If you earn, invest or own property in India while living in the United States, you need a working picture of the Indian tax system before any form makes sense. This India tax system overview explains who collects which tax, how the April-to-March financial year works, what changed on April 1, 2026 when the Income-tax Act, 2025 replaced the Income-tax Act, 1961, and which dates matter for NRIs, OCI holders, returning residents and Indian-Americans with family ties to Pune, Hyderabad, Bengaluru or Ahmedabad.
India tax system overview: who collects what
India taxes at three levels. The Union government collects income tax (on individuals, companies and others), customs duty and the central share of Goods and Services Tax (GST). State governments collect stamp duty and registration charges on property, professional tax and the state share of GST. Cities and towns, such as the municipal corporations of Pune or Hyderabad, levy annual property tax. The India hub on this site covers each area in detail.
| Layer | Main taxes | Where it usually touches an NRI |
|---|---|---|
| Union | Income tax, TDS and TCS, customs, central GST | Rent, interest, dividends, capital gains, remittances |
| State | Stamp duty, registration fee, professional tax, state GST | Buying, selling or gifting property; running a business |
| Municipal | Property tax, water and cess charges | Owning a flat or house you do not live in |
Income tax is administered by the Central Board of Direct Taxes (CBDT) through the e-filing portal at incometax.gov.in. GST registration and returns run through the GST portal; see our guide to GST registration and returns in India if you earn commercial rent or run a business.
What is the financial year, and what is a "tax year"?
The financial year (FY) is April 1 to March 31 for almost every taxpayer. Under the 1961 Act, income was earned in the "previous year" and taxed in the following "assessment year". The 2025 Act defines "tax year" as the twelve-month period of the financial year starting on April 1 (a business or income source that begins mid-year gets a shorter first tax year).
| Income earned | Governing law | Label used |
|---|---|---|
| April 1, 2025 to March 31, 2026 | Income-tax Act, 1961 | FY 2025-26, filed as AY 2026-27 |
| April 1, 2026 to March 31, 2027 | Income-tax Act, 2025 | Tax year 2026-27 |
CBDT's own transition FAQs confirm there is no missing year and no overlap, and that the 2025 Act introduces no new tax. The full change list is on our page about the Income-tax Act 2025 transition. Residents of the United States should note the mismatch with the U.S. calendar tax year; the side-by-side deadline comparison shows both.
Who is taxed on what?
Your residential status decides the reach of Indian tax. A resident pays tax on income from anywhere in the world. A non-resident pays tax only on income received or deemed received in India, or accruing or arising in India. A resident but not ordinarily resident (RNOR) is in between: foreign income is generally taxed only if it comes from a business controlled in India or a profession set up in India. The tests are explained in India residency rules: resident, NRI and RNOR, and the main Indian-source items are listed in NRI income taxable in India.
What are the income tax rates for individuals?
The "new tax regime" is the default for individuals. Section 202 of the 2025 Act sets these slab rates, and the e-filing portal shows the same structure for FY 2025-26:
| Total income (₹) | Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Taxpayers may opt out of the new regime in the return and use the older regime with deductions; business owners must follow the option deadlines. A 4% health and education cess applies, and a surcharge begins at 10% once total income passes ₹50 lakh. The tax rebate that wipes out tax up to ₹12 lakh of income is for resident individuals only; the portal's ITR-2 FAQ confirms non-residents cannot claim it. Special rates for capital gains, dividends and NRI investment income sit on top of these slabs.
Key dates for FY 2025-26 and tax year 2026-27
| Item | Date or rule |
|---|---|
| Advance tax (tax payable of ₹10,000 or more) | 15% by June 15, 45% by September 15, 75% by December 15, 100% by March 15 |
| ITR due date, individuals without business income | July 31 following the year (July 31, 2026 for AY 2026-27; July 31, 2027 for tax year 2026-27) |
| ITR due date, business income without audit | August 31 |
| ITR due date, accounts audited | October 31 (September 2026 circular moved some AY 2026-27 audit-case dates to November 21) |
| Belated return for AY 2026-27 | Up to December 31, 2026, with a late fee of ₹1,000 (income up to ₹5 lakh) or ₹5,000 |
| Updated return (ITR-U), tax year 2026-27 onward | Within 48 months from the end of the financial year after the tax year |
Late payment of advance tax attracts interest under sections 234B and 234C of the 1961 Act for FY 2025-26. The portal's news page lists every extension; check it before relying on any date. Our India compliance calendar for FY 2026-27 tracks them.
How TDS, TCS and advance tax fit in
Most Indian tax reaches the government before you file. Banks, tenants, buyers and mutual funds deduct tax at source (TDS) when they pay you; the 2025 Act keeps the same TDS rates and thresholds as the 1961 Act, only re-presented in section 393. Tax collected at source (TCS) is charged on certain purchases and on remittances above ₹10 lakh under the Liberalised Remittance Scheme. Whatever was deducted shows in your AIS and Form 26AS, and the return reconciles it with the real liability. NRIs often find TDS exceeds final tax, which creates a refund.
A worked example
Meera grew up in Pune and now works in Aurora, Illinois. In FY 2025-26 she earned ₹4,80,000 of rent and interest from India, spent 70 days in India and has no Indian salary. As an Indian citizen on a visit, only the 182-day test applies to her, so she is a non-resident. Her income was received in India, so it is taxable there; her U.S. salary is not. Her FY 2025-26 return belongs to AY 2026-27 under the 1961 Act, with a July 31, 2026 due date, so if she missed it she can still file a belated return before December 31, 2026. Rent she earns from April 2026 belongs to tax year 2026-27 under the 2025 Act and is due by July 31, 2027. She needs a PAN and a registered portal account either way.
Mistakes to avoid
- Calling FY 2026-27 "assessment year 2027-28". Under the 2025 Act the label is tax year 2026-27.
- Assuming Indian rules follow the U.S. calendar year or that a U.S. extension applies in India.
- Ignoring small Indian income because TDS was deducted; a return may still be required or may recover over-deducted tax.
- Using ITR-1, which is only for residents other than RNOR. See NRI ITR filing step by step.
U.S. side
U.S. citizens, green card holders and resident aliens report worldwide income on Form 1040, including Indian rent, interest and gains, and may claim a foreign tax credit for Indian tax paid; see U.S. taxpayers with India income and assets and the US-India tax treaty explained. Indian accounts can trigger FBAR and Form 8938 filing.
How we can help
Our firm in the Aurora and Fox Valley area of Illinois prepares the U.S. return and foreign-account reports, and we coordinate with your Indian Chartered Accountant so the U.S. and Indian filings agree. We do not file Indian returns or represent clients before Indian tax authorities. See cross-border tax for India, Canada and USA and individual returns for newcomers and NRIs.
Frequently asked questions
Does India have a federal and state income tax like the United States?
No. Income tax on individuals is levied only by the Union government. States tax property transactions, professions and their share of GST, but not personal income.
Is the Indian financial year the same as the U.S. tax year?
No. India uses April 1 to March 31. The U.S. individual tax year is normally the calendar year, so one U.S. return covers parts of two Indian years.
What is the difference between assessment year and tax year?
Assessment year was the year after income was earned, used up to AY 2026-27. Tax year is the same year the income is earned and applies from FY 2026-27 under the 2025 Act.
Do I have to file in India if my Indian income is small?
It depends on the type of income, whether tax was deducted, and whether total income exceeds the basic exemption. Confirm with your CA; the rules are covered in NRI ITR filing.
Can I rely on this page for the current year's rules?
It reflects official sources reviewed in October 2026. Provisions can change by notification or circular, so your Indian CA should confirm them for your year.
Official sources
- Income Tax Department: Income-tax Act, 2025 (30 of 2025), as amended by the Finance Act, 2026
- CBDT: FAQs on Interplay and Transition from the Income-tax Act, 1961 to the Income-tax Act, 2025
- Income Tax Department e-filing portal: Returns and forms applicable for AY 2026-27
- GST Portal
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.