How to File Income Tax Return in India as an NRI

Suresh from Dubai called me last week in panic. He'd been living in Dubai for 4 years, earning AED 22,000 monthly, with some rental income and FDs in India. 

His CA back home told him he must file ITR, his cousin said he doesn't need to since he's an NRI, and his bank relationship manager was giving him a third opinion.

"Ankur, I'm completely confused. I live in Dubai, work here, pay no tax here. Do I really need to file tax returns in India? And if yes, how do I do it sitting here?"

This confusion is more common than you think. 

After helping over 300 NRIs navigate their tax obligations, I can tell you that most NRIs either file unnecessarily (wasting time and money) or skip filing when they should (risking penalties and losing refunds).

The truth is: whether you need to file ITR as an NRI depends on specific factors that most people - including some CAs - don't fully understand. 

Even when filing isn't mandatory, it's often beneficial for claiming refunds, establishing financial history, or preparing for your return to India.

By the end of this comprehensive guide, you'll know exactly when you must file ITR as an NRI, which form to use, how to maximize your refunds through DTAA benefits, the complete step-by-step filing process you can complete from anywhere in the world, and most importantly - how to avoid the costly mistakes that trigger tax department notices.

The Quick Answer: When NRIs Must File ITR

Let me give you the bottom line first, then we'll dive deep into each aspect:

You MUST file ITR in India if:

• Your total Indian income exceeds ₹2.5 lakh (old regime) or ₹3 lakh (new regime) annually
• You have capital gains from selling Indian property/shares
• TDS has been deducted on your Indian income and you want refunds
• You have business or professional income in India
• You want to carry forward losses for future tax benefits

You SHOULD consider filing even if not mandatory if:

• You want to claim TDS refunds (even if income is below exemption limit)
• You're planning to return to India and want to establish tax compliance history
• You have taken a home loan in India and want to claim interest deductions
• You want to use the return for visa applications or financial documentation

👉 Tip: When in doubt, file. The penalty for not filing when required is much higher than the small cost of filing when not required.

Now let's understand exactly how to determine your obligations and optimize your tax planning.

Determining Your Tax Residential Status: The Critical First Step

Before you can file ITR, you must determine your residential status for tax purposes. This isn't about your passport or where you feel "at home" - it's a specific calculation that determines your entire tax obligation.

The Three Categories Explained

Non-Resident Indian (NRI): You're an NRI if you've stayed in India for less than 182 days in the financial year. As an NRI, you only pay tax on Indian income.

Resident: If you've stayed in India for 182+ days in the financial year, you're a resident and must pay tax on global income.

Resident but Not Ordinarily Resident (RNOR): A special category for returning Indians who get partial NRI benefits for 2 years.

The Day-Counting Rules

The calculation is more nuanced than most people realize:

Primary Test: 182+ days in India during the financial year = Resident 

Secondary Test: 60+ days in current year AND 365+ days in preceding 4 years = Resident 

Exception for Indian Citizens: The 60-day rule becomes 182 days for Indian citizens visiting India

Real-World Examples

Case 1: Raj lives in Dubai, visited India for 45 days during FY 2024-25. 

Status: NRI (less than 182 days) 

Tax Liability: Only Indian income

Case 2: Priya returned to India in December 2024, stayed 120 days in FY 2024-25. 

Status: NRI (less than 182 days) 

Note: May become resident in subsequent year

Case 3: Amit visits India every year for 90 days, has been doing so for 6 years. 

Status: Resident (Secondary test: 90 days current + 365+ days in preceding 4 years) 

Tax Liability: Global income

👉 Tip: Keep detailed records of your India visits including flight tickets and passport stamps. The tax department can ask for proof of your residential status.

Income Categories That Trigger ITR Filing for NRIs

Understanding what constitutes "Indian income" is crucial because this determines your filing obligation and tax liability.

Salary Income from India

Scenario 1: Salary received in India - Always taxable 

Scenario 2: Salary for services rendered in India - Taxable even if paid abroad 

Scenario 3: Foreign salary credited to Indian account - Generally taxable

Example: If you work for a Dubai company but spend 3 months annually in their Mumbai office, the proportionate salary for those 3 months is taxable in India.

Rental Income from Indian Property

All rental income from Indian properties is taxable for NRIs at slab rates. You can claim:

• 30% standard deduction
• Municipal taxes paid
• Interest on home loan (for let-out property)

Investment Income

Bank Interest:

• NRE account interest: Tax-free
• NRO account interest: Taxable at slab rates with 30% TDS
• Fixed deposits: Taxable with TDS deduction

Dividend Income: Taxable at slab rates (changed from 2020)

Mutual Fund Gains: Subject to capital gains tax based on holding period

Capital Gains from Indian Assets

Property Sales:

• Long-term (held >24 months): 20% with indexation benefit
• Short-term: Taxable at slab rates
• TDS: 20% on sale proceeds

Share Sales:

• Listed equity (held >12 months): 12.5% on gains >₹1.25 lakh
• Unlisted shares: 20% with indexation

👉 Tip: Don't ignore small amounts of Indian income. Even ₹50,000 in bank interest can trigger filing requirements and offer refund opportunities.

Tax Rates and Regimes: What NRIs Actually Pay

NRIs follow the same tax slabs as residents but have some important differences in application and benefits.

Tax Slabs for AY 2025-26

Key Differences for NRIs

No Section 87A Rebate: Unlike residents, NRIs don't get the ₹12,500 rebate, so they start paying tax from the first rupee above the exemption limit.

Higher TDS Rates: Banks and other payers deduct TDS at 30% for NRIs (vs 10% for residents), but this can be reduced by claiming DTAA benefits.

Limited Deductions: Some deductions like HRA are not available to NRIs, but investment-related deductions under Section 80C remain available.

Old vs New Regime for NRIs

New Regime Benefits:

• Lower tax rates on middle income slabs
• No need to maintain investment proofs
• Default regime from AY 2025-26

Old Regime Benefits:

• Deductions under Section 80C (₹1.5 lakh)
• Home loan interest deduction
• Better for NRIs with significant investments

👉 Tip: NRIs with home loans in India or substantial Section 80C investments often benefit more from the old regime. Calculate both scenarios before choosing.

ITR Form Selection: Which Form NRIs Should Use

Choosing the wrong ITR form is one of the most common mistakes NRIs make. Here's your decision tree:

ITR-1 (Sahaj): NOT for NRIs

Despite having simple income, NRIs cannot use ITR-1. This form is explicitly restricted to residents only.

ITR-2: Most Common for NRIs

Use ITR-2 if you have:

• Salary income from India
• Income from house property
• Capital gains
• Foreign assets or income (even if not taxable in India)
• Income from other sources (bank interest, dividends)

What you can report:

• Multiple income heads
• Foreign assets disclosure (Schedule FA)
• Capital gains with detailed computation

ITR-3: For Business Income

Use ITR-3 if you have:

• Business or professional income in India
• Partnership firm income
• Income requiring books of accounts

ITR-4 (Sugam): Limited Use for NRIs

Only for NRIs opting for presumptive taxation on small business income (turnover \<₹2 crore).

Form Selection Examples

Example 1: Software engineer in Dubai with NRO FD interest and rental income Form: ITR-2

Example 2: Consultant with professional income from Indian clients Form: ITR-3

Example 3: Businessperson with small trading income opting for presumptive taxation Form: ITR-4

👉 Tip: When in doubt between ITR-2 and ITR-3, choose ITR-3. It accommodates more income types and won't cause processing delays.

DTAA Benefits: Your Shield Against Double Taxation

Double Taxation Avoidance Agreements are your most powerful tool for reducing tax liability, yet most NRIs don't use them effectively.

How DTAA Works

DTAA ensures you don't pay tax on the same income in both India and your country of residence. India has DTAA with over 100 countries, including all major NRI destinations.

Common DTAA Benefits for UAE NRIs

Interest Income:

• Normal rate: 30% TDS
• With DTAA: Often reduced to 10-12.5%
• Method: Submit Form 10F to payer

Rental Income:

• Generally taxed at slab rates
• DTAA may provide relief in country of residence

Professional Services:

• DTAA often provides complete exemption if services rendered abroad

Claiming DTAA Benefits

Step 1: Obtain Tax Residency Certificate (TRC) from UAE/your country 

Step 2: Submit Form 10F to Indian payers before income payment 

Step 3: Claim additional relief in ITR if needed 

Step 4: Maintain documentation for both countries' tax filings

DTAA vs Unilateral Relief

If your country doesn't have DTAA with India, you can still claim unilateral relief under Section 91, but the process is more complex and benefits are limited.

Real Example of DTAA Savings

Without DTAA: ₹5 lakh NRO interest → 30% TDS = ₹1.5 lakh 

With UAE DTAA: Same interest → 12.5% TDS = ₹62,500 

Annual Savings: ₹87,500

👉 Tip: Submit Form 10F before the start of each financial year to all your Indian income sources. This prevents excess TDS rather than claiming refunds later.

Step-by-Step Online ITR Filing Process

Filing ITR online from abroad is straightforward once you understand the process. Here's the exact step-by-step method:

Pre-Filing Preparation

Documents Needed:

• PAN card
• Aadhaar (if available)
• Form 26AS (download from e-filing portal)
• Bank statements for all Indian accounts
• Investment statements (FDs, mutual funds, etc.)
• Property tax receipts and rental agreements
• TDS certificates from all sources

Account Setup:

• Register on incometax.gov.in using PAN
• Verify email ID and mobile number
• Download Form 26AS to check pre-filled TDS details

The Filing Process

Step 1: Login and Form Selection

• Log into e-filing portal
• Select Assessment Year 2025-26
• Choose appropriate ITR form (usually ITR-2 for NRIs)
• Select online or offline mode (online recommended)

Step 2: Personal Information

• Confirm PAN, name, and address details
• Select residential status as "Non-Resident"
• Choose tax regime (new is default, but check if old is better for you)

Step 3: Income Details

• Enter salary income (if any) from India
• Report house property income with deductions
• Add capital gains with proper computation
• Include income from other sources (bank interest, dividends)

Step 4: Foreign Assets Disclosure

• Report foreign bank accounts (even if no income)
• Include foreign investments and properties
• This is mandatory for NRIs and closely monitored

Step 5: Deductions and Exemptions

• Claim Section 80C investments (if using old regime)
• Add home loan interest deduction
• Include other eligible deductions

Step 6: Tax Computation and Payment

• Review calculated tax liability
• Adjust for TDS already deducted (from Form 26AS)
• Pay additional tax if required or claim refund

Step 7: Verification

• Submit the return online
• Verify within 30 days using Aadhaar OTP, EVC, or physical verification
• Keep acknowledgment receipt safe

👉 Tip: File your return at least 15 days before the deadline. Last-minute filing often leads to technical issues and mistakes.

TDS, Refunds, and Tax Payments

Understanding TDS and refund mechanisms is crucial for NRIs since you often pay more tax than required due to higher TDS rates.

TDS Rates for NRIs

Common TDS Rates:

• Bank interest: 30% (vs 10% for residents)
• Rent payments: 30%
• Professional fees: 30%
• Dividend: 10%

Claiming TDS Refunds

When You Get Refunds:

• TDS deducted exceeds actual tax liability
• DTAA provides lower tax rates
• Total income is below exemption limit but TDS was deducted

Refund Process:

• File ITR showing TDS greater than tax liability
• Provide correct bank account details for refund
• Use same bank account consistently to avoid delays
• Refunds typically processed within 45-60 days

Advance Tax for NRIs

If your tax liability exceeds ₹10,000 after TDS, you must pay advance tax in quarterly installments:

Self-Assessment Tax

Pay any remaining tax liability while filing ITR to avoid interest and penalties.

👉 Tip: Maintain a separate Indian bank account just for tax-related transactions. This simplifies record-keeping and speeds up refund processing.

Capital Gains Taxation: The Complex but Critical Area

Capital gains from Indian assets are often the most complex part of NRI taxation but can significantly impact your tax liability.

Property Capital Gains

Long-Term Capital Gains (holding >24 months):

• Tax rate: 20% with indexation benefit
• TDS: 20% on sale proceeds (can be reduced with lower/nil certificate)
• Exemptions: Section 54 (reinvestment in residential property), Section 54EC (bonds)

Short-Term Capital Gains (holding ≤24 months):

• Tax rate: As per slab rates
• TDS: As per slab rates
• No indexation benefit

Share and Mutual Fund Gains

Listed Equity Shares:

• Long-term (>12 months): 12.5% on gains exceeding ₹1.25 lakh
• Short-term (≤12 months): 20% flat rate

Unlisted Shares:

• Long-term (>24 months): 20% with indexation
• Short-term (≤24 months): As per slab rates

Advance Tax on Capital Gains

Capital gains income requires advance tax payment by 15 March of the same financial year (not in quarterly installments).

Record-Keeping for Capital Gains

Maintain detailed records of:

• Purchase documents with dates and prices
• Improvement costs with receipts
• Sale deed with final sale price
• Brokerage and legal costs
• Indexation calculations

👉 Tip: For property sales, apply for lower/nil TDS certificate in advance to avoid locking up 20% of sale proceeds unnecessarily.

Common Filing Mistakes That Trigger Notices

Based on my experience with NRI tax cases, here are the most common mistakes that lead to tax department scrutiny:

Residential Status Errors

Mistake: Claiming NRI status without proper calculation 

Solution: Document your India stay days meticulously and apply tests correctly

Income Reporting Errors

Mistake: Not reporting foreign income even when not taxable 

Solution: Disclose all income sources for transparency

DTAA Claim Errors

Mistake: Claiming DTAA benefits without proper documentation 

Solution: Maintain TRC and Form 10F filing proof

Foreign Asset Disclosure

Mistake: Not disclosing foreign bank accounts or investments 

Solution: Report all foreign assets even if they generate no income

Form Selection Errors

Mistake: Using ITR-1 or wrong form type 

Solution: Use ITR-2 for most NRI situations, ITR-3 for business income

Verification Delays

Mistake: Not verifying ITR within 30 days 

Solution: Set calendar reminders and verify immediately after filing

👉 Tip: If you receive a tax notice, don't panic. Most notices are for minor discrepancies that can be resolved with proper documentation and explanation.

Deadlines, Penalties, and Compliance Calendar

Understanding deadlines is crucial for avoiding penalties and maintaining compliance.

ITR Filing Deadlines for AY 2025-26

Regular ITR Filing: 15 September 2025 (extended from 31 July) 

For Tax Audit Cases: 31 October 2025 Revised Return: Until 31 December 2025

Late Filing Penalties

Filing after due date but before 31 December:

• ₹5,000 if income >₹5 lakh
• ₹1,000 if income ≤₹5 lakh

Filing after 31 December: Not allowed (must file for subsequent AY)

Other Important Deadlines

Advance Tax: Quarterly installments ending 15 March 

TDS/TCS Statements: Quarterly by payers 

Form 10F Submission: Before income payment or start of FY

Compliance Calendar for NRIs

April-May:

• Collect all tax documents for previous FY
• Submit Form 10F for current FY to avoid excess TDS

June-August:

• File ITR for previous FY
• Pay any additional tax liability

September:

• Verify filed returns
• Pay advance tax installment

December:

• File revised returns if needed
• Plan tax-saving investments for current FY

March:

• Pay final advance tax installment
• Complete tax-saving investments

👉 Tip: Set up automated reminders for all tax deadlines. Missing deadlines not only incurs penalties but also prevents carrying forward of losses.

Professional Help vs Self-Filing: Making the Right Choice

Deciding whether to file yourself or hire a professional depends on your situation complexity and comfort level.

When to Consider Self-Filing

Simple Cases:

• Only salary and bank interest income
• No capital gains or complex investments
• Comfortable with online processes
• Want to understand your tax position better

Tools Available:

• Income tax department's online portal
• Built-in calculators and help guides
• Pre-filled information from Form 26AS

When Professional Help is Recommended

Complex Cases:

• Multiple income sources across countries
• Significant capital gains or business income
• DTAA benefits optimization
• Previous years' corrections needed
• Property transactions or major investments

Benefits of Professional Help:

• Expert knowledge of latest rules
• Optimization strategies for tax savings
• Representation in case of notices
• Time savings and reduced stress

Choosing the Right Professional

Look for:

• CA with NRI taxation expertise
• Experience with your country of residence
• Available for year-round consultation
• Technology-enabled service delivery
• Transparent fee structure

Cost Considerations

Self-Filing: ₹0 (only time investment) 

Basic Professional Service: ₹2,000-5,000 

Comprehensive Service: ₹5,000-15,000 

Complex Cases: ₹15,000+

👉 Tip: Even if you choose self-filing, consider a one-time consultation with a tax expert to understand your specific situation and avoid costly mistakes.

Post-Filing Requirements and Ongoing Compliance

Filing ITR is not the end of your tax obligations. Here's what comes next:

Verification Requirements

Must verify within 30 days using:

• Aadhaar OTP (easiest for NRIs)
• Electronic Verification Code (EVC)
• Physical verification (send signed ITR-V to CPC Bangalore)

Processing and Refunds

Processing Timeline: 6-12 months for online returns 

Refund Timeline: 45-60 days after processing 

Status Tracking: Available on e-filing portal

Record Maintenance

Keep for 7 years:

• Filed ITR copies
• Supporting documents
• TDS certificates
• Investment proofs
• Foreign asset statements

Ongoing Compliance

Annual Requirements:

• File ITR by due dates
• Pay advance tax if applicable
• Update address changes with tax department
• Renew Form 10F submissions

Responding to Notices:

• Respond within specified timeframes
• Provide requested documents
• Seek professional help for complex notices

👉 Tip: Maintain a digital folder with all tax documents organized by year. This makes future filings easier and helps during any tax department queries.

Your NRI Tax Filing Action Plan

Here's your systematic approach to mastering NRI tax filing:

Immediate Steps (This Month):

• Determine your exact residential status using the day-counting rules
• Gather all documents from Indian income sources
• Download Form 26AS and check for discrepancies
• Register/update details on income tax e-filing portal

Filing Preparation (Next Month):

• Choose between old and new tax regime based on your deduction eligibility
• Select appropriate ITR form (usually ITR-2 for most NRIs)
• Organize foreign asset information for mandatory disclosure
• Calculate preliminary tax liability to avoid surprises

Filing Process:

• File ITR online at least 15 days before deadline
• Double-check all income reporting and foreign asset disclosure
• Verify return within 30 days using Aadhaar OTP
• Pay any additional tax liability immediately

Ongoing Optimization:

• Submit Form 10F annually to minimize TDS
• Plan investments and property transactions for tax efficiency
• Maintain systematic records for all Indian financial transactions
• Review and update your tax strategy annually based on changing circumstances

Remember, the goal isn't just compliance - it's optimizing your tax position while maintaining full transparency with tax authorities. A well-planned approach to NRI taxation can save you significant money annually while ensuring you're always prepared for any scrutiny.

The key to successful NRI tax management is treating it as an integral part of your overall financial planning, not an annual chore. With proper understanding and systematic approach, you can turn tax compliance from a source of stress into a tool for financial optimization.

Ready to optimize your NRI tax filing and ensure full compliance? Get expert guidance on NRI taxation rules, understand DTAA benefits, and explore tax-efficient investment options that can reduce your overall tax liability while building wealth in India.