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.
He felt completely confused. Helive in Dubai, works there, pay no tax there. Does he really need to file tax returns in India? And if yes, how can he do it sitting there?"
This confusion is more common than you think. After helping over 300 NRIs navigate their tax obligations, we 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. More importantly, 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 lakhs (old tax regime) , for FY 202-25 ₹3 lakhs (new tax regime), for FY 2025-26 ₹4 lakhs (new tax regime)
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 ): You're an NRI if you've stayed in India for less than 182 days in the financial year. As a non-resident , 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):
12.5% on capital gain acquired after July 23, 2024 (without indexation benefits)
20% on capital gains (LTCG) acquired after July 23, 2024 (with indexation benefits)Short-term: Taxable at slab rates
TDS: 20% on sale proceeds
Equity Sale:
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 Comparison: FY 2024-25 vs FY 2025-26
The table below compares the income tax slabs for FY 2024-25 (Old and New Regimes) and FY 2025-26 (New Regime only, as Old Regime slabs remain unchanged).
Income Range (FY 2024-25) | Old Regime Rate | New Regime Rate (FY 2024-25) | Income Range (FY 2025-26) | New Regime Rate (FY 2025-26) |
Up to ₹2.5 lakh | 0% | — | — | — |
Up to ₹3 lakh | — | 0% | Up to ₹4 lakh | 0% |
₹2.5–5 lakh | 5% | — | — | — |
₹3–6 lakh | — | 5% | ₹4–8 lakh | 5% |
₹5–6 lakh | 10% | — | — | — |
₹6–9 lakh | 15% | 10% | ₹8–12 lakh | 10% |
₹9–10 lakh | 15% | 10% | — | — |
₹10–12 lakh | 20% | 15% | ₹12–16 lakh | 15% |
₹12–15 lakh | 20% | 20% | ₹16–20 lakh | 20% |
Above ₹15 lakh | 30% | 30% | ₹20–24 lakh | 25% |
— | — | — | Above ₹24 lakh | 30% |
Note: For FY 2025-26, the New Regime’s exemption limit increases to ₹4 lakh, with adjusted slabs reducing tax liability for incomes up to ₹16 lakh. The Old Regime slabs for FY 2025-26 remain the same as FY 2024-25.
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
NRIs, even with simple income sources like interest or dividends, cannot use ITR-1, as this form is designed exclusively for resident taxpayers."
ITR-2: Most Common for NRIs
Use ITR-2 if you have:
Salary income from India
Income from house property
Capital gains
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
👉 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.
For example lets consider how UAE- India DTAA helps Indian NRIs in UAE
Common DTAA Benefits for UAE NRIs
Income Type | Taxation without DTAA | DTAA Benefits | How to Avail |
Interest Income | Taxed at 30% TDS (plus surcharge and cess) | Reduced TDS rate of 10–12.5% under Article 11 of India-UAE DTAA, depending on the nature of the interest. | Submit Form 10F, Tax Residency Certificate (TRC) from UAE authorities, and a No-PE declaration to the Indian payer to claim the reduced rate. |
Rental Income | Taxed at applicable slab rates in India (up to 30% plus cess) | Exemption or credit in the UAE, as per Article 6. UAE NRIs can claim a foreign tax credit in the UAE for taxes paid in India, avoiding double taxation. | File ITR (e.g., ITR-2 or ITR-3) in India and claim foreign tax credit in the UAE using tax paid proof (e.g., Form 26AS). Submit TRC to support the claim. |
Professional Services | Taxed in India if services are rendered in India (up to 30% slab rates) | Exemption under Article 14 if services are rendered outside India (e.g., in the UAE) and the NRI has no Permanent Establishment (PE) in India. | Provide Form 10F, TRC, and a No-PE declaration to the Indian payer to claim exemption. Ensure services are documented as performed outside India. |
Income Type | India-UAE DTAA Rate | Standard NRI Rate |
Interest (FDs, Bonds) | 12.5% | 30% |
Dividends | 10% | 20% |
Capital Gains (Property) | Taxed in India | 12.5% LTCG |
Capital Gains (Shares) | Taxed only in UAE (effectively zero) | 12.5% |
Capital Gains (Mutual Funds) | Recent rulings suggest zero tax | 12.5% |
Rental Income | Taxed in India | Slab rates |
Salary | Taxed only in residence country | Slab rates |
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:
Passport
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 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: 20%
Claiming TDS Refunds
When You Get Refunds:
TDS deducted exceeds actual tax liability
DTAA provides lower tax rates (if applicable)
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:
Quarter | Due Date | Percentage |
Q1 | 15 June | 15% |
Q2 | 15 September | 45% |
Q3 | 15 December | 75% |
Q4 | 15 March | 100% |
* If the NRI knows their tax liability of the year ahead then they can file their TDS.
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
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.
