All about NRI Tax Filing

An Indian citizen living or working abroad may still have income that is taxable in India. Whether an individual is required to pay tax or file an Income Tax Return (ITR) in India depends primarily on their residential status under the income-tax law and the nature and source of their income.

For a Non-Resident (NR), India generally taxes income that is received or deemed to be received in India or income that accrues, arises or is deemed to accrue or arise in India. Foreign income that does not have the required Indian nexus is generally outside the Indian tax net for a non-resident.

Who is considered a Non-Resident for Income Tax purposes?

Residential status is determined separately for every year. It is not determined merely by citizenship, passport, NRI bank-account status or the country in which a person works.

For FY 2025-26 / AY 2026-27, Section 6 of the Income-tax Act, 1961 applies.

As a general rule, an individual is treated as a resident in India if either:

• The individual stays in India for 182 days or more during the relevant year; or
• The individual stays in India for 60 days or more during the relevant year and for 365 days or more in aggregate during the four immediately preceding years.

If neither applicable condition is satisfied, the individual is generally treated as a non-resident.

However, special rules apply to Indian citizens leaving India for employment, Indian citizens leaving India as crew members and Indian citizens or Persons of Indian Origin visiting India.

Special 120-day rule for certain visitors to India

For an Indian citizen or Person of Indian Origin visiting India, the normal 60-day test is generally replaced by 182 days.

However, where such person's income, other than income from foreign sources, exceeds ₹15 lakh, the 60-day requirement is replaced by 120 days. Where the prescribed conditions are satisfied, the person may become Resident but Not Ordinarily Resident (RNOR) instead of a non-resident.

Deemed residency for certain Indian citizens

An Indian citizen whose income, other than income from foreign sources, exceeds ₹15 lakh may be deemed to be resident in India where the person is not liable to tax in any other country or territory by reason of domicile, residence or similar criteria.

Such deemed residents are generally treated as RNOR subject to the prescribed conditions.

Income-tax residency and FEMA residency are different

Residential status for income-tax purposes is determined under the Income-tax Act.

The Foreign Exchange Management Act (FEMA) separately determines whether a person is resident in or outside India for foreign-exchange, banking and related regulatory purposes.

The distinction can become important, particularly in relation to NRE accounts and other foreign-exchange-related transactions.

Income taxable in India for an NRI

An NRI is not automatically exempt from Indian income tax. Income having the required connection with India may be taxable in India.

1. Salary earned for services performed in India

Salary for services rendered in India is generally taxable in India even if the salary is credited outside India.

The position may be modified in certain situations by an applicable Double Taxation Avoidance Agreement (DTAA).

2. Income from house property in India

Rental income or other taxable income arising from a house property situated in India is generally taxable in India.

Eligible deductions under the house-property provisions may be claimed subject to the applicable conditions.

3. Capital gains from assets situated in India

Capital gains may arise when an NRI sells assets such as:

• Land or building situated in India
• Shares of Indian companies
• Mutual fund units
• Securities
• Other capital assets taxable in India

The applicable tax treatment depends on the type of asset, holding period, transaction date and the specific provisions governing the asset.

An applicable DTAA may also affect the taxation of capital gains.

4. Interest income

Interest from an NRO account or other taxable Indian deposits may be taxable in India.

However, interest on an eligible NRE account is generally exempt subject to the prescribed conditions.

Not every government bond or savings certificate is automatically tax-free. The specific instrument must qualify for exemption under the applicable provisions.

5. Dividend income

Dividend income from Indian companies is not generally exempt in the hands of an NRI.

Dividend income is generally taxable in the shareholder's hands, subject to the applicable provisions of the Income-tax Act and any beneficial DTAA rate.

6. Business or professional income

Business or professional income may be taxable in India where the non-resident has the required business connection, permanent establishment or other taxable presence or nexus in India.

Special provisions may also apply to particular businesses carried on by non-residents.

Which ITR should an NRI file?

For AY 2026-27, the applicable ITR form depends on the nature of income.

ITR-2

ITR-2 is generally applicable to a non-resident individual who does not have income from profits and gains of business or profession.

ITR-3

ITR-3 is generally applicable where the individual has income from business or profession along with other eligible heads of income.

The eligibility conditions for the relevant ITR form should always be checked before filing.

When is an NRI required to file an ITR?

NRI return-filing requirements should not be determined merely by applying the old ₹2.5 lakh threshold.

For AY 2026-27, the applicable threshold depends on factors including the applicable tax regime, nature of income and statutory return-filing conditions.

New Tax Regime rates for AY 2026-27

Under the old tax regime, the general basic exemption limit applicable to a non-resident individual is different.

Higher age-based exemption limits available to resident senior citizens should not automatically be applied to NRIs.

An NRI may also file an ITR where required to:

• Claim a refund of excess TDS
• Report taxable capital gains or other income
• Carry forward eligible losses
• Comply with another statutory return-filing requirement

Important: Section 87A rebate is not available to NRIs

The rebate under Section 87A is available only to qualifying resident individuals.

Therefore, an NRI cannot claim the Section 87A rebate merely because their income falls within the rebate threshold.

Due date for filing NRI returns for AY 2026-27

Deductions available to NRIs

NRIs may claim certain deductions where the statutory conditions are satisfied. However, the availability of deductions also depends on the tax regime selected.

Under the old tax regime

Depending on eligibility, an NRI may be able to claim deductions such as:

• Section 80C for eligible investments or payments
• Section 80CCD for qualifying pension contributions
• Section 80D for eligible health-insurance premiums and specified medical expenditure
• Section 80E for eligible education-loan interest
• Section 80G for qualifying donations
• Other deductions where the relevant section permits a non-resident to claim them

Not every deduction available to a resident taxpayer is available to an NRI. A deduction specifically restricted to a resident individual cannot be claimed merely because the taxpayer is an Indian citizen.

Under the new tax regime

Most Chapter VI-A deductions are not available under the new tax regime.

Only specified deductions permitted under the new regime, such as eligible employer contributions under Section 80CCD(2), may be claimed subject to the applicable conditions.

Accordingly, an NRI should not assume that deductions such as Section 80C or Section 80D can be claimed while remaining under the default new tax regime.

TDS on payments to NRIs

TDS rules for non-residents differ from the rules commonly applicable to resident taxpayers.

For many payments to non-residents, Section 195 applies where the payment represents a sum chargeable to tax in India.

The applicable withholding rate can depend on:

• Nature of income
• Applicable provisions of the Income-tax Act
• Surcharge and cess, where applicable
• Relevant DTAA provisions
• Availability of a valid Tax Residency Certificate and other documentation
• Availability of a lower or nil deduction certificate

Where appropriate, a taxpayer may apply for a lower or nil withholding certificate under the applicable provisions.

Can an NRI submit Form 15G or Form 15H?

No.

Forms 15G and 15H under the Income-tax Act, 1961 are available only to eligible resident taxpayers.

Non-residents cannot use these declarations to prevent TDS.

From Tax Year 2026-27, Forms 15G and 15H are replaced by Form 121 under the Income-tax Act, 2025. However, non-residents continue to be ineligible for such declaration.

Where excessive TDS is expected, the lower or nil withholding certificate mechanism may instead be examined.

Double Taxation Avoidance Agreement – DTAA

The same income may sometimes become taxable both in India and in the country where the NRI is resident.

India has entered into Double Taxation Avoidance Agreements with several countries to provide relief from double taxation.

Where a DTAA applies, the taxpayer may generally apply the provisions of the Income-tax Act or the applicable DTAA, whichever is more beneficial, subject to the relevant statutory and treaty conditions.

Depending on the treaty, relief may be provided through:

• Exemption of income in one country
• Foreign tax credit
• A restricted or concessional tax rate
• Allocation of taxing rights between the two countries

To claim treaty benefits, an NRI may be required to obtain:

• A valid Tax Residency Certificate (TRC) from the foreign jurisdiction
• Form 10F, where applicable
• Other supporting documentation required for the relevant DTAA claim

Section 115G – When may an NRI not need to file an ITR?

Section 115G does not provide a general exemption from income tax.

Instead, it provides a limited relaxation from the requirement to furnish a return where specified conditions are satisfied.

Under the Income-tax Act, 1961, a Non-Resident Indian may not be required to furnish a return under Section 139(1) where:

1. The person's total income consists only of specified investment income, long-term capital gains from qualifying foreign-exchange assets, or both; and
2. The required tax has been deducted at source from such income.

This is a specific relaxation and should not be treated as a general exemption available to every NRI.

Documents generally required for NRI tax filing

The documents required depend on the taxpayer's income and transactions. Common documents include:

1. PAN
2. Passport and travel details for determining days of stay in India
3. Form 16, where salary is taxable in India
4. Form 16A or other applicable TDS certificates
5. Form 26AS
6. Annual Information Statement (AIS)
7. Taxpayer Information Summary (TIS)
8. NRO/NRE bank statements and interest certificates
9. Details of income earned or received in India
10. Property purchase, sale and rental documents
11. Demat, broker and capital-gains statements
12. Mutual fund transaction statements
13. Business or professional income records, where applicable
14. Proof of eligible deductions and exemptions
15. Tax Residency Certificate and Form 10F where DTAA benefits are claimed
16. Details of advance tax and self-assessment tax paid

Advance tax for NRIs

Advance-tax provisions may apply where the taxpayer's advance-tax liability is ₹10,000 or more after considering eligible TDS and other tax credits.

Where advance tax is payable but is not paid correctly within the prescribed instalments, interest may become applicable under the relevant provisions.

Income-tax Act, 1961 vs Income-tax Act, 2025

A significant transition applies from 1 April 2026.

Accordingly, residential status and income-tax liability for FY 2025-26 / AY 2026-27 continue to be determined under the Income-tax Act, 1961.

Income arising from 1 April 2026 falls under the Income-tax Act, 2025 for Tax Year 2026-27 onwards.

Frequently Asked Questions

Is it mandatory for every NRI to file an ITR in India?

No. Filing depends on the individual's taxable income, applicable basic exemption limit, nature of income and other statutory return-filing requirements.

An NRI may also file a return to claim a refund of excess TDS or for another tax-related purpose even where filing is not otherwise mandatory.

Is foreign salary taxable in India for an NRI?

A non-resident is generally taxable in India on income received or deemed to be received in India and income accruing, arising or deemed to accrue or arise in India.

Salary for services rendered in India can therefore be taxable even where it is paid outside India.

Is NRE account interest taxable?

Interest from an eligible NRE account is generally exempt subject to the statutory conditions, including the applicable FEMA/RBI residential-status conditions.

Is NRO account interest taxable?

NRO account interest is generally taxable in India and is normally subject to applicable withholding provisions.

Can NRIs claim the Section 87A rebate for AY 2026-27?

No. Section 87A applies to qualifying resident individuals and is not available to non-residents.

Can an NRI use Form 15G or Form 15H to prevent TDS?

No. Forms 15G and 15H are restricted to qualifying resident taxpayers.

From Tax Year 2026-27, the replacement Form 121 under the Income-tax Act, 2025 also does not make non-residents eligible for this declaration.

Can an NRI claim a refund if excess TDS has been deducted?

Yes. If the tax deducted in India exceeds the final tax liability determined under the Income-tax Act and the applicable DTAA, the NRI may file the relevant ITR and claim the eligible refund.

Conclusion

NRI taxation depends on much more than citizenship or the fact that a person lives overseas. Residential status must first be determined for the relevant year, after which the source and nature of each income must be examined.

NRIs earning salary, rent, interest, dividends, capital gains or business income connected with India should also review the applicable TDS provisions, DTAA benefits, deductions and correct ITR form before filing.

The transition to the Income-tax Act, 2025 from 1 April 2026 makes the relevant year particularly important. The return for FY 2025-26 / AY 2026-27 continues to be governed by the Income-tax Act, 1961, while income arising from 1 April 2026 onwards falls under the Income-tax Act, 2025.

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