NRIs often hesitate to invest in India because of one major concern — taxation.

Some completely avoid Indian investments, fearing tax complications, while others invest without knowing there are legit ways to reduce or avoid double taxation.

If you are either of them, you are at the right place.

How Can NRIs Avoid Taxes?

Let’s simplify how NRIs can smartly plan their finances and avoid paying extra taxes while using NRI services in Jaipur, so you can save some money.

1. Understand Your Residential Status

Before you start planning taxes, it’s important to know your residential status as per the Income Tax Act, 1961.

You are considered an NRI (Non-Resident Indian) if you:

●    Stay in India for less than 182 days during a financial year, or

●    Stay for less than 60 days in the current year and less than 365 days in the previous four years.

Your residential status determines which income is taxable in India and which is not.

2. Know What Income is Taxable for NRIs

Income you receive or earn in India is taxable, including:

●    Salary earned in India

●    Rent from property located in India

●    Interest from Indian bank accounts (except NRE & FCNR accounts)

●    Capital gains from Indian investments

Income earned outside India is not taxable in India for NRIs. Ambition Finserve can help if you are looking for an NRI services provider in Jaipur, who can help you invest.

3. Use DTAA (Double Taxation Avoidance Agreement)

One of the best tools to avoid paying tax twice is the DTAA — Double Taxation Avoidance Agreement.

India has signed this agreement with over 90 countries, including the USA, UK, UAE, Canada, and Australia.

This ensures that if you’ve already paid tax on a certain income in one country, you don’t have to pay it again in another.

How it helps:

●    Prevents double taxation on the same income.

●    Allows you to claim tax credit or exemption in one country.

●    Simplifies tax filing and promotes legal compliance.

4. Choose the Right Bank Accounts

The type of bank account you hold as an NRI plays a big role in tax savings. There are three main types:

●    NRE Account (Non-Resident External):

○    Principal and interest are fully tax-free in India.

○    Best for income earned abroad and transferred to India.

●    NRO Account (Non-Resident Ordinary):

○    Used to manage income earned in India like rent or dividends.

○    Interest earned is taxable at 30%, but can be reduced using DTAA.

●    FCNR Account (Foreign Currency Non-Resident):

○    Deposits in foreign currency.

○    Interest is tax-free in India.

Choosing the right mix of accounts can help minimize your taxable income.

5. Invest in Tax-Efficient Options

NRIs can also invest in several instruments that offer tax benefits under Section 80C and other sections of the Income Tax Act. Some good options include:

●    ELSS (Equity Linked Savings Scheme) – Offers tax deduction up to Rupees 1.5 lakh in old tax regime.

●    NPS (National Pension System) – Extra deduction under Section 80CCD(1B) in old tax regime.

●    Tax-Free Bonds – Interest earned is fully exempt from tax.

●    NRE Fixed Deposits – Interest is tax-free in India.

By choosing these instruments, NRIs can enjoy better returns while keeping their tax burden minimal.

6. File Taxes in Both Countries (If Applicable)

If you earn income in both India and your country of residence, you must file tax returns in both countries.

This doesn’t mean double payment.

You can claim foreign tax credit under DTAA while filing taxes in your resident country.

Also, remember to:

●    File ITR in India if you earn taxable income here.

●    Report global income in your resident country (if required).

7. Get Professional Help for NRI Tax Planning

Tax laws for NRIs can be confusing — from residential status to claiming DTAA benefits, every step requires accuracy.

It’s best to consult an experienced financial professional who understands both Indian and international tax regulations.

Conclusion

Avoiding taxes as an NRI isn’t about evading them — it’s about smart planning and legal optimization. By understanding DTAA, choosing the right accounts, and investing in tax-saving instruments, you can ensure your hard-earned money works for you — not against you.

FAQs

1. Do NRIs have to pay tax on income earned in India?

Yes. NRIs must pay tax only on income earned or received in India, such as salary, rent, capital gains, or interest from NRO accounts. Income earned outside India is not taxable in India.

2. What is DTAA, and how does it help NRIs?

The Double Taxation Avoidance Agreement (DTAA) helps NRIs avoid paying tax twice on the same income — once in India and again in their resident country. NRIs can claim a tax credit or exemption if they provide a Tax Residency Certificate (TRC) and, where needed, Form 10F.

3. Is interest on NRE or FCNR accounts taxable in India?

No. Interest earned on NRE and FCNR accounts is fully tax-exempt in India as long as the account holder remains an NRI. Interest on NRO accounts, however, is taxable at 30% + cess, though DTAA relief may reduce this rate.

4. Can NRIs claim tax benefits under Section 80C?

Yes — but only under the old tax regime. NRIs can claim deductions up to Rupees1.5 lakh under Section 80C for eligible investments such as ELSS funds, life insurance, NPS, and principal repayment on home loans. Under the new regime, most deductions including 80C are not available.