How NRIs Can File Income Tax Returns in India

The Indian diaspora is spread across the globe, with millions of Non-Resident Indians (NRIs) earning income abroad while still having financial ties to India. While many NRIs assume they don’t need to worry about taxes in India, the reality is more complex. If you earn income from Indian sources, such as property rentals, capital gains, fixed deposits, or dividends, you may be required to file Income Tax Returns (ITR) in India.

This comprehensive guide will walk you through how NRIs can file income tax returns in India in 2025, eligibility requirements, forms to use, step-by-step filing process, and common mistakes to avoid. By the end, you’ll have a clear roadmap to stay compliant with Indian tax laws while maximizing benefits.

Who Qualifies as an NRI?

Before understanding tax filing, you must determine your residential status under the Income Tax Act, 1961.

Residential Status Rules:

You are considered an NRI if:

• You stayed in India for less than 182 days in a financial year, OR

• You stayed in India for less than 60 days in a financial year AND less than 365 days in the preceding 4 years.

???? Remember: This calculation must be done each financial year to confirm your status.

When Should NRIs File an ITR in India?

An NRI must file income tax returns in India if:

1. Total taxable income in India exceeds ₹2.5 lakh in a financial year.

2. You have earned capital gains (short-term or long-term) from the sale of assets such as property, shares, or mutual funds in India.

3. You want to claim a refund for excess TDS (Tax Deducted at Source) deducted by banks or employers.

4. You want to carry forward losses (like capital loss) to future years.

Income Taxable in India for NRIs

As per Indian tax rules, NRIs are taxed only on income earned or accrued in India. Examples include:

• Salary income received in India (or for services rendered in India).

• Rental income from property located in India.

• Interest income from savings accounts, fixed deposits, and NRO accounts.

• Capital gains from the sale of property, shares, or mutual funds in India.

• Dividends received from Indian companies.

???? Note: Income earned abroad (salary, investments, or business) is not taxable in India for NRIs.

Tax Deductions and Benefits Available to NRIs

NRIs can also claim several deductions while filing their returns:

• Section 80C: Up to ₹1.5 lakh for investments in ELSS, NPS, life insurance premiums, principal repayment of home loan, etc.

• Section 80D: Health insurance premium deduction up to ₹25,000 (₹50,000 for parents).

• Section 80E: Deduction on education loan interest.

• Section 80G: Donations to eligible charities.

• Section 24(b): Deduction on home loan interest (up to ₹2 lakh).

Step-by-Step Guide for NRIs to File Income Tax Returns in India (2025)

Here’s a clear process NRIs should follow:

Step 1: Determine Your Taxable Income in India

• Collect details of salary (if any), rental income, interest income, and capital gains.

• Calculate total taxable income above ₹2.5 lakh (basic exemption limit).

Step 2: Gather Required Documents

You will need:

• PAN (Permanent Account Number)

• Passport (to determine residential status)

• Form 16 (if salary income in India)

• Form 26AS / AIS (Annual Information Statement for TDS details)

• Bank account statements (NRO/NRE accounts)

• Property transaction details (if applicable)

Step 3: Choose the Right ITR Form

• ITR-2: For NRIs with income from salary, house property, or capital gains.

• ITR-3: For NRIs with business or professional income in India.

Step 4: Log in to the Income Tax e-Filing Portal

• Visit incometax.gov.in.

• Log in using your PAN and password.

Step 5: Select the Assessment Year (AY)

• For income earned in FY 2024-25, select AY 2025-26.

Step 6: Fill in Income Details

• Enter details of income sources: salary, rent, interest, capital gains.

• Claim deductions (80C, 80D, etc.) as applicable.

Step 7: Validate TDS and Tax Payments

• Cross-check Form 26AS / AIS to ensure TDS deducted by banks or employers is correctly reflected.

• Pay any self-assessment tax if there is a shortfall.

Step 8: Verify Tax Calculation

• The portal auto-calculates your tax liability.

• Confirm the figures match your records.

Step 9: Submit the Return Online

• File the return electronically.

• Choose “e-Verification” via Aadhaar OTP, net banking, or send signed ITR-V to CPC Bangalore (if e-verification not possible).

Step 10: Keep Acknowledgment for Records

• Download and save the ITR acknowledgment for future reference.

Deadlines for NRIs to File ITR

• Standard due date: 31st July of the assessment year.

• For FY 2024-25 (AY 2025-26): Deadline is 31st July 2025 (unless extended by CBDT).

Common Mistakes NRIs Should Avoid

1. Not checking residential status carefully.

2. Forgetting to claim TDS refunds.

3. Using the wrong ITR form.

4. Not reporting rental or capital gains income.

5. Missing the filing deadline, leading to penalties.

Double Taxation and DTAA Benefits

One major concern for NRIs is double taxation—paying tax in both India and the country of residence. India has signed Double Taxation Avoidance Agreements (DTAA) with over 80 countries, including the USA, UK, Canada, UAE, and Singapore.

• Under DTAA, NRIs can either claim tax credit in their resident country or pay lower tax rates in India on certain incomes (like dividends or royalties).

• Example: If tax is deducted on interest income in India, you can claim credit for that in your resident country.

Frequently Asked Questions (FAQs)

Q1. Do NRIs need to file ITR in India if their income is only from NRE account interest?
No, interest earned on NRE and FCNR accounts is tax-free in India, so filing is not required unless you have other taxable income.

Q2. Can NRIs file ITR without being physically present in India?
Yes, NRIs can file online from anywhere in the world through the Income Tax e-Filing portal.

Q3. What if excess TDS has been deducted by the bank?
NRIs must file an ITR to claim a refund of excess TDS deducted on interest or other incomes.

Q4. Is rental income from property in India taxable for NRIs?
Yes, rental income is fully taxable. Tenants are required to deduct 30% TDS before paying rent to NRIs.

Q5. Which ITR form should NRIs use?
Generally, ITR-2 is used for salary, rental, or capital gains income, while ITR-3 applies if there is business income.

Q6. Can NRIs claim deductions under Section 80C?
Yes, NRIs can claim deductions for ELSS, life insurance, NPS, and repayment of home loan principal.

Q7. What happens if an NRI misses the ITR filing deadline?
A late fee of up to ₹5,000 may apply under Section 234F, and loss carry-forward benefits may be lost.

Q8. Do NRIs need Aadhaar to file ITR?
Aadhaar is not mandatory for NRIs. PAN is sufficient to file returns.

Q9. How are capital gains taxed for NRIs in India?

• Short-term gains (property: held <2 years, shares <12 months) are taxed at normal slab rates.

• Long-term gains are taxed at 20% (with indexation) for property and 10–15% for listed securities.

Q10. How does DTAA help NRIs?
DTAA prevents double taxation by allowing tax relief or lower withholding tax rates, depending on the treaty with the NRI’s country of residence.

Conclusion

Filing income tax returns in India as an NRI may seem complicated, but with the right information, the process is straightforward. By determining your residential status, calculating taxable income, selecting the correct ITR form, and filing online through the government portal, you can remain fully compliant with Indian tax laws.

The key is to plan ahead, claim eligible deductions, and make use of DTAA benefits to avoid double taxation. With digital platforms, NRIs can now file ITRs online from anywhere in the world, making compliance easier than ever before.