How NRI Investments Are Taxed in India (FY 2025-26)

The tax you pay depends almost entirely on what you hold the investment in. The same surplus can earn tax-free interest in one account and be taxed at 30% in another. Structure decides the outcome. Surcharge and the 4% health & education cess apply on top of every rate below.

Park repatriable surplus in NRE/FCNR for tax-free interest; keep NRO only for income that must sit in India.

Long-term (held over 12 months): 12.5% on gains above ₹1.25 lakh/year (Section 112A). Short-term (12 months or less): 20% (Section 111A). Dividends are taxed at slab; TDS is commonly 20% under Section 195, which a DTAA can reduce.

Debt mutual funds bought on or after 1 April 2023 are taxed at slab rates on the gain regardless of holding period — no long-term concession and no indexation. Plan accordingly: large debt exposure now sits closer to NRO interest in tax terms than to equity.

Rental income is taxed at slab rates after the 30% standard deduction; a sale is taxed as capital gains (long-term at 12.5% without indexation post 23 July 2024), with TDS deducted by the buyer on the full sale price unless a lower-deduction certificate (Section 197) is obtained.

Bond interest is generally taxable at slab with TDS; listed-bond LTCG at 12.5%; certain notified bonds carry exempt interest. NRIs can invest in NPS — a rare tax-favoured long-term option. NRIs cannot open new PPF or NSC; an existing PPF opened while resident can usually run to maturity but not be extended.

Across categories, Section 195 deducts tax at source — 30% on NRO interest, 20% on dividends, 12.5%+ on gains — often more than the real liability. Cut it upfront with a DTAA rate (TRC + Form 10F) or reclaim by filing a return.