NRI Tax StatusWhat income is taxed in India?
Section 5 of the Income-tax Act, 2025 sets what a person’s total income includes, depending on residential status (read on 13 November 2026).
| Status | Received or accruing in India | Foreign business controlled in India or profession set up in India | Other foreign income |
|---|---|---|---|
| Resident and ordinarily resident | Taxed | Taxed | Taxed |
| Resident but not ordinarily resident | Taxed | Taxed | Not taxed |
| Non-resident | Taxed | Taxed only if received or accruing in India | Not taxed |
The words of the section
- Residents, 5(1): income that is received or deemed received in India, or accrues or arises or is deemed to accrue or arise in India, or accrues or arises outside India; but for a person not ordinarily resident, income accruing outside India is included only when derived from a business controlled in or a profession set up in India.
- Non-residents, 5(2): income received or deemed received in India, or accruing or arising, or deemed to, in India.
- 5(3): foreign income is not treated as received in India merely because it is taken into account in a balance sheet prepared in India.
- 5(4): income included on one basis (accrued) is not included again on another (received).
Which rates and deductions apply to each status, and any relief under a tax treaty, are outside this site.
Common questions
Is income I earn abroad taxed in India if I am an NRI?
Not under section 5(2): a non-resident is taxed on income received in India or accruing or arising in India. It is taxed for a resident who is ordinarily resident, and for an RNOR only when it comes from a business controlled in India or a profession set up in India.
Source
- The Income-tax Act, 2025, as published in the Gazette of India Extraordinary: section 5 (scope of total income), section 6 (residence in India) and section 2(78) ("person of Indian origin"). The enacted text was read on 13 November 2026.
The rules are those of the Income-tax Act, 2025 as read on 13 November 2026. This site is independent, not connected with the Income Tax Department, and gives information, not tax advice. Residential status under the Income-tax Act is different from residence under FEMA, which decides how you may hold accounts and investments. Ask a chartered accountant about your own facts.