India's New Income Tax Act Just Took Effect. Here's What Changed for NRIs.

The Old Act Is Gone

On April 1, 2026, the Income Tax Act 1961 — the law that governed Indian taxation for 64 years — was formally replaced by the Income Tax Act 2025. If you're an NRI who files Indian taxes, this isn't a theoretical change. The section numbers you knew, the form numbers you used, and some of the rules that determined how your income gets assessed have all changed.

The good news: your actual tax rates haven't changed. The bad news: almost everything else has been renumbered, and there's a new rule specifically aimed at NRI income that you should understand.

What Actually Changed

1. Every Section Number Is Different

The new act consolidates and renumbers the entire Income Tax Act. Section 80C isn't Section 80C anymore. Section 195 (TDS on payments to non-residents) has a new number. If you've been filing your own returns or reading your CA's notes with references to specific sections, those references are now outdated.

This is a nuisance, not a crisis. The underlying rules are largely the same — the government's stated goal was simplification, not reform. But if you're comparing this year's return to last year's, nothing will line up by section number.

2. Form 16 Is Now Form 130

If you receive salary income in India (some NRIs do, through Indian subsidiaries or retained positions), your annual TDS certificate is no longer Form 16. It's Form 130. The CBDT notified revamped income tax forms under the Income Tax Rules 2026, effective from April 1.

Same information, different form number. Your employer or their payroll provider should handle this, but if you're collecting documents for filing, look for Form 130 instead of Form 16.

3. Rule 9 — NRI Income Estimation

This is the one that matters.

Rule 9 of the Income Tax Rules 2026 gives tax authorities new methods for estimating the India-linked income of non-residents where the "actual amount cannot be definitely ascertained." The methods include:

• Turnover-based estimation — applying a profit percentage to your Indian turnover
• Proportionate-profit method — allocating global profits based on Indian operations
• Other suitable methods — a catch-all that gives the assessing officer discretion

If you have business income connected to India — consultancy fees, freelance work for Indian clients, or income from a business that operates in both countries — this rule gives the tax department a framework to estimate what portion is Indian income, even if you haven't clearly separated it.

This doesn't apply to straightforward cases like NRO interest or rental income where the amount is obvious. It's aimed at situations where income flows across borders and the Indian portion is ambiguous.

What to do: If you earn income from Indian clients or have business activities that span India and your country of residence, talk to your tax advisor about how Rule 9 might apply. The estimation methods are new, and the case law doesn't exist yet. Getting ahead of this is better than being surprised by an assessment.

4. No More TAN for NRI Property Transactions

Previously, if someone bought property from an NRI in India, the buyer needed to obtain a TAN (Tax Deduction and Collection Account Number) to deduct TDS on the transaction. That requirement is gone. PAN-based TDS payment is now sufficient.

This simplifies property sales for NRIs — fewer steps, fewer registrations, less paperwork for the buyer. If you're planning to sell property in India, this removes one administrative hurdle.

5. TCS on Remittances and Travel — Reduced to 2%

The Budget 2026-27 reduced Tax Collected at Source on two things NRIs care about:

• Overseas tour packages: TCS cut from 5% to a flat 2%
• Remittances for education or medical purposes: TCS cut from 5% to 2%

If you're sending money from India under LRS for these purposes, or buying a tour package from an Indian travel agent, you'll pay less TCS upfront. You still get credit for TCS when you file, but lower TCS means less cash locked up in the interim.

What Didn't Change

• Tax slabs — no changes for FY 2026-27. Both old and new regime rates remain the same.
• NRE/FCNR interest — still completely tax-free in India
• NRO interest TDS — still deducted at 30% (plus surcharge and cess)
• DTAA benefits — Double Tax Avoidance Agreements continue to apply. If your country has a DTAA with India (the US, Canada, and UK all do), you can still claim reduced TDS rates with a valid Tax Residency Certificate.
• ITR filing deadline — still July 31, 2026 for FY 2025-26

The Bottom Line

The new act is a renumbering exercise with a few substantive changes. For most NRIs with straightforward Indian income (bank interest, rent, mutual fund gains), the impact is cosmetic — different section numbers, different form numbers, same tax.

For NRIs with business income that crosses borders, Rule 9 is the change to watch. It gives tax authorities a structured way to estimate your Indian income, and "other suitable methods" is deliberately broad.

If you handle your own filing: update your mental map of section numbers, look for Form 130 instead of Form 16, and don't panic when the return form looks different.

If you use a tax service: they should already know all of this. If they don't, that tells you something. Here are the ones we recommend: Best NRI Tax Filing Services for 2026.