCS @ 20% still applies on remittances over ₹10 lakh unless for education or medical purposes.
In case of Non-PAN case, TCS rate will be 20% with a threshold limit of Rs. 10 Lakh.
NRIs sending funds to India are generally not subject to TCS but must ensure the correct classification of source and recipient.

Double Taxation Relief – Form 67 Mandatory

If you are taxed abroad and also taxed in India (e.g. global income as RNOR/Resident), claiming Foreign Tax Credit (FTC) requires:

Timely filing of Form 67, before or along with your ITR.
Documentary evidence of tax paid abroad.

Revised ITR Forms for AY 2025-26

The updated forms include:

Enhanced disclosures for foreign income
Segregation of passive vs. active income
Mandatory PAN-Aadhaar linking for RNORs (Resident but Not Ordinarily Resident)

Tax Planning Strategies for FY 2025-26

Choose the Right ITR Form

NRIs generally use:

ITR-2 for salary, capital gains and rental income
ITR-3 if they have business income in India or other form as applicable.

Incorrect form = defective return notice.

Avoiding Double Taxation

Use applicable DTAA (Double Taxation Avoidance Agreements) between India and your country of residence.
Disclose all relevant income transparently and apply tax credits via Form 67.

Manage Indian Investments

Interest on NRO accounts is taxable; TDS at 30% applies.
NRE and FCNR interest is tax-free only if you maintain NRI status.
Consider repatriating funds legally and reporting them in tax filings.

Sale of Property in India

Long-term capital gains taxed at 12.5% without indexation or 20% with indexation
Buyer must deduct TDS @ 12.5% or 20%, depending on section.
DTAA may provide relief on capital gains

Plan Your Residential Days in India

Crossing 120 or 182 days could change your tax residency and bring global income under the Indian tax net. Use a day count tracker.

Final Words:

NRI taxation in India is becoming more digitally monitored, globally aligned and disclosure-heavy. With stricter timelines and penalties, it’s important to take a proactive approach to compliance and planning.

Need help filing your NRI ITR or claiming FTC? Contact UJA for expert assistance in ITR filing, foreign asset reporting and DTAA advisory.

NRI Taxation - Recent Changes and Planning for FY 2025-26

Who Qualifies as an NRI in FY 2025-26?

Recent Changes NRIs Should Know (As of 2025)

Tax Planning Strategies for FY 2025-26

Final Words:

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