The Classic Partners LLP

Exempt Income for NRIs

Not all Indian income of an NRI is taxable. We help you structure NRE and FCNR deposits, equity gains, and treaty-protected income so you never pay tax on income that is legally exempt.

Plan Your Exempt Income

Key Exemptions Available to NRIs

Interest on NRE accounts — exempt as long as you qualify as a non-resident under FEMA.
Interest on FCNR (B) deposits — exempt for non-residents and RNORs, including until maturity for returning Indians who remain RNOR.
Long-term capital gains on listed equity (Section 112A) — exempt up to the prescribed annual threshold.
Specified bonds and government-notified securities for NRIs.
Income exempt under an applicable DTAA with your country of residence.

Interest on NRO accounts is fully taxable and suffers TDS — a frequent surprise for new NRIs. Dividend income is also taxable in the NRI's hands since FY 2020-21.

Exemptions for Returning Indians

FCNR and RFC account interest stays exempt while you hold RNOR status after returning to India.
A planned return date can stretch the RNOR window to 2–3 years — see our Returning Indian page and recent immigrant services.
Foreign income (other than from a business controlled from India) is outside the Indian tax net while RNOR.

Disclosure Still Matters

Exempt income must still be disclosed in Schedule EI when filing your return of income in India. Correct disclosure prevents mismatch notices from AIS/26AS data and preserves your refund claims. We map every income source to the right provision — taxable, exempt, or treaty-relieved — and document the basis.

How We Help

Account Structuring

NRE vs NRO vs FCNR allocation aligned to your residency timeline.

Equity & MF Planning

Harvesting the Section 112A exemption threshold each year.

DTAA Mapping

Identifying income that the treaty makes taxable only in your home country.

RNOR Window Planning

Maximising exempt foreign income via recent immigrant planning.

Schedule EI Disclosure

Accurate exempt-income reporting in the ITR to avoid notices.

Status Monitoring

Annual residential status checks before exemptions lapse.

Frequently Asked Questions

Is NRE account interest taxable for NRIs?

No. Interest on NRE accounts is exempt from Indian income tax as long as the account holder qualifies as a non-resident under FEMA. Once status changes to resident, the account must be redesignated and interest becomes taxable.

Is FCNR deposit interest exempt after returning to India?

Yes, FCNR interest remains exempt while the returning Indian holds RNOR status, which typically lasts 2 to 3 years after return, and the deposit can be held until maturity.

Is NRO account interest exempt?

No. NRO interest is fully taxable in India and suffers TDS at source; a return must be filed to claim any refund of excess TDS.

Are dividends from Indian shares exempt for NRIs?

No. Since FY 2020-21, dividends are taxable in the shareholder's hands, though DTAA rates often cap the Indian tax on dividends for NRIs.

Does exempt income need to be reported in the ITR?

Yes. Exempt income must be disclosed in Schedule EI of the return even though no tax is payable on it, which keeps the return consistent with AIS data and avoids notices.

Paying tax on income that should be exempt?

Let us review your Indian income sources and restructure them around the exemptions you're entitled to.