If you’ve ever read an article about NRI investing and stumbled over terms like FEMA, DTAA, TDS, LTCG, or PFIC — you’re not alone. Financial jargon is one of the biggest barriers between NRIs and their money in India.
This glossary is built specifically for NRIs. Every term is defined in plain English, explained through the lens of someone managing money from abroad, and linked to the blog where you can read more. Bookmark this page — you’ll come back to it.
Your Status: Who You Are Under Indian Law
NRI (Non-Resident Indian)
An Indian citizen who resides outside India. Under FEMA, you’re an NRI if you’ve lived outside India for more than 182 days in the preceding financial year. Under the Income Tax Act, the test is different — it considers days spent in India over multiple years. Your FEMA status determines your banking and investment rights. Your Income Tax status determines how you’re taxed. These can differ in the same year.
OCI (Overseas Citizen of India)
An immigration status for foreign citizens of Indian origin. OCI cardholders can live, study, and work in India indefinitely. For investment and banking purposes, OCIs have the same rights as NRIs — they can open NRE, NRO, and FCNR accounts, invest in mutual funds, buy residential and commercial property, and purchase term insurance. The same restrictions apply: no agricultural land, plantation property, or farmhouse purchases.
PIO (Person of Indian Origin)
A foreign citizen with Indian ancestry. The PIO card scheme was merged into OCI in 2015. All PIO cards were valid as deemed OCI cards until December 31, 2025. If you held a PIO card, you should have converted to OCI by now.
RNOR (Resident but Not Ordinarily Resident)
A transitional tax status for NRIs returning to India. For 2–3 years after returning, you may qualify as RNOR, which means your foreign income (overseas salary, foreign investment gains) is not taxed in India. Only India-sourced income is taxed during the RNOR period.
Tax Residency
The country where you are considered a resident for tax purposes. Most countries use a 183-day physical presence test. Your tax residency determines which country has the primary right to tax your worldwide income. Not the same as citizenship or visa status.
Your Accounts: Where Your Money Sits
NRE Account (Non-Resident External)
A rupee-denominated bank account for parking your overseas earnings in India. Foreign currency is converted to INR on deposit. Interest earned is completely tax-free in India. Both principal and interest are fully repatriable — you can send the money back abroad anytime with no limit. Both NRIs and OCI cardholders can open NRE accounts. Can be held jointly only with another NRI or OCI — not with a resident Indian. For more: NRE vs NRO guide.
NRO Account (Non-Resident Ordinary)
A rupee account for managing income earned in India — rent, dividends, pension, interest. Can also receive foreign remittances. Interest is taxable in India at slab rates (TDS deducted at 30% plus cess, reducible under DTAA). Repatriation of principal is capped at USD 1 million per financial year across all NRO accounts. Current income (rent, interest, dividends) is repatriable without this cap, after tax. Can be held jointly with a resident Indian.
FCNR Account (Foreign Currency Non-Resident)
A fixed deposit account denominated in foreign currency (USD, GBP, EUR, AUD, CAD, JPY). Deposits are maintained in the foreign currency, eliminating exchange rate risk during the deposit tenure. Interest is tax-free in India. Fully repatriable. Available only as term deposits (1–5 years), not savings accounts.
PIS Account (Portfolio Investment Scheme)
A designated bank account required for NRIs to trade directly in Indian stock markets. Linked to a Demat and trading account. Operated through an authorised dealer bank. Required under RBI/SEBI rules for direct equity investment by NRIs.
Demat Account
An electronic account that holds your shares and securities in digital form (dematerialised). Required for investing in Indian stocks, ETFs, and bonds. Must be redesignated as an NRI Demat account after you become an NRI.
Your Investments: What You Can Put Money Into
Mutual Fund
A professionally managed pool of money from many investors, invested in stocks, bonds, or other securities. Managed by an Asset Management Company (AMC). NRIs can invest in Indian mutual funds through NRE or NRO accounts, subject to KYC completion and FATCA declaration. Mutual fund investments are subject to market risks.
AMC (Asset Management Company)
The company that manages a mutual fund — selects securities, executes trades, manages the portfolio. Examples: HDFC AMC, ICICI Prudential AMC, SBI MF. Not all AMCs accept investments from US and Canadian NRIs due to FATCA/PFIC compliance burden.
SIP (Systematic Investment Plan)
A method of investing a fixed amount at regular intervals (usually monthly) into a mutual fund. Automates investing, removes the need to time the market, and benefits from rupee cost averaging. Each SIP instalment is a separate purchase with its own holding period for tax purposes. For more: SIP guide for NRIs.
NAV (Net Asset Value)
The per-unit price of a mutual fund, calculated daily. When you invest via SIP or lump sum, you buy units at the day’s NAV. When you redeem, you sell units at the day’s NAV. NAV = (Total assets – Total liabilities) ÷ Number of units outstanding.
ELSS (Equity Linked Savings Scheme)
A type of equity mutual fund that qualifies for tax deduction under Section 80C (up to ₹1.5 lakh per year, old regime only). Has a 3-year lock-in period. Relevant only for NRIs who have Indian taxable income and file under the old tax regime.
NRE FD (Fixed Deposit)
A term deposit in an NRE account. Interest is completely tax-free in India. Fully repatriable. Current rates: 6.50–7.25% p.a. (as of 2026). Minimum tenure typically 1 year. Premature withdrawal is allowed with a penalty.
Your Taxes: What Gets Deducted and How
TDS (Tax Deducted at Source)
Tax withheld by the payer before you receive your income. For NRIs, TDS is deducted on NRO interest (30% plus cess), mutual fund redemptions (12.5% LTCG / 20% STCG for equity), rental income (31.2%), dividends (20% plus surcharge and cess), and property sale proceeds (20% of full sale consideration). TDS rates for NRIs are generally higher than for residents. Reducible under DTAA with TRC and Form 10F. For more: TDS guide for NRIs.
LTCG (Long-Term Capital Gains)
Profit from selling an asset held longer than the specified period. For equity mutual funds and listed shares: 12 months. For property: 24 months. For gold and unlisted assets: 24 months. Equity LTCG is taxed at 12.5% above an annual exemption of ₹1.25 lakh. Property LTCG is taxed at 12.5% without indexation (dual option for properties acquired before July 23, 2024).
STCG (Short-Term Capital Gains)
Profit from selling an asset held for less than the specified period. Equity STCG is taxed at 20% (changed from 15% in the July 2024 Budget). Non-equity STCG is taxed at slab rates (up to 30%).
ITR (Income Tax Return)
The annual tax filing submitted to the Income Tax Department. NRIs must use ITR-2 (not ITR-1 or ITR-4). Filing is mandatory if Indian income exceeds ₹2.5 lakh (old regime) or ₹4 lakh (new regime), or if capital gains arise. Filing is the only way to claim refunds on excess TDS. For more: capital gains tax guide.
PAN (Permanent Account Number)
A 10-character alphanumeric identifier issued by the Income Tax Department. Mandatory for all financial transactions in India — opening bank accounts, investing in mutual funds, buying or selling property, filing ITR. NRIs can apply for PAN from abroad.
Section 80C
A provision allowing tax deductions up to ₹1.5 lakh per year on specified investments (PPF, ELSS, life insurance premiums, home loan principal). Available only under the old tax regime. Relevant for NRIs with Indian taxable income.
Old Regime vs New Regime
Two parallel income tax structures. The old regime has higher slab rates but allows deductions (80C, 80D, 80G, Section 24). The new regime (default from AY 2024–25) has lower slab rates but removes most deductions. NRIs must actively opt out to use the old regime. NRIs are not eligible for the Section 87A rebate under either regime.
Your Compliance: The Rules That Govern Everything
FEMA (Foreign Exchange Management Act, 1999)
The foundational law governing all foreign exchange transactions for NRIs. Determines which accounts you can hold, what you can invest in, how much you can repatriate, and what property you can buy. Administered by the RBI. Violations can attract penalties up to 3x the contravention amount or ₹2 lakh, plus ₹5,000 per day for continuing violations.
KYC (Know Your Customer)
Identity and address verification required before you can invest in mutual funds, open bank accounts, or trade securities. Involves submitting passport, visa, overseas address proof, and FATCA declaration. Must be “KYC Validated” (not just registered) for mutual fund investments. Can be completed digitally from abroad.
FATCA (Foreign Account Tax Compliance Act)
A US law requiring foreign financial institutions (including Indian banks and AMCs) to identify and report accounts held by US persons to the IRS. All NRIs sign a FATCA self-declaration when investing in India — confirming whether they are a US person. For non-US NRIs, it’s a simple checkbox. For US NRIs, FATCA triggers reporting obligations (Form 8938) and AMC restrictions. For more: FATCA guide.
PFIC (Passive Foreign Investment Company)
How the IRS classifies foreign mutual funds, including Indian mutual funds. PFICs are subject to punitive US tax treatment — annual Form 8621 filing per fund, mark-to-market tax on unrealised gains, or excess distribution method (tax at highest rate plus compounded interest). This makes Indian mutual funds impractical for US NRIs. Does NOT apply to NRIs in UK, UAE, Australia, Singapore, or other non-US countries.
CRS (Common Reporting Standard)
The global equivalent of FATCA, adopted by over 100 countries. Under CRS, Indian financial institutions report account information of non-resident account holders to the Indian tax authorities, who share it with the account holder’s country of residence. Ensures tax transparency across borders.
Form 10F
A self-declaration filed electronically on the Indian Income Tax portal. Contains details of your tax residency, the DTAA article being claimed, and the income type. Required (along with TRC) to claim DTAA benefits — specifically reduced TDS rates. File it before earning income, not after.
TRC (Tax Residency Certificate)
An official document from your country’s tax authority proving you’re a tax resident of that country. Required to claim DTAA benefits in India. Issued by HMRC (UK), ATO (Australia), UAE Federal Tax Authority, IRAS (Singapore), IRS Form 6166 (US). Processing time: typically 2–4 weeks.
Form 15CA / Form 15CB
Forms required when remitting money out of India. Form 15CA (renamed Form 145 from April 2026) is an online declaration by the remitter. Form 15CB (renamed Form 146 from April 2026) is a certificate from a Chartered Accountant confirming tax compliance. Required for remittances above ₹5 lakh.
Form 16A
A TDS certificate issued by the deductor (bank, AMC, tenant) showing how much TDS was deducted on your income. Proof that tax was withheld. Needed for claiming FTC/FITO in your home country and for filing Indian ITR to claim refunds.
Your Treaty Benefits: How Double Taxation Is Avoided
DTAA (Double Taxation Avoidance Agreement)
A bilateral treaty between India and another country preventing the same income from being taxed twice. India has DTAAs with over 90 countries. DTAA reduces Indian withholding tax rates (typically to 10–15% for dividends and interest vs 20–30% domestic rates) and allows you to claim Foreign Tax Credit in your home country. Benefits must be claimed proactively with TRC and Form 10F. For more: DTAA guide for NRIs.
FTC (Foreign Tax Credit)
A credit claimed in your country of residence (US, UK, Canada) for taxes already paid in India. Prevents double taxation by reducing your home-country tax liability by the Indian tax amount. Claimed on your home-country tax return (Form 1116 in the US, SA106 in the UK). You pay the higher of the two countries’ rates, not both.
FITO (Foreign Income Tax Offset)
Australia’s version of FTC. A dollar-for-dollar credit from the ATO for Indian taxes paid, up to the Australian tax on that foreign income. Same principle as FTC — prevents double taxation.
Withholding Tax
Tax deducted at source by the payer before income reaches you. In the NRI context, this is TDS in India — deducted by banks (on interest), AMCs (on mutual fund gains), tenants (on rent), and property buyers (on sale proceeds). DTAA caps the withholding rate at treaty levels.
Your Repatriation: Getting Money Out of India
Repatriation
Transferring money from India to your country of residence. From NRE and FCNR accounts: fully repatriable, no limit. From NRO accounts: principal capped at USD 1 million per financial year (current income like rent, interest, dividends is repatriable without this cap, after tax). Requires Form 15CA/15CB for amounts above ₹5 lakh.
LRS (Liberalised Remittance Scheme)
An RBI scheme allowing resident Indians to remit up to USD 250,000 per financial year abroad for permitted purposes. This applies to residents, not NRIs. Relevant if you’re returning to India and want to send money out, or if your family members in India want to remit funds to you.
FIRC (Foreign Inward Remittance Certificate)
A certificate issued by your Indian bank confirming receipt of foreign funds. Important for property purchases — proves the source of funds was foreign remittance, which determines repatriation rights when you sell the property.
Your Insurance: Protection Terms
Term Insurance
Pure life insurance — pays a lump sum to your nominee if you die during the policy term. No maturity benefit (you don’t get money back if you survive). Significantly cheaper than endowment or ULIP plans. Indian term insurance premiums are 50–60% lower than in developed countries for the same coverage.
ULIP (Unit Linked Insurance Plan)
An insurance product that combines life cover with market-linked investment. Often sold to NRIs as an “investment.” Generally considered poor value compared to buying separate term insurance and investing in mutual funds. Higher charges reduce effective returns.
Claim Settlement Ratio
The percentage of death claims an insurance company pays out versus the total claims received. A ratio above 95% is considered good. Published annually by IRDAI (Insurance Regulatory and Development Authority of India).
Your Property: Real Estate Terms
Stamp Duty
A state government tax paid when registering a property transaction. Rates vary by state: 3–8% of property value. Paid by the buyer at the time of registration. Part of the total entry cost of buying Indian property.
Mutation
The process of transferring property ownership in government revenue records. Required after a property purchase, inheritance, or gift. Done at the local municipal or revenue office. Separate from registration — registration proves the transaction, mutation updates ownership records.
Section 54 / 54EC / 54F
Three legal exemptions from capital gains tax on property sale. Section 54: reinvest LTCG in a new residential property within 2 years (purchase) or 3 years (construction). Section 54EC: invest up to ₹50 lakh in NHAI/REC bonds within 6 months, 5-year lock-in. Section 54F: reinvest entire sale proceeds of a non-property asset into one residential property.
Lower Deduction Certificate (Form 13)
An application to the Indian tax authorities requesting reduced TDS on a specific transaction (typically property sale). Without it, the buyer deducts TDS at 20% of the full sale consideration — not just the gain. With Form 13, TDS is reduced to match your actual tax liability. Apply 4–6 weeks before the sale through the TRACES portal.
Frequently Asked Questions
What is the difference between NRE and NRO accounts?
NRE accounts hold overseas earnings converted to INR — interest is tax-free in India, and both principal and interest are fully repatriable with no limit. NRO accounts manage Indian-source income (rent, dividends, pension) — interest is taxable at slab rates with TDS at 30%, and repatriation of principal is capped at USD 1 million per financial year. NRE can be held jointly only with other NRIs/OCIs; NRO can be held jointly with resident Indians.
What does DTAA mean for NRIs?
DTAA (Double Taxation Avoidance Agreement) is a treaty between India and your country of residence that prevents the same income from being taxed twice. It reduces Indian withholding tax rates and allows you to claim a credit in your home country for Indian taxes paid. You need a Tax Residency Certificate (TRC) and Form 10F to claim DTAA benefits — without these, TDS is deducted at the higher domestic rate.
What is PFIC and does it affect all NRIs?
PFIC (Passive Foreign Investment Company) is an IRS classification that applies to foreign mutual funds. It affects only US NRIs (citizens, Green Card holders, tax residents). Indian mutual funds are classified as PFICs, requiring annual Form 8621 filing and punitive tax treatment. NRIs in the UK, UAE, Australia, Singapore, and other non-US countries are not affected by PFIC rules.
What is the difference between LTCG and STCG for NRIs?
LTCG (Long-Term Capital Gains) applies when you sell an asset held longer than the specified period — 12 months for equity/equity mutual funds, 24 months for property/gold. Equity LTCG is taxed at 12.5% above ₹1.25 lakh annual exemption. STCG (Short-Term Capital Gains) applies for shorter holding periods — equity STCG at 20%, non-equity at slab rates. TDS is deducted automatically on NRI redemptions.
What documents do NRIs need to claim DTAA benefits?
Two documents are essential: a Tax Residency Certificate (TRC) from your home country’s tax authority, and Form 10F filed electronically on the Indian Income Tax portal. Submit both to the Indian payer (bank, AMC, tenant, property buyer) before the income is earned. Without these documents, TDS is deducted at domestic rates — you’ll need to file ITR to claim a refund, which takes 6–12 months.
Disclaimer: This glossary is for informational purposes only and does not constitute financial, legal, or tax advice. Tax rates, regulatory definitions, and FEMA provisions are subject to change. Definitions are simplified for accessibility and may not capture every legal nuance. Mutual fund investments are subject to market risks — read all scheme-related documents carefully. Consult a qualified financial advisor and tax professional for advice specific to your circumstances.
