India – Taxation

How does the tax system in India work?

India’s personal income tax framework is managed at the Union (central government) level by the Income Tax Department, a body that sits within the Central Board of Direct Taxes (CBDT), itself part of the Ministry of Finance. In contrast to countries like the United States, where individual states impose their own separate income taxes alongside federal ones, India has no state-level personal income tax — all personal income tax is both set and collected by the central government.

The cornerstone of India’s approach to taxing individuals is residential status during the relevant financial year. It is not citizenship that determines your tax liability; it is where you live and how long you spend in India. An Indian citizen can be classified as a non-resident for tax purposes in a given year, just as a foreign national may qualify as a resident under Indian tax law.

An individual qualifies as a resident for the tax year if they are physically present in India for 182 days or more during that year (the 182-day rule), or physically present in India for at least 60 days during the relevant tax year combined with at least 365 days in aggregate across the four preceding tax years (the 60-day rule). Failing both of these tests means the individual is treated as a non-resident (NR) for that year.

India also has a meaningful intermediate category beyond the basic resident/non-resident divide. Someone arriving in India from overseas will typically qualify as Resident but Not Ordinarily Resident (RNOR) if they have been classified as a non-resident in 9 of the 10 immediately preceding years, or if their total physical presence in India over the last 7 years amounts to fewer than 729 days. RNOR status generally persists for around 2–3 years before a person progresses to become a Resident and Ordinarily Resident (ROR).

There is also a “deemed resident” rule to be aware of. An Indian citizen will be treated as resident in India if their total income — excluding income from foreign sources, meaning income arising outside India other than from a business controlled from or a profession established in India — exceeds ₹15 lakh in the preceding year. This rule applies only where the individual is not liable to tax in any other country or jurisdiction.

It is worth noting that the Income Tax Act, 1961, which has underpinned Indian taxation for many decades, is set to be repealed from 1 April 2026 when the Income Tax Act 2025 takes effect. The 2025 legislation was designed to streamline and simplify the existing framework. Consult the official Income Tax Department website regularly for the latest guidance as the transition unfolds.

Does India have double taxation agreements, and how do they affect expats?

India maintains a wide network of Double Taxation Avoidance Agreements (DTAAs) — bilateral treaties intended to prevent the same income from being taxed in two countries simultaneously. India has concluded comprehensive DTAAs with over 90 countries, and these treaty provisions hold precedence over the provisions of the domestic Indian Income Tax Act.

Relief under a DTAA can be claimed through one of two approaches: the exemption method, under which income is subject to tax only in one of the two countries and fully exempted in the other; or the tax credit method, under which income is taxed in both countries but the taxpayer may offset the foreign tax paid against their liability in the country of residence.

Opting to apply a DTAA is entirely at the taxpayer’s discretion. Where domestic Indian tax provisions — such as basic exemption limits or lower slab rates — produce a more favourable outcome, a taxpayer may choose to rely on those instead of invoking the treaty.

Claiming DTAA relief in India involves a defined procedure. You must obtain a Tax Residency Certificate (TRC) from the country where you are resident, which formally establishes your residential status for that jurisdiction. When filing your Income Tax Return (ITR) in India as a non-resident, you are required to declare in the ITR form whether a TRC has been obtained. If the TRC does not contain all the necessary particulars — such as your name, status, nationality, tax identification number, period of residency, and address outside India — that information must be submitted electronically via Form 10F.

The complete and current list of India’s DTAAs, including full treaty texts for each partner jurisdiction, is maintained by the Income Tax Department on its international taxation page. Visit incometaxindia.gov.in — Double Taxation Avoidance Agreements to access the directory. DTAAs address a broad range of income categories, including employment income, management remuneration, capital gains, immovable property income, interest, dividends, and business profits.

What taxes do expats need to pay in India?

India has a range of taxes levied at both the central and state level, but income tax will be the primary concern for most expats. India operates a progressive income tax system — as your earnings rise, the applicable rate increases. Below is an overview of the main taxes you are likely to encounter.

Income Tax

From Assessment Year 2024–25 onwards, the new tax regime is the default option for individuals, although taxpayers retain the right to elect the old regime instead. The new regime offers reduced tax slab rates but removes the ability to claim most deductions, while the old regime carries higher headline rates but allows taxpayers to bring down their taxable income through a range of exemptions and deductions.

For residents and non-residents below the age of 60, income tax rates for FY 2025–26 begin at 5% on income above ₹3,00,000 and scale up to 30% on income exceeding ₹15,00,000 under the new regime. From FY 2025–26, resident individuals whose income does not exceed ₹12 lakh can effectively pay no tax as a result of the Section 87A rebate — though this rebate is unavailable to non-residents. NRIs may opt for either the old or new regime; the basic exemption threshold for NRIs stands at ₹4 lakh under the new regime and ₹2.5 lakh under the old. Always verify current slab rates on the Income Tax Department website.

A surcharge becomes payable where total income surpasses ₹5 million. On top of this, a health and education cess of 4% is charged on the aggregate of income tax and any applicable surcharge to arrive at the overall effective tax liability.

Capital Gains Tax

Gains arising from the disposal of Indian assets are taxable in India for both residents and non-residents. The capital gains tax framework was materially revised following Union Budget announcements in 2024–25, which introduced a uniform rate on long-term capital gains across many asset classes, revised short-term rates, and updated indexation rules. For listed shares or equity mutual fund units sold within 12 months of acquisition, gains are treated as short-term and taxed at 20%; gains on holdings of more than 12 months are treated as long-term capital gains. For immovable property, long-term gains (where the asset has been held for more than 24 months) are generally taxable at 12.5% without indexation, or 20% with indexation for eligible purchases made before July 2024 (as of 2025–26) — consult the official source for guidance specific to your situation.

Goods and Services Tax (GST)

India overhauled its indirect tax structure in 2017 by introducing the Goods and Services Tax, which replaced a complex web of levies including VAT, service tax, and excise duty. GST applies to the supply of goods and services, with rates spanning 5% to 28%; 18% is the most widely applicable standard rate. If you operate a business in India above the relevant turnover threshold, you will need a PAN card to register, and GST registration may also be required.

Property Tax

Property taxes in India are administered at the local level and rates vary significantly depending on location. Each city or town’s municipal authority is responsible for setting and collecting property tax independently. Rates can differ substantially between, for example, Mumbai and a smaller urban centre in Rajasthan. Contact the relevant local municipal corporation to find out the rate applicable in your locality.

Provident Fund / Social Security Contributions

Rather than a conventional social security tax, India operates the Employees’ Provident Fund (EPF) system. Both employees and employers contribute 12% of basic salary to the fund — a structure loosely comparable to employer-employee pension schemes elsewhere, though with important distinctions.

Expats employed by Indian employers are generally required to participate in the EPF. India does not have comprehensive totalization agreements with all countries, which means some workers may be subject to dual social security-type contributions depending on their employment arrangements and where services are performed. If you are employed by an overseas company while residing in India, examine your position carefully.

Inheritance and Gift Tax

India does not currently impose a separate inheritance or estate duty. That said, gifts received from individuals who are not close relatives and which exceed certain thresholds are treated as taxable income under the head “Income from Other Sources.” Gifts from specified relatives are exempt from tax regardless of their value. Refer to the Income Tax Department for the current definition of “relative” and the applicable monetary thresholds.

Are there any tax breaks or special regimes for expats in India?

India has not introduced a dedicated named programme for foreign nationals comparable to Portugal’s Non-Habitual Resident scheme or Italy’s flat-tax arrangement for new arrivals. Nevertheless, there are significant structural provisions within Indian tax law that work in favour of those who have recently moved to the country.

RNOR Status: India’s De Facto Transitional Relief

The most meaningful tax advantage available to someone relocating to India from abroad is the Resident but Not Ordinarily Resident (RNOR) classification. Unlike full residents who must account for all income earned anywhere in the world, RNORs are taxed only on income received or generated in India — their foreign-sourced income falls outside the scope of Indian tax.

RNOR classification generally applies if you have been a non-resident in 9 of the 10 preceding years, or if your cumulative time in India over the last 7 years is fewer than 729 days. This status typically lasts 2–3 years, giving newly arrived individuals a transitional window to reorganise their finances under more favourable tax conditions.

In practice, most expats who have come from abroad will remain either a non-resident or an RNOR for the first two to three financial years following their arrival in India. This means that, for most new arrivals, there is a practical period during which foreign income is not drawn into the Indian tax net. This outcome is determined automatically by your stay history each year — there is no separate application process.

NRE and FCNR Account Exemptions

Interest earned on Non-Resident External (NRE) accounts is tax-exempt in India for as long as the account holder has not yet attained full Resident and Ordinarily Resident (ROR) status. Interest on Foreign Currency Non-Resident (FCNR) deposits continues to be exempt from Indian tax until the deposit matures, even where the holder’s status has changed to ROR in the interim. These transitional benefits are worth factoring into your financial planning before you arrive.

Old vs New Tax Regime: Choosing What Works for You

The old tax regime preserves access to a range of deductions and exemptions — including deductions under Section 80C, House Rent Allowance, and others — making it potentially advantageous for individuals whose income profile and investment behaviour allow them to make significant use of those provisions. Determining which regime is more beneficial depends on your personal financial picture, particularly your level of income, the investments you hold, and the deductions you are eligible to claim. For individuals not operating a business, it is possible to switch between regimes on an annual basis at the point of filing.

How and when do expats file a tax return in India?

India’s financial year runs from 1 April to 31 March, and income tax returns are normally due by 31 July in the year following the end of that financial year. Returns are submitted through the Income Tax Department’s e-filing portal. All returns are filed for an “Assessment Year” (AY) — the year in which income earned during the preceding “Financial Year” (FY) is assessed. For instance, income earned in FY 2025–26 falls under AY 2026–27.

The step-by-step filing process for expats is as follows:

1. Obtain a PAN card. A Permanent Account Number (PAN) is India’s individual taxpayer identification number, broadly equivalent to a tax file number in Australia or a National Insurance number in the United Kingdom. Any person earning taxable income in India — whether resident or non-resident — must have a PAN. Applications can be made through the Income Tax Department portal or through authorised PAN service centres.
2. Determine your residential status. Before anything else, establish your tax residency classification for the relevant financial year. This must be revisited each year and cannot be assumed to carry forward automatically. Compile records of your entry and exit dates — passport stamps, boarding passes, and travel itineraries — covering the relevant year and the four preceding years.
3. Compile your income details. Non-residents are liable to Indian tax only on income that arises, accrues, or is received in India — for example, salary earned for duties performed in India, rent from Indian property, gains on Indian assets, or interest from Indian bank accounts. Those with full resident status must bring worldwide income into account.
4. Select the correct ITR form. ITR-2 applies if you have no business or professional income in India; ITR-3 is required if you carry on a business or profession in India. In most cases, non-residents will use ITR-2. The relevant forms are available on the e-filing portal.
5. Claim DTAA relief (if applicable). If your income has been taxed in another country and that country has a DTAA with India, obtain your Tax Residency Certificate (TRC) from the relevant foreign authority and, where additional details are required, submit Form 10F electronically through the portal prior to or together with your return.
6. File online and pay any tax due. Access the Income Tax e-filing portal, complete the appropriate ITR form, and submit your return. Any remaining tax liability can be settled via net banking or debit card. If your expected annual tax liability will exceed ₹10,000, advance tax payments must be made in instalments throughout the year.
7. Retain your acknowledgement (ITR-V). Once your return has been submitted, download and securely store your ITR-V acknowledgement. Verify the return electronically using your Aadhaar OTP or net banking credentials, or alternatively post a signed copy of the ITR-V to the Centralised Processing Centre within 30 days of filing.

Filing after the 31 July deadline attracts a late fee of up to ₹5,000 under Section 234F (a reduced amount may apply if your total income falls below ₹5 lakh — check current thresholds on the official portal, as these are subject to change). Belated returns can generally be submitted up to 31 December of the Assessment Year. Engaging a Chartered Accountant or tax adviser with cross-border experience is strongly advisable to ensure accuracy and compliance.

What are the tax implications of leaving India?

India does not currently apply a formal exit tax on unrealised gains when a long-term resident departs — there is no equivalent of the exit tax levied in countries such as Germany or the United States on departure. That said, there are several important obligations to address when you are preparing to leave India.

Filing a Final Tax Return

If you held tax-resident status in India at any point during the financial year in which you depart, you will be required to file a return for that year by the standard deadline of 31 July of the following year. That return should account for all India-sourced income — and, if you held full ROR status for any portion of the year, your worldwide income during that period. There is no specialised departure return form; the standard ITR forms are used.

Changing Your Tax Residency Status

Residency status must be evaluated afresh for every financial year. Spending fewer than the threshold number of days in India in a given year does not guarantee non-resident status in the following year — the calculation must be performed again each time. Once your physical presence in India falls below 182 days in a financial year and you do not satisfy the 60-day/365-day alternative test, non-resident status is restored automatically.

Ongoing Obligations After Departure

Leaving India does not necessarily bring your Indian tax obligations to a complete end. Non-residents remain liable for Indian tax on income that is earned, arises, or accrues in India — including salary for services performed in India, rental income from Indian property, capital gains on Indian assets, or interest from NRO bank accounts. If you retain property, investments, or accounts in India that continue to generate income, you may be required to file annual ITRs even after departure.

Notifying Banks and Converting Accounts

When your residency status changes upon leaving India, you are required to inform your Indian banks accordingly. The Reserve Bank of India mandates this notification, and a failure to advise your bank of the change in your residential status can result in Foreign Exchange Management Act (FEMA) violations and associated penalties. Existing resident savings accounts must be reclassified or converted into NRO (Non-Resident Ordinary) accounts.

Selling Assets Before or After Departure

If you are still within your RNOR period at the time of departure, or anticipate returning to non-resident status, liquidating foreign assets during the RNOR window may allow you to benefit from the exemption on capital gains that applies to that category. Similarly, the timing of any disposal of Indian assets relative to your departure date can influence whether any resulting capital gains are assessed at resident or non-resident rates. Take personalised advice from a qualified tax professional before making any decisions.

Practical tips for managing taxes as an expat in India

• Keep precise records of your days in India. Your entire Indian tax position — including whether your foreign income is drawn into the Indian tax base — depends on the exact number of days you are physically present in India during each financial year. Maintain thorough records of passport stamps, boarding passes, and travel dates. The financial year runs from 1 April to 31 March, so even a single additional day in India towards year end can alter your residency classification.
• Apply for a PAN card without delay. Without a PAN, you cannot file an ITR, open certain types of bank account, or carry out high-value financial transactions in India. Submit your application as soon as you arrive — or even before, through the online portal.
• Make the most of your RNOR window. RNOR status typically applies for 2–3 years after moving to India, offering a valuable period during which your foreign income is not exposed to Indian tax. Use this time to restructure overseas investments and financial arrangements before you transition into full ROR status and become taxable on your worldwide income.
• Engage your DTAA proactively. With DTAAs in place covering more than 90 countries, there is a good chance that a treaty applies to your situation. To invoke DTAA relief, you will need a Tax Residency Certificate from your country of residence in hand before filing your Indian return — do not leave this to the last moment.
• Seek advice before disposing of assets. The capital gains tax consequences of selling Indian or foreign assets — whether property, shares, or other holdings — can be considerable. Capital gains rules were significantly revised in 2024–25, so make sure any advice you receive reflects the current rules rather than earlier legislation.
• Inform banks promptly when your status changes. Delays in notifying your bank of a change in residential status can give rise to FEMA compliance issues that are both time-consuming and expensive to resolve after the fact.
• Factor in advance tax obligations. If your projected tax liability for the year is likely to exceed ₹10,000, you are obliged to make advance tax payments in instalments across the year, with due dates falling on 15 June, 15 September, 15 December, and 15 March. Interest charges apply to shortfalls.
• Engage a Chartered Accountant with international experience. India’s tax code is intricate, and the rules affecting foreign nationals are especially complex, with further changes anticipated as the Income Tax Act 2025 comes into force. A Chartered Accountant registered with the Institute of Chartered Accountants of India (ICAI) who specialises in international and expat tax matters is an indispensable resource. Cross-check all guidance against the official Income Tax Department portal, since rates, rules, and deadlines are subject to regular revision.

Frequently asked questions: taxation in India for expats

When do I become a tax resident in India?

You are treated as a tax resident of India if your physical presence in India reaches 182 days or more during the tax year, or if you are present for at least 60 days in the tax year and your cumulative presence across the four preceding tax years totals 365 days or more. Residency status must be determined separately for each financial year running from 1 April to 31 March.

As a tax resident, will I be taxed on my worldwide income?

A Resident and Ordinarily Resident (ROR) individual is subject to Indian tax on their entire global income — covering both income earned within India and income arising abroad. However, someone classified as Resident but Not Ordinarily Resident (RNOR) — a status that typically applies for the first two to three years following arrival from overseas — is taxed only on income received or generated in India, not on income from foreign sources.

What is the filing deadline for an income tax return in India?

Income tax returns are ordinarily due by 31 July following the close of the relevant tax year. Since the tax year ends on 31 March, the return for the year ending 31 March 2026 would typically need to be filed by 31 July 2026. Check the Income Tax Department portal for any official extensions, as deadlines are occasionally revised by notification.

How is foreign pension income taxed in India?

Where you hold full Resident and Ordinarily Resident (ROR) status in India, foreign pension income forms part of your taxable worldwide income and must be reported in your ITR. If your home country has a DTAA with India, the treaty may reduce or fully eliminate the Indian tax charge on that pension income. India introduced Section 89A specifically to address difficulties arising from double taxation on funds accumulated in foreign retirement accounts, particularly where the timing of taxation differs between India and the source country. Take professional advice on how your specific pension type and country of origin is treated under the applicable treaty.

Do I need a PAN card as a foreign national living in India?

Yes. Any individual earning taxable income in India — whether salary, rental receipts, capital gains, or investment returns — is required to hold a PAN card. It serves as India’s universal taxpayer identification number, comparable in function to a TFN in Australia or a fiscal code in Italy. A PAN is required to file an ITR, to open NRO bank accounts, and to execute a wide range of financial transactions above specified value thresholds.

Does India have an inheritance tax or estate duty?

India does not at present levy any dedicated inheritance tax or estate duty. However, gifts received by an individual from people who are not close relatives, where the total value exceeds specified thresholds, are included in the recipient’s taxable income. Gifts from relatives falling within the definition set out in the Income Tax Act are entirely exempt from tax. The applicable rules depend on the relationship between the giver and receiver — consult a tax adviser and the official Income Tax Department guidance for current thresholds and definitions.

What happens to my Indian tax obligations after I leave India?

Once your time in India falls below the relevant residency thresholds, you revert to non-resident status for tax purposes. In that capacity, income arising or originating outside India is no longer subject to Indian tax, and your liability is confined to income earned in India, accruing from Indian sources, or received directly in India. If you continue to receive rent from Indian property or interest from NRO accounts, annual ITR filing obligations in India will remain. You must also notify your banks of your change in residency status promptly to satisfy FEMA requirements.

Can I file my Indian tax return online?

Yes. The Income Tax Department provides a comprehensive e-filing platform at eportal.incometax.gov.in, through which both residents and non-residents can submit returns, settle outstanding tax, monitor refund status, and file supporting documentation such as Form 10F. The vast majority of individual taxpayers, including non-residents, file their returns through this portal. Complying with TDS provisions, observing filing deadlines, and meeting all reporting requirements is essential to avoid penalties.