Top Tax Traps NRIs Fall Into
& Legal Ways to Save

Many Non-Resident Indians face unexpected tax troubles due to simple mistakes. From residential status errors to double taxation, navigate the complexities of the Income Tax Act and FEMA rules legally.

Trap #1

Residential Status

Miscounting days can make your global income taxable in India.

Trap #2

Double Taxation

Paying tax twice? Use DTAA to claim credits legally.

Trap #3

High TDS & Banking

Deductions up to 30%? FEMA rules for Savings accounts.

Trap #4

Filing & Assets

Reporting foreign assets erroneously and filing obligations.

The Residential Status Trap

In India, your tax status is based on the days you spend here, not your citizenship. A small calculation error can turn an NRI into a "Resident" or "RNOR," making your global income taxable in India.

Days in India Calculator

Days spent in India (Financial Year)

0 Days60 Days365 Days

Likely Status: NRI

Your global income is generally NOT taxable in India.

* This is a simplified checker based on the primary 182-day rule. Other conditions (like 60 days + 365 days in 4 years) may apply.

Risk Visualization

Tracking days is crucial. Careful planning of visits helps avoid unwanted tax surprises.

The Double Taxation Trap

Earning abroad and in India? Without proper planning, you might pay tax twice. The Double Taxation Avoidance Agreement (DTAA) is your legal shield.

Required Documents

To claim credit for taxes paid abroad and avoid paying twice, you typically need to file:

1Form 10F Self-declaration for invoking DTAA benefits.
2TRC (Tax Residency Certificate) Proof of residency from your current country.
3Form 67 Statement of income offered to tax abroad.

Tax Liability Simulation

Apply DTAA?

*Hypothetical scenario: Income taxed at 30% in India and 25% Abroad. Without DTAA, you pay both (55%). With DTAA, you pay the higher of the two or claim credit, effectively paying only 30%.

High TDS & Banking Rules

NRIs often face TDS rates up to 30% on rent and capital gains. Additionally, continuing to use a regular resident savings account is a violation of FEMA rules.

Reducing TDS Legally

TDS often exceeds actual tax liability. Instead of waiting for a refund, apply for a lower deduction.

Solution: Form 13

Apply under Section 197 for a Lower or Nil TDS Certificate. This matches the deduction to your real liability.

The Banking Mandate (FEMA)

You must convert resident savings accounts upon moving abroad. Violations lead to penalties.

NRE Account

Non-Resident External

For Foreign Earnings transfer to India.
Principal & Interest are fully Repatriable.
Interest earned is Tax-Free in India.

NRO Account

Non-Resident Ordinary

For India-sourced Income (Rent, Dividends).
Restricted Repatriation (up to $1M USD/year).
Interest is Taxable in India.

Filing ITR & Asset Reporting

Even with small income, filing might be mandatory or beneficial. Reporting foreign assets when not required is a risky trap.

⚠️

Foreign Asset Trap

Do NOT fill Schedule FA by mistake

Only Residents must report foreign assets (Schedule FA). If an NRI fills this:

It signals the wrong residential status.
It may trigger scrutiny from the tax department.
Always choose the correct ITR form (Usually ITR-2 for NRIs).

Do You Need to File ITR?

Total Indian Income > ₹2.5 Lakh?

Earned Capital Gains (Short/Long Term)?

Want to claim TDS Refund?

Recommendation:Select options above.

Common NRI Tax Trap

Top Tax Traps NRIs Fall Into
& Legal Ways to Save

Residential Status

Double Taxation

High TDS & Banking

Filing & Assets

The Residential Status Trap

Days in India Calculator

Likely Status: NRI

Risk Visualization

The Double Taxation Trap

Required Documents

Tax Liability Simulation

High TDS & Banking Rules

Reducing TDS Legally

Solution: Form 13

The Banking Mandate (FEMA)

NRE Account

NRO Account

Filing ITR & Asset Reporting

Foreign Asset Trap

Do You Need to File ITR?

Thombre & Associates

Common NRI Tax Trap

Top Tax Traps NRIs Fall Into & Legal Ways to Save

Residential Status

Double Taxation

High TDS & Banking

Filing & Assets

The Residential Status Trap

Days in India Calculator

Likely Status: NRI

Risk Visualization

The Double Taxation Trap

Required Documents

Tax Liability Simulation

High TDS & Banking Rules

Reducing TDS Legally

Solution: Form 13

The Banking Mandate (FEMA)

NRE Account

NRO Account

Filing ITR & Asset Reporting

Foreign Asset Trap

Do You Need to File ITR?

Thombre & Associates

Top Tax Traps NRIs Fall Into
& Legal Ways to Save