Tax on Income from Other Sources earned by NRI

An NRI taxpayer may have multiple sources of income that are subject to tax in India. One of the sources includes, ‘Interest Income’ earned on savings bank accounts, fixed deposits, dividends earned from investments, and interest earned from other investments made in India. Such income is classified under “Income from Other Sources” and shall be taxable in the hands of NRI.

Before understanding taxes on IFOS, you need to determine your residential status which primarily qualifies as an NRI. Residential Status Calculator for Income Tax | Resident, NRI or RNOR status check | Quicko.

An individual is an NRI (non-resident Indian) who is a citizen of India but resides outside India for a minimum specified number of days as stated in the IT Act.

Once the resident status has been determined, an individual should identify sources of income earned in India to ensure proper disclosure in the ITR form and tax payments at applicable rates.


Interest income from bank accounts and fixed deposits: An Individual staying outside may be for employment/education/business is required to convert their savings bank account into specified non-resident accounts under FEMA. In that, two commonly used accounts are NRO and NRE accounts, whereas FCNR accounts are used to open a fixed deposit account in foreign currency.

The interest earned on the NRE account and FCNR deposits are exempted from tax in India. Hence, there would be no TDS. Whereas interest earned on the NRO account is fully taxable at applicable slab rates and will be subject to a TDS of 31.2%. There is no basic exemption limit.

An NRO (non-resident ordinary) account is a bank account that is maintained by NRIs in India. The account can be used to receive income earned in India, such as dividends, or interest on savings and refunds can also be received in NRO accounts.

Here’s an example to understand the taxability of interest income in India as NRI:

Let’s say you’re an NRI with an NRO account in India and earn an interest income of ₹1,00,000 from the account. The taxability of this income would be as follows:

  1. Residential status: As your interest income is earned in India, basically, your source of income is in India. Therefore, liable to pay tax on this income in India only.
  2. TDS: The bank would deduct TDS at the rate of 31.2% on the interest income credited to the NRO account, including a health and education cess of 4%, which would be ₹1,00,000*31.2% = ₹31,200 And you can claim a credit for the TDS deducted while filing your ITR in India.
  3. Tax return: You would be required to file an income tax return in India to report your interest income under IFOS, taxable at slab rates, and claim any deductions or exemptions. The return must be filed by July 31st of the following financial year.
    As the total liability is less than ₹2,50,000 and there’s no other income other than this in India, the refund will be issued for the same.

Now let’s discuss the taxability of dividends received by NRI. NRI having dividend income from investments made in an Indian company is taxable at 20% (TDS). For example, an NRI who has a dividend income in India of ₹18,00,000, on which the TDS will be deducted of ₹3,74,400 (20% tax + 4% cess) on the dividend income.

Tax Rates: Old Regime & New Regime

Which ITR Form should NRI fill out?
NRI receiving income from ‘Other Sources’ is required to file ITR Form-2.

Read more about Income Tax for NRI and Foreign Income - Learn by Quicko

If any questions, ask them out!

@Muskan_Balar - An NRI having no taxable income in India, has not filed any tax returns . Due to some other transactions in the same AY, has received show-cause notice under 148a. As a part of reply to the notice, can the the NRI file for ‘Condonation of Delay’ request via the portal to file the time barred returns even if there is not refund or claims?

Hi @G_Rod

ITD has recently sent notices to taxpayers to file ITR under Section 139 (8A). Quicko can help you to file ITR. You can book a MEET using the below link where a tax expert will connect with you and help you to prepare and file the ITR and respond to the notice received"

Book a MEET

Please note that March 31, 2023, is the last date to file ITR for AY 2020-21.

Hope it helps.