Unable to complete your ITR filing?
An Overseas Citizen of India (OCI) cardholder is a foreign citizen with specified rights to enter, live and work in India. OCI is not dual citizenship and does not itself determine Indian tax liability. Taxability depends mainly on the person’s residential status for each year and the source and place of receipt of income.
OCI, NRI and tax residency are different
- OCI: A foreign citizen registered under the Citizenship Act. An OCI generally has parity with NRIs in financial and economic matters but cannot normally purchase agricultural land, a farmhouse or plantation property.
- NRI: An Indian citizen who is non-resident under the applicable law.
- Tax resident: Determined separately every year from days stayed in India and special residency rules. An OCI may be non-resident, RNOR or resident and ordinarily resident.
Which income is taxable in India?
| Status | Income taxable in India |
|---|---|
| Non-resident | Income received or deemed received in India, and income accruing, arising or deemed to accrue or arise in India. |
| RNOR | The above, plus foreign income from a business controlled in India or profession set up in India. |
| Resident and ordinarily resident | Worldwide income, subject to treaty relief and foreign-tax credit rules. |
Indian rent, profit from property situated in India, salary for services performed in India and income from an Indian asset or source can be taxable through the deemed-accrual rules.
Foreign income first received outside India does not become taxable merely because the money is later remitted to India. However, it may still be taxable where the OCI is resident and ordinarily resident in India.
NRE, NRO and FCNR(B) accounts
| Account | General tax treatment |
|---|---|
| NRE | Interest is exempt while the individual qualifies as a person resident outside India under FEMA or is otherwise permitted by RBI to maintain the account. |
| NRO | Interest is taxable in India and normally subject to TDS. NRO accounts are commonly used for rent, pension, dividends and other Indian receipts. |
| FCNR(B) | Interest on eligible foreign-currency deposits is exempt for a non-resident or RNOR, subject to statutory and RBI conditions. |
Important: When residential status under FEMA changes, bank accounts should be redesignated promptly. Income-tax residency and FEMA residency are separate tests.
Sale of property in India
Capital gains from Indian land or buildings are taxable in India. Property held for more than 24 months is generally a long-term capital asset.
Long-term gains are generally taxed at 12.5% without indexation, plus applicable surcharge and cess. The special tax comparison using 20% with indexation for property acquired before 23 July 2024 is available only to a resident individual or HUF. A non-resident OCI does not receive this protection.
Stamp-duty value may replace the declared sale value where the statutory safe-harbour conditions are not met. Eligible relief may be available under sections 54, 54EC or 54F, subject to investment, ownership and time-limit conditions.
For AY 2026-27, where the seller is non-resident, the buyer must follow the withholding provisions under section 195 instead of the 1% property TDS provision under section 194-IA. A lower-deduction certificate may be considered where the expected TDS substantially exceeds the final tax liability.
1961 Act and 2025 Act mapping
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Residence and scope | Sections 5, 6, 7 and 9 | Sections 5, 6, 7 and 9 |
| NRE and FCNR exemptions | Sections 10(4)(ii) and 10(15)(iv)(fa) | Section 11 read with Schedule IV |
| Property capital gains | Sections 45, 48, 50C, 54, 54EC, 54F and 112 | Sections 67, 72, 78, 82, 85, 86 and 197 |
| Return filing | Section 139 | Section 263 |
Returns for income earned during FY 2025-26 must be filed for AY 2026-27 under the Income-tax Act, 1961. Income earned from 1 April 2026 onwards falls under the Income-tax Act, 2025.
How to file through myITreturn
- Log in to myITreturn.com and select the relevant member.
- Choose the correct residential status after entering the number of days stayed in India.
- Add Indian salary, rent, bank interest, dividends and capital gains. Report exempt NRE or FCNR interest separately wherever required.
- Match TDS with Form 26AS and AIS. Add property-sale details, purchase cost, improvement cost and eligible exemption claims.
- Use ITR-2 where there is no business or professional income. Use ITR-3 where business or professional income exists.
- Review the computation, pay any balance tax, submit the return and complete e-verification.
Foreign-asset reporting generally applies to resident and ordinarily resident taxpayers, not to non-residents or RNORs. A DTAA claim may require a valid Tax Residency Certificate and Form 10F.
Common mistakes to avoid
- Treating OCI status as automatic non-resident tax status.
- Leaving resident savings accounts unchanged after becoming non-resident under FEMA.
- Assuming NRO interest is exempt because the account holder lives abroad.
- Applying 1% property TDS when the seller is non-resident.
- Ignoring Indian rent or capital gains because the sale proceeds were remitted abroad.
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