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Income-tax Act, 2025 for NRIs: what changed, what didn't, and the new section and form numbers

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In short

  • The Income-tax Act, 2025 applies from 1 April 2026; income of FY 2025-26 and earlier years stays under the 1961 Act.
  • The Act cuts the law from 819 sections to 536 and replaces 'previous year' and 'assessment year' with a single 'tax year'.
  • Residency tests, the NRE interest exemption and the NRI special regime (old sections 115C to 115H, now 212 to 217) carry over in substance.
  • Key NRI forms are renumbered: Form 15CA is now Form 145, Form 15CB is Form 146, Form 13 is Form 128 and Form 27Q is Form 144.

For most NRIs, the Income-tax Act, 2025 changes the labels far more than the tax. Residency tests, tax rates, the NRE interest exemption and the special NRI regime all carry over in substance. What changes is the numbering of sections and forms, plus the replacement of “assessment year” with a single “tax year”.

The new Act received presidential assent on 21 August 2025 and came into force on 1 April 2026. It replaces the Income-tax Act, 1961. The Income-tax Rules, 2026 replace the 1962 Rules and renumber almost every form.

Which Act applies to which year

This is the first thing to get right. The rule is simple.

Income earned in Governing law Return filed Name used on the return
FY 2025-26 (1 April 2025 to 31 March 2026) and earlier Income-tax Act, 1961 During 2026, or later for belated, revised or updated returns Assessment year 2026-27
Tax year 2026-27 (1 April 2026 to 31 March 2027) onward Income-tax Act, 2025 From 2027 Tax year 2026-27

A saving clause in Section 536 of the 2025 Act keeps the 1961 Act alive for earlier years. Assessments, notices, appeals and reassessments for FY 2025-26 and before continue under the old law, even when they happen after April 2026.

So the return you filed in 2026 was a 1961 Act return. Your first return under the new Act covers tax year 2026-27 and will be filed in 2027. No second return is needed for FY 2025-26 income.

Withholding is different. TDS deducted on or after 1 April 2026 falls under the new Act and its new forms. A property sale in May 2026 is a tax year 2026-27 event.

The “tax year” concept

The 1961 Act taxed income of the “previous year” in the following “assessment year”. Income earned in 2025-26 was assessed in AY 2026-27. That gap caused endless confusion.

Section 3 of the 2025 Act replaces both terms with one “tax year”. It is the 12-month period starting 1 April. A new business or a new source of income starts its tax year on the day it begins.

For NRIs, this matters mainly when reading notices, Form 26AS replacements and bank certificates. A document saying “tax year 2026-27” refers to income from April 2026 to March 2027.

What stayed the same

Residency tests

The income-tax department’s non-resident FAQ says the basic residency conditions in Section 6 of the new Act are identical to old Section 6(1). The 182-day test, the 60 + 365 test, the relief for citizens leaving for work or visiting, and the 120-day rule all carry over. The FAQ describes the Rs 15 lakh deemed-resident rule and the “not ordinarily resident” conditions as similar to the old ones. Details are in our residential status guide.

Tax rates

The new Act was framed as a simplification. Tax rates were not changed by it. Long-term capital gains on property and most other assets remain at 12.5% under Section 197 (Section 112 of the 1961 Act). Listed equity gains above Rs 1.25 lakh remain at 12.5% under Section 198 (old Section 112A).

The indexation option for land or buildings bought before 23 July 2024 still applies only to resident individuals and HUFs. NRIs selling property cannot use it.

NRE interest exemption

Interest on NRE accounts stays tax-free. The exemption moved from Section 10(4)(ii) to Schedule IV of the 2025 Act. It still depends on your status under FEMA, not on the income-tax day count.

Special NRI regime

The old Chapter XII-A gave NRIs an optional regime for income from certain foreign-exchange assets. These are assets bought in convertible foreign exchange, such as shares of an Indian company. The regime is carried into Sections 212 to 217 of the new Act.

  • 20% tax on investment income from such assets, Section 214 (old 115E);
  • capital gains exemption on reinvestment, with a three-year lock-in, Section 215 (old 115F);
  • no return needed if your only income is such investment income or long-term gains with TDS deducted, Section 216 (old 115G);
  • continued concessional treatment after becoming resident, by declaration in the return, Section 217 (old 115H).

You can still opt out of the regime in your return, as under old Section 115-I.

Foreign-currency computation

Non-residents selling shares or debentures of an Indian company bought in foreign currency can still compute gains in that currency. The provision moved from the first proviso to Section 48 to Section 72.

Section numbers NRIs see most

Topic 1961 Act 2025 Act
Residence tests 6(1) 6(2)
Deemed resident (Rs 15 lakh, not taxed elsewhere) 6(1A) 6(7)
Not ordinarily resident 6(6) 6(13)
NRE interest exemption 10(4)(ii) Schedule IV
Rebate for resident individuals 87A 156
Long-term capital gains rate 112 197
Listed equity long-term gains 112A 198
Listed equity short-term gains 111A 196
NRI special regime 115C to 115H 212 to 217
Return filing exemption for NRIs 115G 216
Return of income (original, belated, revised, updated) 139(1), (4), (5), (8A) 263(1), (4), (5), (6)
TDS on payments to non-residents 195 393(2)
Late filing fee 234F 428
Saving and transition None 536

Form numbers NRIs see most

Purpose Old form (1962 Rules) New form (2026 Rules)
Remitter’s declaration for payments abroad 15CA 145
Chartered accountant’s certificate for remittance 15CB 146
Application for lower or nil TDS certificate 13 128
TDS challan-cum-statement for property, rent and similar payments by individuals 26QB, 26QC, 26QD, 26QE 141
Quarterly TDS return for payments to non-residents 27Q 144
TDS certificate for non-salary payments 16A 131
Salary TDS certificate 16 130
Annual tax statement 26AS 168
Information for claiming treaty benefit 10F 41
Application for Indian tax residency certificate 10FA 42
No-TDS declaration 15G / 15H 121

Old form numbers still apply to filings for FY 2025-26 and earlier. Expect banks and buyers to use the new numbers for anything done from April 2026.

What actually changed for NRIs

A few points of substance did shift alongside the renumbering.

  • Refunds in late returns. The new Act confirms that a refund can be claimed through a belated or revised return. This helps NRIs who miss the due date after excess TDS on a property sale.
  • Buyers of NRI property. From 1 October 2026, resident individual and HUF buyers can deposit TDS using their PAN, without a TAN. This came through the Finance Act, 2026 and makes sales to individual buyers simpler.
  • Lower-deduction certificates. Applications under the new law go on Form 128 under Section 395 of the 2025 Act. A certificate is issued for a stated period, so check its dates before relying on it.

Worked example: one sale, two Acts

Meera lives in London and owns a flat in Mumbai. She agrees to sell it for Rs 1.2 crore.

Scenario 1: sale registered on 20 March 2026. The transfer falls in FY 2025-26. The buyer deducts TDS under Section 195 of the 1961 Act and files Form 27Q. She reports the gain in her return for AY 2026-27, filed under the 1961 Act.

Scenario 2: sale registered on 20 April 2026. The transfer falls in tax year 2026-27. The buyer deducts TDS under Section 393(2) of the 2025 Act and files Form 144. She reports the gain in her return for tax year 2026-27, filed in 2027.

In either scenario, if she sends the money abroad after 1 April 2026, the remittance uses Form 145 and Form 146.

In both cases, the 12.5% long-term gains rate and the inability to use indexation are the same. Only the paperwork labels differ.

Practical checklist

  • Identify the year of every transaction. Anything on or before 31 March 2026 stays under the 1961 Act.
  • Ask your bank which form numbers it now uses for TDS certificates and remittances.
  • Apply on Form 128 for a lower TDS certificate if you are selling property in tax year 2026-27.
  • Get a new Form 41 and tax residency certificate for treaty claims in tax year 2026-27.
  • If you opted into the special NRI regime or filed an old Section 115H declaration, keep the papers. The new Act treats a valid declaration as continuing.
  • Update any template letters or buyer instructions that mention Section 195 or Form 26QB.

If you have pending assessments or appeals for earlier years, have a chartered accountant check which procedural provisions apply.

Common mistakes

  • Filing an FY 2025-26 return as a “tax year 2025-26” return. It is still AY 2026-27 under the 1961 Act.
  • Quoting old form numbers to a buyer in 2026-27. Form 26QB and Form 27Q have been replaced for new transactions.
  • Assuming rates changed. The new Act did not change rates. Budget changes come through the annual Finance Act.
  • Reusing an old lower-TDS certificate. Certificates carry a validity period. One issued under the old Act and Form 13 may not cover a sale in tax year 2026-27.
  • Treating the NRE exemption as lost. It moved to a schedule. The FEMA test is unchanged.

What to do next

Sources

This guide explains the rules as they stood on 25 October 2026. It is general information, not tax, legal or financial advice. Rules change, and individual cases have exceptions, so confirm your position with a chartered accountant before acting. Spotted an error? Tell us and we will correct it.