India introduces NEW Tax Systems from April 1, 2026 – NRIs aren’t spared either: What’s Changing?

One of the most visible changes is conceptual rather than monetary.

Under the old regime, taxpayers had to deal with:

• Previous Year, and
• Assessment Year

Under the new law, India uses “Tax Year” instead. The CBDT explains that this is intended to eliminate confusion caused by dual-year terminology.

What this means in practice

• Income earned from 1 April 2025 to 31 March 2026
  is still governed by the Income-tax Act, 1961, and filed as AY 2026–27.

• Income earned from 1 April 2026 to 31 March 2027
  is governed by the Income-tax Act, 2025, and referred to as Tax Year 2026–27.

Why NRIs should care

If you are:

• receiving rent from Indian property,
• selling Indian real estate,
• earning Indian dividends or interest,
• claiming DTAA benefit,
• obtaining lower/nil withholding,
• filing an Indian return in 2026 or 2027,

you must now ensure you are referring to the correct law, correct year, and correct form set.

Despite the legal overhaul, several fundamentals remain broadly the same.

1. NRIs are still taxed mainly on Indian-source income

The basic rule remains: a non-resident is taxable in India only on income that is received, deemed received, accrues, arises, or is deemed to accrue or arise in India, subject to treaty relief.

2. DTAA relief still continues

India’s tax treaty network remains relevant. The Income Tax Department continues to state that a non-resident eligible under a DTAA can claim relief, subject to documentation such as a Tax Residency Certificate (TRC) and other prescribed details.

3. The special NRI investment taxation framework still survives

Search results from the Income Tax Department’s updated schedules and summaries show that the special rate structure for certain NRI investment income and long-term capital gains continues under the new framework.

4. Transition protection exists

Old rights and obligations do not vanish. Refunds, pending appeals, past-year assessments, and earlier tax positions continue under the savings provisions.

5. Core withholding and advance-tax mechanics remain familiar

The CBDT has clarified that the policy framework for TDS/TCS and advance tax is broadly unchanged, though the drafting and section numbering have been modernized.

Here are the changes that actually matter on the ground.

1. New law, new section numbering, new compliance references

The same concepts now sit in different sections. For instance, under the CBDT transition FAQs:

• TDS on salary is consolidated under section 392
• TDS on other payments, including many non-resident payments, is consolidated under section 393
• TCS is under section 394

This matters because:

• deductors must quote the new section/table item
• old references may trigger portal or validation errors
• professionals, banks, tenants, brokers, and property buyers dealing with NRIs will need updated compliance workflows

2. India’s new Income-tax Rules, 2026 are now operative

The notified rules came into force on 1 April 2026. These rules operationalize the new Act and introduce corresponding forms, procedures, and reporting formats.

3. The transition year requires dual-system awareness

The CBDT states that during this period:

• AY 2026–27 filings for FY 2025–26 will still be under the old Act
• advance tax and withholding for Tax Year 2026–27 will run under the new Act

For NRIs, this can create confusion unless carefully managed.

4. Certain compliance forms have changed

A notable example from EY’s summary of the new rules is that foreign tax credit documentation has shifted from Form 67 to Form 44 under the new framework for eligible taxpayers claiming foreign tax credit.
This is more directly relevant to residents claiming FTC, including returning Indians or RNOR/resident cases, but it is still important for globally mobile individuals moving in and out of NRI status.

5. Information systems and portal logic are changing

The tax department has explicitly said the portal will support compliance under both Acts in parallel. NRIs filing belated returns, revised returns, refund claims, or tax payments need to ensure they are selecting the correct:

• AY / Tax Year
• challan type
• law reference
• section code

This is one of the most searched questions—and one of the most misunderstood.

Short answer:

There does not appear to be a fresh NRI residency overhaul from 1 April 2026.
The new Act reorganizes and simplifies the law, but currently available official material suggests continuity, not a radical rewrite, of the underlying residential-status framework.

The Income Tax Department’s updated “Residential Status” guidance continues to reflect familiar categories:

• Resident
• Resident but Not Ordinarily Resident (RNOR)
• Non-Resident

It also continues to reference the deemed resident/RNOR architecture already known from earlier law.

So what should NRIs conclude?

Do not assume that 1 April 2026 created a brand-new 120-day or deemed-resident regime. Those concepts were already part of the pre-2026 framework. What changed is primarily:

• statutory presentation,
• section numbering,
• drafting style,
• administrative operation under the new Act.

Practical advice

If you are:

• spending extended time in India,
• returning to India after working abroad,
• splitting time between India and the Gulf/US/UK/Singapore,
• drawing Indian investment income,

you should still compute your residential status carefully for each relevant year using the updated rules and current thresholds.

From a practical standpoint, the following Indian-source income heads remain the main exposure points for NRIs:

1. Rental income from property in India

Taxable in India. TDS obligations continue where applicable, and return filing may be necessary.

2. Capital gains on sale of Indian property

Still taxable in India. Buyer-side withholding remains a major issue, though compliance is now being eased operationally for resident buyers purchasing from non-residents.

3. Interest income

For example:

• NRO account interest
• certain Indian securities or deposits
• debentures or bonds, depending on instrument and treaty position

Taxability and rates remain subject to the Act plus treaty relief.

4. Dividend income from Indian companies

Taxable in India in the hands of the shareholder, with DTAA relief where applicable.

5. Business income connected with India

Income attributable to a business connection, source, or property in India remains within the tax net, and the new rules also continue provisions for determination of income in the case of non-residents where exact income is not readily ascertainable.

6. Income deemed to accrue or arise in India

This remains a major anti-avoidance and source-rule area, especially for cross-border structures, indirect transfers, royalties, fees for technical services, and digital nexus issues.

The structural change

The CBDT states that the old patchwork of TDS sections has largely been consolidated into the new Act, especially into section 393 for non-salary payments.

What stays the same

The department says the rates and thresholds are largely the same, with exact rates to be read with the applicable Finance Act.

Why this matters for NRIs

Many NRI tax obligations are experienced first through withholding, not final assessment. Common examples:

• buyer withholding on property purchase from an NRI
• bank withholding on NRO interest
• tenant withholding on rent
• withholding on dividends, royalties, or other sums chargeable in India

Transition rule

The CBDT’s FAQ gives a clear principle:

• If the payment or credit happened on or before 31 March 2026, the 1961 Act applies.
• If the payment or credit happens on or after 1 April 2026, the 2025 Act applies.

This is especially important where contracts or transactions straddle March and April 2026.

Lower or nil withholding certificates

The CBDT confirms that a certificate issued under section 197 of the old Act can continue to remain valid for payments/credits on or after 1 April 2026, provided it covers the relevant receivables/tax year conditions. That is a useful continuity measure for NRIs and cross-border payees.

This is arguably the most user-relevant NRI tax change emerging from Budget/Finance Act 2026.

The old pain point

When a resident buyer purchased immovable property from a non-resident, the buyer typically needed to:

• obtain a TAN
• deduct TDS
• deposit tax
• comply with the more complex non-resident withholding process

This was cumbersome for ordinary resident individuals buying a flat or house from an NRI seller.

The new relief

Budget 2026 documents and official budget material indicate that TDS on sale of immovable property by a non-resident is to be deducted and deposited through the resident buyer’s PAN-based challan instead of requiring a TAN.

Why this matters

This change:

• reduces compliance friction
• makes NRI property sales more practical
• lowers entry barriers for resident buyers
• may improve transaction efficiency in the Indian real estate market

Important caution

This is a compliance simplification, not an exemption from tax.
The sale by the NRI remains taxable according to applicable capital gains rules, and the correct withholding computation still matters. Buyers and sellers should still verify:

• whether the gain is short-term or long-term,
• treaty interaction,
• whether a lower withholding certificate is needed,
• surcharge and cess impact,
• PAN and documentation accuracy.

DTAA relief remains central

The Income Tax Department continues to state that a non-resident claiming treaty benefit must obtain a Tax Residency Certificate and satisfy other documentation requirements.

Foreign tax credit form changes

Under the new rules, EY notes that the prescribed form for claiming foreign tax credit has changed from Form 67 to Form 44, and where foreign taxes paid or deducted exceed INR 1,00,000, a CA certificate is mandatory.

Why this matters for NRIs and returning Indians

Pure NRIs with only Indian-source income may not always be the direct users of FTC forms in India. However, the issue becomes relevant where a person:

• changes status from NRI to resident,
• becomes RNOR or resident,
• has global income brought into Indian taxation,
• claims relief for foreign taxes against Indian liability.

Documentation checklist for treaty-based positions

Expect continued importance of:

• Tax Residency Certificate (TRC)
• Form 10F or equivalent treaty documentation, as applicable
• PAN
• withholding records
• foreign tax proof where claiming credit
• bank statements and source documentation

The CBDT transition FAQs make this point very clearly.

Will NRIs need to file two returns because of the new law?

No.

You will not file two returns for the same income stream simply because the law changed.

The filing timeline works like this

For income from 1 April 2025 to 31 March 2026

• governed by the 1961 Act
• filed as AY 2026–27
• filing generally in 2026

For income from 1 April 2026 to 31 March 2027

• governed by the 2025 Act
• filed for Tax Year 2026–27
• filing generally in 2027

Practical risk areas for NRIs

NRIs should pay extra attention to:

• correct year selection
• correct law selection
• correct form set
• correct TDS mapping
• refund claims for old years versus new-year tax payments

Due dates

The CBDT FAQs indicate that due dates remain substantially the same as before, even though the law has moved to the Tax Year concept.

Yes, official Income Tax Department materials indicate continuity of the special tax provisions for non-resident Indians under the new framework.

Search results from the official site and the new schedules continue to reflect familiar rules such as:

• 20% on certain investment income of a non-resident Indian
• specific treatment for certain long-term capital gains
• continued recognition of special NRI provisions

This is important because many NRIs rely on the dedicated tax regime applicable to:

• specified foreign exchange assets,
• certain investment income,
• qualifying long-term capital gains.

Key takeaway

The new Act appears to preserve substance while reformatting structure. NRIs should not assume that beneficial legacy provisions disappeared merely because section numbers changed.

The transition FAQs also contain NRI-specific discussion and indicate continuity on legacy provisions.

One specific example visible in official search snippets is that, under the old law, a non-resident computing capital gains on transfer of shares or debentures of an Indian company could use the first proviso to section 48 mechanism in relevant cases. The official materials suggest continuity treatment where older-year rights or tax characterizations are involved.

Why this matters

Many NRIs hold:

• listed Indian shares,
• unlisted Indian shares,
• mutual fund units,
• real estate,
• bonds and debentures,
• inherited or legacy assets.

The practical message is:

• pre-1 April 2026 years remain governed by the old law;
• post-1 April 2026 years use the new law;
• substantive tax outcomes may often be similar, but documentation and section references differ.

Some 2026 commentary highlighted reduced TCS on overseas remittances and broader TCS rationalization. Official Income Tax Department materials available through search results show continued guidance on TCS under LRS and related thresholds.

Is this an NRI change?

Not always directly. TCS under LRS often affects resident remitters, not NRIs per se.
However, globally mobile Indian families frequently have mixed resident/NRI members, and remittance planning is often intertwined with tax residency, overseas education, gifting, and investment structuring.

So why mention it?

Because many readers searching “NRI tax changes” are really asking about the broader cross-border tax environment. Budget 2026 appears to signal:

• continued rationalization,
• simplification of compliance,
• reduced friction on certain cross-border transactions.

Still, one should separate:

• true NRI taxation changes, and
• general international tax administration changes.

One of the practical changes from 1 April 2026 is that several tax forms have been renumbered, consolidated, or newly introduced under the Income-tax Rules, 2026. For NRIs, this matters because form references are often used in:

• foreign tax credit claims,
• treaty documentation,
• lower/nil withholding applications,
• remittances to non-residents,
• salary and cross-border payroll situations,
• TDS certificates and declarations.

A form change does not always mean a change in tax policy. In many cases, the substance is similar, but the form number, filing reference, or rule citation has changed.

Table: Old Forms vs New Forms from 1 April 2026

Here is a practical action list for NRIs, OCI holders, returning Indians, and cross-border families.

1. Re-map your timeline

Separate your Indian income into:

• up to 31 March 2026 → old Act
• from 1 April 2026 onward → new Act

2. Recheck your residential status

Do not assume your status based on old habits. Compute it properly for each year.

3. Review TDS on all Indian income streams

Especially:

• rent
• property sale
• NRO interest
• dividends
• professional/business receipts from India

4. Update advisors and internal records to the new section references

This is essential for:

• employers,
• banks,
• tenants,
• resident property buyers,
• brokers,
• chartered accountants,
• family offices.

5. If selling Indian property, examine the new PAN-based buyer compliance route

This may make deals smoother—but only if paperwork is handled correctly.

6. Keep DTAA paperwork ready

At minimum:

• TRC
• PAN
• treaty declarations
• income proofs
• withholding certificates

7. Watch old-versus-new return forms carefully

AY 2026–27 and Tax Year 2026–27 are not interchangeable.

8. For complex cases, do not rely on headlines

Particularly if you have:

• stock options,
• ESOPs,
• foreign pensions,
• Indian startup shares,
• indirect transfers,
• trust structures,
• split residency,
• inheritance issues.