Non-resident Indians (NRIs) with India-sourced income must file income tax returns (ITR) for compliance, claiming refunds, and carrying forward losses. While interest earned on Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) accounts is exempt from tax, interest on Non-Resident Ordinary (NRO) accounts is taxable.
Income from rental income from property in India, capital gains from Indian assets, dividends from Indian companies are taxable. However, if an NRI’s total income consists only of investment income and/or long-term capital gains subject to specific tax rates under Chapter XIIA of the Income-tax Act, 1961, and tax has been deducted at source on such income, then they are not required to file an ITR.
Mandatory disclosures
When filing ITR in India, NRIs must disclose their residential status, income earned or sourced from India such as rent, interest, salary, capital gains, and details of Indian assets. Foreign assets and income need not be declared unless the NRI becomes a resident and ordinarily resident, in which case Schedule FA will also be required to be filled.
NRIs must report TDS and tax credits (via Form 26AS), provide Indian bank account details for refunds, and if claiming DTAA benefits, submit details of foreign taxes paid, country of residence, and a valid Tax Residency Certificate and electronically filed Form 10F.
Sandeep Sehgal, partner-Tax, AKM Global, a tax and consulting firm, says the taxpayer must have a pre-validated Indian bank account, which can include an NRO account, to claim an income tax refund in India. “It is noteworthy to mention that refunds cannot be processed to a foreign bank account.”
Exemptions for NRIs
All NRIs are eligible for various deductions such as under Section 80C for investments in life insurance premiums, tuition fees, equity-linked savings schemes, and Public Provident Fund, premium paid for medical insurance (Section 80D), etc. However, deductions under sections like 80TTB (for senior citizens) and 80U are not available to them. These deductions are available only in the old tax regime.
To avoid double taxation, India has signed Double Taxation Avoidance Agreements (DTAAs) with several countries. These agreements ensure that NRIs are not taxed twice on the same income. Relief under DTAAs is provided through various mechanisms, including the exemption method (where income is taxed only in one country), the tax credit method (where income is taxed in both countries, but a credit is given for tax paid abroad). Taxpayers can claim the benefit of foreign tax credit paid by filing the Form 67 on or before the end of the relevant assessment year.
Sanjoli Maheshwari, executive director , Nangia & Co LLP, says NRIs must furnish a Tax Residency Certificate from their country of residence, file online Form 10F, and provide a declaration of beneficial ownership to avail DTAA benefits. “It would be pertinent to note that in case beneficial provisions as per the relevant DTAA are considered, then NRIs would be required to file their tax returns in India,” he says.
ITR forms for NRIs
For the Assessment Year 2025–26, most Non-Resident Indians (NRIs) are required to file their income tax returns using Form ITR-2. This form is suitable for NRIs having income from salary, income from house property, capital gains (from Indian assets), income from other sources (interest from NRO, dividends) etc.
Importantly, ITR-1 (Sahaj) is not available to NRIs, as it is restricted to resident individuals with income only from salary, one house property, and other limited sources. In rare cases where an NRI has income from a proprietary business or profession in India, Form ITR-3 may be applicable. However, for the vast majority of NRIs who do not have business income, ITR-2 remains the standard return form to be filed.
Sonam Chandwani, managing partner, KS Legal & Associates, says filing the return using an incorrect form may lead to the return being treated as defective. “It will result in delays in processing, or even rejection of refund claims. So, careful assessment of income sources and residential status is imperative before selecting the appropriate ITR form,” she says.
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