Navigating Indian Tax Rules as a Global Entrepreneur in 2025
Starting a business in India as a Non-Resident Indian (NRI) or foreign entity? Then understanding the Indian tax terrain isn't just useful—it's essential. Tax regulations in India for NRIs are layered, sometimes counter intuitive, and often updated without much fanfare.
Whether you're based in Singapore or Sydney, Tokyo or Texas, understanding these intricacies will protect your business from penalties and unlock potential tax benefits.
Let’s break it all down in plain English—because taxes are already complicated enough.
You’d think it's all about where your passport says you're from. But no—India classifies NRIs based on physical presence.
An individual is considered an NRI if:
They reside outside India for 183 days or more during the financial year, or
Their stay in India in the past 4 years is less than 365 days and less than 60 days in the current year.
Simple, right? But here’s the twist: the moment your duration in India exceeds those limits—even unintentionally—your tax status flips. That change triggers a whole new set of obligations.
Only income that is either earned in India or originates from India is taxed. So if you made money in Mumbai but live in Manchester, you're still liable to pay Indian taxes on that income.
Rent received from property in India
Capital gains from selling Indian assets
Interest earned on Indian bank accounts (except NRE accounts)
Income from businesses or consultancy services rendered in India
Interest from NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts
Overseas income, as long as it doesn't arise or accrue in India
But remember—countries like the US and UK tax their residents on global income. So, you might end up filing both in India and in your country of residence.
Still with me? Good. Now let’s look at what you must do if you're doing business in or through India.
Without a Permanent Account Number (PAN), you can't file taxes in India. If your business is earning revenue from India, even if it’s minimal, a PAN is your starting point
Any Indian entity paying an NRI is obligated to deduct tax at source (TDS). The details of this deduction are filed through Form 27q. If you're the recipient, this TDS can be claimed back during ITR filing if your final tax liability is lower.
If your total taxable income in India exceeds ₹2.5 Lakh (about USD 3,000), filing an ITR is mandatory.
You know what? Most tax trouble comes not from fraud, but from honest mistakes.
Claiming Deductions Not Meant for NRIs: Some sections, like 80G (donations), are valid. Others, like 80C (certain investments), may not apply.
Overlooking Double Taxation Treaties (DTAA): India has agreements with countries like the US, UK, Australia, Japan, and Singapore. Not understanding these can mean paying tax twice on the same income.
Neglecting Advance Tax Payments: NRIs often assume TDS covers it all. But if your estimated tax liability exceeds ₹10,000, advance tax payments are compulsory.
Setting up a business or startup in India? Here's how to stay ahead:
Choose the right business structure: LLP, Pvt Ltd, or branch office—each has different tax implications.
Open an NRO business account: It’s a must for managing Indian revenues.
Invest through official channels: Routes like FDI (Foreign Direct Investment) should be used. Skipping formalities can attract severe penalties.
Hire a local tax consultant: Preferably one with NRI specialization. They can bridge the gap between your country’s tax regime and India’s.
Company Bio: PKP Consult is a premier India-based financial advisory firm, guiding NRIs and global entrepreneurs from Singapore, the USA, Japan, Australia, and the UK through Indian tax regulations. As featured in The Essential Guide to NRI Tax Matters in 2025, our advisory approach reflects our commitment to empowering non-resident clients with accurate, timely, and actionable financial insights.
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