Part 1 laid the foundation: residency, the three account types, and the slabs that apply to an NRI. This instalment is where the money is actually made or lost — the offshore-onshore gateway at GIFT City, the treaty machinery that stops you paying tax twice, the property-sale withholding that can freeze a fifth of your sale price, the FEMA rules for sending funds abroad, and the disclosure line whose breach carries a 300% penalty. As before, sections are cited new-first with the old number in brackets.
GIFT City's International Financial Services Centre (IFSC) is best understood not as a tax shelter but as a tax architecture — a jurisdiction that sits geographically inside India yet is treated, for many purposes, as offshore. For an NRI, it is increasingly the cleanest way to hold global and Indian-linked assets in foreign currency without tripping domestic compliance at every step.
The headline reliefs:
- IFSC-unit deduction under Section 147 (erstwhile Section 80LA) — a 100% profit-linked deduction on specified IFSC-unit income for a defined block of consecutive years, subject to receipt in convertible foreign exchange.
- No STT or CTT on transactions carried out on an IFSC stock exchange in foreign currency — and no GST on services provided by, or received in, an IFSC unit from offshore.
- Fund and AIF structures domiciled in the IFSC let NRIs access global portfolios, mutual funds, and Alternative Investment Funds directly in USD, with specified exemptions for non-resident investors on certain securities.
You will see GIFT City marketed as "tax-free." It isn't — it is a set of specific, conditional exemptions, each tied to the type of security, the currency of the transaction, and the investor's status. The benefits are real and substantial, but they reward structure and documentation, not wishful thinking. Treat it as a planning tool, not a loophole.
If your country of residence also taxes you, the same income can be taxed in two places. India's network of Double Taxation Avoidance Agreements exists to prevent exactly that, and the enabling provisions are Section 159 (erstwhile Section 90) for treaty countries and Section 160 (erstwhile Section 90A) for specified associations. The taxpayer is entitled to whichever of the treaty or the domestic Act is more beneficial.
But the relief is not automatic. To claim treaty benefit you must hold a valid Tax Residency Certificate (TRC) from your country of residence, and file Form 10F electronically. Without the TRC, the treaty rate simply does not apply — the assessing officer falls back to the full domestic rate. Where the treaty and the Act both bite, a tie-breaker sequence — permanent home, then centre of vital interests, then habitual abode, then nationality — decides which country gets primary taxing rights.
An NRI in the UAE pays no personal income tax there — yet the India-UAE treaty, backed by a UAE TRC, still governs how Indian-source income (interest, capital gains, dividends) is taxed in India, often at a reduced rate. The lesson: a "no-tax" home country does not make the treaty irrelevant. Get the TRC and file Form 10F before the income arises, not after.
This is where NRIs lose the most sleep — and the most cash. When an NRI sells Indian property, the buyer is obliged to deduct tax at source under Section 393 (erstwhile Section 195). Long-term gains (property held over 24 months) are charged at 12.5% under Section 197 (erstwhile Section 112); short-term gains are taxed at slab rates, effectively up to 30%. Surcharge and a 4% cess stack on top.
The trap is what the TDS is computed on. Unless the seller produces a certificate, the buyer typically deducts on the entire sale consideration — not on the gain. On a ₹2 crore flat with a ₹40 lakh gain, that is the difference between tax on ₹2 crore and tax on ₹40 lakh. The excess is recoverable only by filing a return and waiting months for a refund.
The fix is a lower-deduction certificate — the old Section 197, which under the 2025 Act is now Section 395. Note the trap: the new Section 197 is the LTCG charging section, while the old Section 197 (the certificate) has become Section 395. Same number, opposite ends of the Act. Apply on the new Form 128 (replacing Form 13) — and note a real change: the 2025 framework permits only a lower rate, the nil-TDS certificate is no longer available.
How much cash gets locked up?
Base rates only — 12.5% on long-term gains, 30% on short-term — for illustration. Actual withholding also carries surcharge (up to 15% on LTCG) and 4% cess, so the real figures run higher. This is not a tax computation; the gain shown ignores indexation and exemptions. Confirm on your own facts.
Earning in India is one thing; sending it abroad is governed by FEMA, not the Income-tax Act. The rules differ sharply by account:
| Source of funds | Repatriable? | How |
|---|---|---|
| NRE / FCNR balances | Freely, no cap | Both principal and interest |
| NRO balances & current income | Up to USD 1 million per financial year | Form 145 (self-declaration) + Form 146 (CA certificate) |
| Sale of property | Within the USD 1M/year limit* | Sale proceeds routed through the NRO account |
The USD 1 million per financial year ceiling is the figure to remember — it covers NRO balances and the proceeds of asset sales together. The gateway is procedural: a self-declaration in Form 145 (erstwhile 15CA) and, in most cases, a chartered accountant's certificate in Form 146 (erstwhile 15CB) confirming that the applicable tax has been paid or withheld. No Form 146, no remittance.
If the property was originally bought using funds remitted from abroad or out of an NRE/FCNR account, the sale proceeds of up to two residential properties can be repatriated without being squeezed into the USD 1 million limit — subject to conditions. Sequencing the purchase route years earlier can quietly preserve full repatriability on exit.
Recall the RNOR "cushion" from Part 1. It ends the year you become Resident & Ordinarily Resident — and that is precisely when the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 switches on. This is a separate statute, untouched by the 2025 renumbering, and it applies only to a resident-and-ordinarily-resident person — not to an NRI, and not to an RNOR.
Once you are ROR, you must disclose all foreign assets and income in the foreign-asset schedule of your Indian return. Get it wrong — an undisclosed overseas account, a foreign property left off the schedule — and the consequences are severe: tax at a flat 30% plus a penalty of 300% of the tax on the undisclosed amount, alongside the risk of prosecution. Honest disclosure is cheap; the penalty for omission is ruinous.
The mistake is to carry an NRI's "my foreign accounts are nobody's business in India" mindset one year too long. The day you tip into ordinary residence, every foreign account, holding, and income stream must be on your Indian return. Map your foreign assets before that first ROR year begins — not when the notice arrives.
Confirm your residential status each year on the Section 6 day-count · keep NRE/FCNR documentation clean to preserve the interest exemption · obtain a TRC and file Form 10F before treaty income arises · apply for a §395 certificate well ahead of any property sale · stay within the USD 1M/year repatriation limit with Form 145/146 (erstwhile 15CA/15CB) in hand · and the year you become ROR, disclose every foreign asset.
GIFT City routing, treaty positioning, property-sale withholding, and the ROR transition are all decisions with a narrow right-timing window. See how I work with the diaspora on NRI tax & advisory, or get in touch.
References: Income-tax Act, 2025 — Section 147 (IFSC-unit deduction), Sections 159 & 160 (DTAA / specified associations), Section 197 (LTCG), Section 393 (TDS on payments to non-residents), Section 395 (lower-deduction certificate); erstwhile Sections 80LA, 90, 90A, 112, 195 & 197 of the Income-tax Act, 1961. Also: FEMA, 1999 and RBI Master Directions (repatriation, immovable property); Forms 10F, 145 & 146 (erstwhile 15CA & 15CB), and 128 (erstwhile 13); the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. The Act is effective 1 April 2026 (FY 2026-27 onward). This article is general information current at the date of publication, not advice on any specific matter — please consult a professional on your own facts.