Do NRIs Need to File Income Tax in India if They Have No Income

Last week, Mehta called us from Singapore, worried and told us I haven't earned a single rupee from India in two years. My bank accounts are nearly empty, I sold my property, and I don't work there. 

Do I still need to file ITR?"

His question surprised me, but it shouldn't have. This is the most common misconception I encounter among NRIs.

Here's what Mehta didn't realize: Even with what he thought was "zero income," he actually had ₹3,200 in dormant account interest and a small TDS deduction he'd forgotten about. More importantly, his residential status had changed mid-year, triggering mandatory filing requirements regardless of income.

If you think you have "no income" from India, you're probably asking the wrong question. The real question is: "Does the Income Tax Department think I have filing obligations?"

By the end of this guide, you'll know exactly when ITR filing is mandatory (even with zero income), how to identify hidden income sources you might have missed, and the step-by-step process to stay compliant without overpaying penalties.

Let's start by busting the biggest myth that gets NRIs into trouble.

The Biggest Myth: "No Income Means No Filing"

This is the most expensive assumption NRIs make. The Income Tax Act doesn't just look at your income - it looks at specific activities and thresholds that trigger mandatory filing.

Here's what most NRIs don't understand: Filing obligations depend on multiple factors beyond just income amount. You could have zero net income but still be legally required to file ITR.

The truth: Even if your Indian income is zero, you must file ITR if you meet any of these criteria during the financial year:

• Deposited more than ₹50 lakh in savings accounts
• Deposited more than ₹1 crore in current accounts
• Had TDS/TCS of ₹25,000 or more deducted
• Incurred travel expenses from India exceeding ₹2 lakh for foreign travel
• Had any capital gains (even if offset by losses)
• Changed residential status during the year

Real example: Sharma from Dubai had zero rental income because his tenant left. But he deposited ₹60 lakhs from a property sale into his NRO account. Despite zero current income, he was legally required to file ITR due to the deposit amount.

👉 Tip: Don't confuse "current income" with "filing obligations." The tax department tracks financial activities, not just earnings.

What Really Counts as "No Income" for NRIs

Before assuming you have no income, let's define what the Income Tax Department considers as income sources for NRIs:

Income Sources You Might Have Forgotten

Interest Income:

• Even ₹10 interest from dormant NRO savings accounts
• Interest on fixed deposits (even if they matured)
• Interest on refunds from income tax department

Also Read - Best NRI Fixed Deposit Accounts India Complete Tax & Rate Guide

Property-Related Income:

• Rental income (even if collected by family members)
• Deemed rental income if property remained vacant
• Capital gains from property sales (even if you reinvested)

Also Read - Taxation on Rental Income in India for NRIs

Investment Income:

• Dividend from Indian shares or mutual funds
• Capital gains from selling investments
• Income from partnerships or businesses

Other Sources:

• Prize money or gifts received in India
• Professional fees paid by Indian entities
• Director's remuneration from Indian companies

Income That Doesn't Count for NRIs

• Salary earned abroad (if you're truly NRI)
• Interest from NRE and FCNR accounts (tax-exempt)
• Foreign rental income (not taxable in India for NRIs)
• Capital gains from foreign assets (for NRIs)

👉 Tip: Check your NRO account statements for any interest earned, even small amounts. Banks deduct TDS on interest.

When ITR Filing is Mandatory Even with Zero Income

This is where many NRIs get surprised. The Income Tax Act specifies several scenarios where filing is mandatory regardless of income level:

Scenario 1: High-Value Financial Transactions

You must file ITR if during the financial year you had:

Scenario 2: Tax Deductions and Collections

TDS/TCS threshold: If total TDS + TCS exceeds ₹25,000, filing is mandatory.

Common TDS sources for "zero income" NRIs:

• Interest on NRO accounts: 30% TDS on any amount
• Rental income: 30% TDS (even if property was vacant for part of the year)
• Professional fees: 10% TDS on consulting work

Sale of property: LTCG 12.5% , STCG - 20% ( For transfers on or after July 23, 2024) Scenario 3: Capital Gains Transactions

Any capital gains transaction triggers mandatory filing, even if:

• You had capital losses that offset gains
• The net gain was zero after exemptions
• You reinvested proceeds under Section 54

Scenario 4: Residential Status Changes

If you became an NRI mid-year or returned to India during the year, filing might be mandatory to:

• Establish your correct residential status
• Claim exemptions for the NRI period
• Report foreign assets if you became resident

Also Read - Step-by-Step Guide to Converting Resident Account to NRI Account

The Hidden Costs of Not Filing When Required

Many NRIs think, "If I have no income, what's the worst that can happen?" The answer: a lot more than you'd expect.

Immediate Penalties

Late Filing Fee: Up to ₹5,000 for missing the due date Interest on Tax Due: 1% per month on any tax liability Prosecution Risk: Under Section 276CC, non-filing can lead to imprisonment

Long-term Consequences

Loss of Tax Benefits:

• Cannot carry forward capital losses
• Lose right to claim TDS refunds
• Future DTAA claims may be questioned

Compliance Issues:

• Bank accounts may be flagged for non-compliance
• Difficulty in obtaining tax clearance certificates
• Problems with future investment applications

Administrative Hassles:

• Tax department notices and inquiries
• Required to maintain more detailed documentation
• Potential audit selection in subsequent years

Real Cost Example

Gupta from London thought he had zero income. He skipped filing for two years. When the tax department traced ₹1.2 lakhs in NRO interest and TDS deductions, his total penalty:

• Late filing fee: ₹10,000 (2 years × ₹5,000)
• Interest on unpaid tax: ₹8,400
• Professional fees for resolving: ₹15,000
• Total cost: ₹33,400 for "zero income"

Step-by-Step: How to Determine if You Must File

Follow this systematic approach to assess your filing obligations:

Step 1: Gather All Financial Documents

Collect statements for the entire financial year (April to March):

• All Indian bank accounts (NRE, NRO, savings, current)
• Investment statements (mutual funds, shares, FDs)
• Property transaction records
• TDS certificates (Form 16A)
• Foreign remittance records

Step 2: Check Your Residential Status

Determine your status for the entire financial year:

• Count days spent in India
• Consider the purpose of visits
• Check if you meet deemed resident criteria

Also Read - Difference Between NRI and Resident Tax Filing in India

Step 3: Calculate Total Indian Income

Add up all income sources:

Interest income: ₹_____
Rental income: ₹_____
Capital gains: ₹_____
Other income: ₹_____
Total: ₹_____

Step 4: Check Mandatory Filing Triggers

Even if total income is below threshold, check if you had:

• High-value transactions
• TDS/TCS exceeding ₹25,000
• Any capital gains
• Change in residential status

Step 5: Determine Your Obligation

Must file if:

• Total income > ₹3 lakh (old regime) or ₹4 lakh (new regime)
• Any mandatory trigger applies
• You want to claim TDS refunds

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

Filing ITR with Zero Income: The Process

If you determine you must file despite zero income, here's the exact process:

Choose the Right ITR Form

ITR-2: Most common for NRIs with zero income

• Use if you have foreign assets to disclose
• Required for any capital gains transactions
• Needed if claiming exemptions

ITR-3: Required if you have business income (even if zero net profit)

Key Sections to Fill Carefully

Income Details:

• Report all income sources, even if amounts are zero
• Show TDS deducted correctly
• Include exempt income for completeness

Foreign Assets: If your income exceeds ₹1 crore OR you're a returning resident, disclose:

• Foreign bank accounts
• Overseas property
• Foreign investments
• Assets held by spouse/children

Deductions and Exemptions:

• Claim all eligible deductions under Chapter VIA
• Report exemptions under various sections
• Include DTAA benefits if applicable

Common Mistakes to Avoid

Documentation Errors:

• Not reporting small interest amounts
• Missing TDS entries from Form 26AS
• Incorrect bank account details

Status Errors:

• Wrong residential status declaration
• Missing foreign asset disclosures
• Incorrect filing of DTAA benefits

Process Errors:

• Filing wrong ITR form
• Missing mandatory schedules
• Not e-verifying within time limit

When You Actually Don't Need to File (Rare Cases)

True exemption from filing exists only in limited scenarios:

Complete Exemption Criteria

You don't need to file if ALL of these apply:

• Total Indian income below threshold (₹2.5L/₹4L)
• No mandatory filing triggers
• No TDS deducted during the year
• No capital gains transactions
• No change in residential status
• No foreign assets to disclose

Typical "Zero Filing" Profiles

The Complete Expatriate:

• Lives abroad full-time (truly NRI status)
• No Indian assets or investments
• No Indian bank accounts or minimal balance
• No property or business interests

The Clean Exit:

• Properly closed all Indian financial ties
• No residual income sources
• Completed all regulatory obligations
• No pending transactions or refunds

👉 Tip: Even if you qualify for exemption, consider filing voluntarily to maintain clean tax records, especially if you plan to return to India.

Benefits of Filing Even When Not Required

Sometimes filing when not required is the smart financial decision:

Immediate Benefits

TDS Refunds: Claim back excess tax deducted
Loss Carry Forward: Preserve capital losses for future use
Clean Records: Maintain continuous filing history

Long-term Advantages

Investment Compliance: Required for many investment products
DTAA Claims: Establishes your eligibility for treaty benefits
Return Planning: Smoothens transition when you return to India

Documentation Value

Loan Applications: Many banks require ITR for processing
Visa Applications: Some countries accept ITR as income proof
Business Setup: Required for partnership or directorship applications

Recent Changes That Affect NRIs (2025 Updates)

Several recent amendments impact NRIs with low or zero income:

New Residential Rules

120-Day Rule: Indians earning over ₹15 lakhs may become deemed residents if they spend more than 120 days in India and aren't tax residents elsewhere.

Impact: Could trigger mandatory filing even if you think you're NRI.

Enhanced Reporting Requirements

Lower Disclosure Threshold: Foreign assets disclosure threshold reduced for certain categories.

Automatic Information Exchange: Increased data sharing between countries means non-filing is easier to detect.

TDS Changes

Digital Transactions: More transactions now attract TDS Lower Exemption Limits: Some TDS exemptions have been reduced

👉 Tip: These changes make it even more important to evaluate your filing obligations annually, not just assume previous years' decisions apply.

Special Situations: When "No Income" Gets Complicated

Returning to India Mid-Year

If you returned to India during the financial year:

• Your residential status may be mixed (NRI for part of the year, resident for the rest)
• Global income becomes taxable from the date of return
• Special rules apply for RNOR status

Filing requirement: Usually mandatory to establish correct status and claim appropriate exemptions.

Joint Ownership of Assets

If you jointly own property or investments with resident relatives:

• Your share of income is taxable
• TDS may be deducted on your behalf
• Family members might receive income in your name

Example: Property co-owned with spouse who lives in India generates rental income. Your share is taxable even if you don't receive the money directly.

Also Read - Can NRIs Open Joint Accounts with Residents in India

Closed Business or Partnership

Even if you closed a business:

• Final returns may be required
• Pending income or refunds may arise
• Capital gains from asset disposal

Dormant Accounts and Investments

• Banks continue to pay interest on dormant accounts
• Mutual fund dividends may still be paid
• Fixed deposits may mature and earn interest

👉 Tip: Don't assume dormant means zero income. Check all statements carefully.

How to File a Nil Return: Practical Walkthrough

If you must file with zero income, here's the simplest approach:

Before You Start

Documents Required:

• PAN card
• Aadhaar card
• Bank statements for all Indian accounts
• Form 26AS (TDS summary)
• Foreign asset details (if applicable)

Filing Steps

1. Login to Income Tax Portal using PAN and password
2. Select ITR Form (usually ITR-2 for NRIs)
3. Fill Basic Information including residential status
4. Income Section: Enter zero for applicable income heads
5. TDS Section: Match with Form 26AS carefully
6. Deductions: Claim eligible deductions
7. Verification: E-verify within 30 days

After Filing

• Download and save acknowledgment
• Note the ITR-V receipt number
• Keep all supporting documents for 6 years
• Track refund status if TDS was deducted

Country-Specific Considerations for Major NRI Destinations

UAE Residents

• No personal income tax means easier compliance
• Higher scrutiny on large deposits from property sales
• DTAA benefits available for Indian income
• Emirates ID may be required for some applications

US Residents

• Must report Indian income on US returns anyway
• Complex DTAA provisions apply
• FBAR and FATCA reporting requirements
• State tax implications vary

UK Residents

• Remittance basis may affect Indian filing obligations
• Pension income has special DTAA treatment
• Brexit has changed some procedural aspects

Singapore Residents

• Territorial tax system in Singapore
• Strong DTAA with India
• Lower rates on dividend and interest income

👉 Tip: Your resident country's tax system affects your Indian filing strategy. Consider country-specific DTAA benefits when planning.

Tools and Resources to Make It Easier

Government Resources

1. Income Tax E-Filing Portal: incometax.gov.in - Official filing platform
2. Form 26AS: Check TDS deducted in your name
3. Residential Status Calculator: Available on IT portal

Professional Services

1. Qualified CAs: For complex situations
2. Online Filing Platforms: For guided assistance
3. NRI Tax Specialists: For multi-country complications

Red Flags That Attract Tax Department Attention

Even with zero income, certain patterns increase scrutiny risk:

High-Risk Patterns

• Large deposits followed by zero filing
• Multiple years of non-filing after regular filing history
• Mismatched TDS records with no corresponding returns
• Foreign travel on Indian cards without filing

How to Stay Under the Radar

• File consistently, even nil returns
• Ensure TDS records match your filings
• Maintain proper documentation
• Update address and contact details

If You Get a Notice

• Don't panic - notices are often routine
• Gather all relevant documents
• Respond within specified timeframe
• Consider professional help for complex notices

👉 Tip: Consistent filing, even when not required, often prevents notices better than sporadic compliance.

The Cost-Benefit Analysis: To File or Not to File

Let's break down the real economics:

Cost of Filing (When Not Required)

• Professional fees: ₹3,000-₹8,000
• Time investment: 2-4 hours
• Documentation effort: Minimal to moderate

Cost of Not Filing (When Required)

• Late fees: Up to ₹5,000 per year
• Interest penalties: 1% per month
• Professional fees for remediation: ₹10,000-₹25,000
• Lost tax benefits: Could be significant

The Break-Even Analysis

File if: Potential penalty risk > Cost of filing

Don't file if: Zero penalty risk AND no TDS to claim

Most NRIs' situation: File voluntarily because the protection is worth more than the cost.

Your Action Plan: What to Do Right Now

Based on your situation, here's your immediate next step:

If You've Never Filed as NRI

1. Assess last 4 years using criteria in this guide
2. Calculate potential penalties if filing was required
3. File missing returns if necessary (ITR-U for past years)
4. Set up system for ongoing compliance

If You've Been Filing but Considering Stopping

1. Re-evaluate using current criteria
2. Consider benefits of continued filing
3. Don't break filing continuity without strong reason
4. Consult professional for complex situations

If You're Genuinely Zero Income

1. Double-check all potential income sources
2. Verify no mandatory filing triggers
3. Consider voluntary filing for record-keeping
4. Monitor changes in circumstances annually

If You're Returning to India Soon

1. File all pending returns before return
2. Plan RNOR strategy for first two years
3. Optimize timing of return for tax benefits
4. Set up compliant investment structure

👉 Tip: The safest approach is filing annually. The cost of compliance is almost always lower than the cost of non-compliance problems.

Key Takeaways

Here's everything you now know that most NRIs don't:

The Reality Check: Having "no income" doesn't automatically mean no filing obligations. Multiple other factors can trigger mandatory filing requirements.

The Thresholds: Even with zero income, you must file if you had high-value transactions, TDS above ₹25,000, any capital gains, or changes in residential status.

The Hidden Income: Interest on dormant accounts, forgotten investments, and family-managed assets can create tax obligations you didn't know existed.

The Penalties: Non-filing when required costs much more than voluntary filing when not required. Late fees, interest, and professional remediation costs add up quickly.

The Benefits: Filing regularly (even nil returns) maintains clean records, preserves loss carry-forwards, enables TDS refunds, and smoothens future compliance.

The Modern Reality: Enhanced reporting requirements, automatic information exchange, and digital tracking make non-compliance easier to detect than ever.

The Smart Strategy: When in doubt, file. The cost of compliance is almost always lower than the cost of non-compliance problems.

The biggest mistake we see is NRIs who assume they understand their filing obligations without doing proper analysis. Tax law doesn't care about your assumptions - it cares about the facts.

Don't let "no income" become "big problems." Take 30 minutes to properly assess your situation using this guide. Your future self will thank you.

Better to be safe than sorry - especially when the cost of being sorry is so much higher.

Join our NRI community WhatsApp group to get advice from other NRIs to solve your NRI taxation dilemmas.
Sources:
Income Tax Department,
ICICI Bank,
Reserve Bank of India,

HDFC Bank,

This guide is for educational purposes and doesn't constitute tax advice. Individual situations vary significantly. Always consult qualified tax professionals familiar with both Indian and your resident country's laws before making compliance decisions.