NRI Income Tax Filing Requirements — Complete 2025 Guide (With Residency Rules, TDS Rates & DTAA Benefits)

Introduction: The ₹8 Lakh Mistake Most NRIs Make (And How to Avoid It)

Real case (anonymized):

Rajesh, a software engineer in the US since 2019, owns a flat in Mumbai that he rents out for ₹40,000/month (₹4.8L annually).

His tenant dutifully deducts 31.2% TDS (₹1.5 lakhs) and deposits it to the government.

Rajesh thinks: “TDS deducted = tax paid = done.”

He never files an Income Tax Return in India.

Fast forward to 2024:

Rajesh wants to sell the property. During the transaction, the buyer’s lawyer discovers:

❌ No ITR filed for 5 years
❌ ₹7.5 lakhs TDS deducted but never claimed as refund
❌ No Form 15CA/15CB for past remittances
❌ Actual tax liability: ~₹50K/year (after deductions)
❌ Refund unclaimed: ₹5 lakhs+ over 5 years

Now what?

Must file 5 years of ITRs retroactively
Pay late fees (₹25,000)
Hire CA (₹50,000+)
Delay property sale by 3-6 months
Potential scrutiny notices

The avoidable mistake: Not filing ITR assuming “TDS = final tax.”

This happens to 60%+ of NRIs who:

❌ Don’t realize they need to file ITR in India
❌ Confuse TDS deduction with final tax
❌ Don’t know their residency status
❌ Ignore rental income, interest, capital gains
❌ Miss claiming refunds (lakhs stuck with government)
❌ Face problems during property transactions/repatriation
❌ Get notices years later (Section 148 reassessment)

This comprehensive guide covers:

Who is an NRI under Indian tax law (residency test)
Do NRIs need to file ITR? (7 scenarios)
What income is taxable for NRIs
NRI bank accounts and taxation (NRE, NRO, FCNR)
TDS rates for NRIs (2025 update)
Documents required for NRI ITR filing
Which ITR form to use (ITR-2, ITR-3, etc.)
DTAA benefits (reducing double taxation)
Common NRI tax scenarios (property, rent, capital gains)
Penalties and late fees
Step-by-step compliance framework
How to claim refunds

1. Who is an NRI Under Indian Tax Law? (Residency Status Test)

Critical concept: Residency status determines what income India can tax.

Residency is determined EVERY YEAR (not a one-time classification).

The Basic Residency Test (Section 6 of Income Tax Act):

You are a Resident in India if:

✅ Condition A (Basic Rule):
You are in India for 182 days or more during the financial year (April 1 – March 31).

✅ Condition B (Four-Year Rule):
You are in India for:

60 days or more in the relevant financial year, AND
365 days or more during the preceding 4 financial years (combined).

If NEITHER condition is met → You are a Non-Resident (NR).

Special Exceptions (When 60 Days Becomes 182 Days):

For the following categories, Condition B’s “60 days” increases to “182 days”:

Exception 1: Indian Citizens Leaving India for Employment Abroad

If you left India during the FY for employment abroad, you’re treated more favorably.

Example:
You work in Dubai. Visit India for 100 days in FY 2024-25.
Status: Non-Resident (because 100 < 182, and employment abroad exception applies).

Exception 2: Indian Citizens/PIOs Visiting India

Indian citizens or Persons of Indian Origin (PIO) coming to India on a visit.

Practical impact: Most NRIs working abroad fall under this exception → need 182 days (not 60) to become resident.

New Rule (2020 Onwards): Deemed Resident but Not Ordinarily Resident (RNOR)

For high-income NRIs:

If you’re in India for 120-181 days AND your India-sourced income exceeds ₹15 lakhs, you become Resident but Not Ordinarily Resident (RNOR).

RNOR benefits:

Taxed only on India-sourced income (like NRI)
NOT taxed on global income
Better than full resident status

Practical Residency Calculation:

Step 1: Count days in India (use passport stamps/travel records)

Step 2: Apply basic test:

≥182 days → Resident
<182 days → Check Exception (employment abroad/visiting)

Step 3: If <60 days → Definitely NRI (no further check needed)

Step 4: If 60-181 days → Check 4-year history (365 days?)

Example Scenarios:

Scenario 1:
Software engineer in US, visits India for 30 days during FY.
Status: Non-Resident (30 < 60 days).

Scenario 2:
Consultant in UK, works remotely from India for 150 days.
Status: Non-Resident (150 < 182, employment abroad exception).

Scenario 3:
NRI returning to India permanently, stays 200 days in FY.
Status: Resident (200 > 182).

Scenario 4:
NRI staying 100 days in FY + 400 days in past 4 FYs + India income ₹20L.
Status: Resident but Not Ordinarily Resident (RNOR).

Why Residency Status Matters:

Status	Taxable Income	Tax Rate	Global Disclosure
Resident	Global income (worldwide)	Slab rates	Yes, required
RNOR	India-sourced + foreign income received/accrued in India	Slab rates	Limited
Non-Resident (NRI)	Only India-sourced income	Slab rates (no exemption limit benefits in some cases)	No

2. Do NRIs Need to File Income Tax Return in India? (7 Trigger Scenarios)

Short answer: NRIs must file ITR if they have any taxable income in India exceeding basic exemption (₹2.5 lakhs for general, ₹3L for senior citizens).

✅ Scenario 1: Total Indian Income >₹2.5 Lakhs

Includes:

Rental income
Interest on NRO accounts
Capital gains (property, shares, mutual funds)
Business/professional income in India
Any other India-sourced income

Example:
NRO interest: ₹1.5L + Rental income: ₹1.2L = ₹2.7L → Must file ITR.

✅ Scenario 2: TDS Deducted and Refund is Due

Common situation:

Property sold: TDS @20-30% deducted
Actual capital gains tax liability: 10-15%
Refund due: File ITR to claim excess TDS back

Example:
Property sale: ₹1 crore
TDS deducted: ₹20 lakhs (20%)
Actual LTCG after indexation: ₹30 lakhs
Actual tax: ₹6 lakhs (20% of ₹30L)
Refund: ₹14 lakhs → Must file ITR to get refund!

✅ Scenario 3: Capital Gains from Indian Assets

Assets include:

Real estate (house, flat, land)
Equity shares (listed/unlisted)
Mutual funds
Bonds, debentures
Gold, jewelry (if sold)

Even if no TDS: Must report and pay tax via ITR.

✅ Scenario 4: You Hold Assets in India (Generating Income)

Assets:

Rental property
NRO fixed deposits
Shares giving dividends
Business interests

Even if income <₹2.5L individually: Combined income may cross threshold.

✅ Scenario 5: Rental Income from Indian Property

Taxability:

Tenant deducts 31.2% TDS (on rent >₹50,000/month)
You must file ITR to:
- Report rental income
- Claim 30% standard deduction
- Claim home loan interest deduction
- Get refund if TDS > actual tax

Example:
Rent: ₹6 lakhs/year
TDS deducted: ₹1,87,200 (31.2%)
After 30% standard deduction: Taxable income = ₹4.2L
Actual tax (if only income): ~₹21,000
Refund due: ₹1,66,200 → Must file ITR.

✅ Scenario 6: You Claim DTAA Benefits

DTAA (Double Taxation Avoidance Agreement) benefits require:

Form 10F submission
Tax Residency Certificate (TRC)
ITR filing in India to claim credit/exemption

Example:
US-based NRI earns interest in India.
Files US tax return, pays tax there.
To claim Foreign Tax Credit in US → needs Indian ITR as proof.

✅ Scenario 7: High-Value Transactions (Reporting)

Even if no tax liability, ITR may be required for:

Property transactions >₹30 lakhs
Bank deposits >₹1 crore
Foreign remittances >specified limits

AIR/SFT reporting triggers notice if ITR not filed.

When NRI Does NOT Need to File ITR:

✅ Only NRE account interest (tax-free, no other Indian income)
✅ Only FCNR interest (tax-free)
✅ Total Indian income <₹2.5 lakhs (and no refund due, no DTAA claim)

3. What Income is Taxable for NRIs in India?

Golden Rule: NRIs are taxed only on income that accrues or arises in India.

✅ Taxable Income for NRIs (India-Sourced):

1. Salary for Services Rendered in India

Example: NRI comes to India, works for 2 months → salary for those 2 months taxable in India.

Not taxable: Salary earned abroad for work done abroad.

2. Rental Income from Indian Property

Always taxable (regardless of where rent is received).

Deductions allowed:

30% standard deduction (no proof needed)
Municipal taxes paid
Home loan interest (for self-occupied: ₹2L limit; for let-out: full interest)

3. Interest Income

Account Type	Taxable?	TDS Rate
NRE Account	❌ No (tax-free)	No TDS
NRO Account	✅ Yes	30% (+surcharge+cess)
FCNR Account	❌ No (tax-free)	No TDS
Fixed Deposits (resident account)	✅ Yes	30%

4. Capital Gains from Indian Assets

Assets: Property, shares, mutual funds, bonds, gold

Tax rates:

LTCG on listed equity: 12.5% (>₹1.25L gains)
STCG on listed equity: 20%
LTCG on property: 20% with indexation
STCG on property: Per slab rates (30% for NRIs)

5. Business/Professional Income in India

If you have:

Proprietorship in India
Partnership firm share
Consulting income from Indian clients (services rendered in India)

Taxable at slab rates.

6. Dividend Income from Indian Companies

Post-2020: Dividends taxable in hands of NRI.

TDS: 20% (+surcharge+cess) = ~21-23%

DTAA may reduce rate (e.g., India-US DTAA: 15%).

7. Royalty, Fees for Technical Services (FTS)

TDS: 10% (Section 115A) or DTAA rate (if lower).

❌ NOT Taxable for NRIs (Foreign-Sourced):

✅ Salary earned abroad for work done abroad
✅ Foreign bank interest
✅ Foreign capital gains (property, stocks outside India)
✅ Foreign business income
✅ Pension from foreign employer

Exception: If remitted to India and service/income has India connection, may become taxable (complex cases—consult expert).

4. NRI Bank Accounts and Taxation (NRE, NRO, FCNR)

Understanding account types is crucial for tax planning.

Account 1: NRE (Non-Resident External) Account

Purpose: Park foreign earnings in India

Currency: INR (converted from foreign currency at deposit)

Features:

✅ Interest: Tax-free
✅ Principal + interest: Fully repatriable
✅ No TDS deducted
✅ No ITR filing needed (if only income)

Best for: Savings from foreign salary, full repatriation planned.

Account 2: NRO (Non-Resident Ordinary) Account

Purpose: Manage India-sourced income (rent, dividends, pension, sale proceeds)

Currency: INR

Features:

❌ Interest: Taxable at 30% (+surcharge+cess = 31.2%)
⚠️ Principal + interest: Repatriable up to $1 million per FY (requires Form 15CA/15CB)
✅ TDS deducted automatically
⚠️ ITR filing needed if income >₹2.5L

Best for: Rent collection, pension deposit, property sale proceeds (initial parking).

Account 3: FCNR (Foreign Currency Non-Resident) Account

Purpose: Fixed deposit in foreign currency

Currency: USD, GBP, EUR, JPY, etc.

Features:

✅ Interest: Tax-free
✅ Fully repatriable
✅ No exchange rate risk (held in foreign currency)
✅ No TDS

Best for: Long-term savings, avoiding currency fluctuation, repatriation needs.

Tax Comparison Table:

Aspect	NRE	NRO	FCNR
Interest taxable?	No	Yes (30%)	No
TDS on interest	0%	31.2%	0%
Repatriation	Full	$1M/year	Full
ITR needed?	No (if only income)	Yes (if >₹2.5L)	No (if only income)
Currency	INR	INR	Foreign currency

5. NRI TDS Rates (2025 Update)

TDS (Tax Deducted at Source) is advance tax deducted by payer.

Comprehensive TDS Rate Card for NRIs:

Income Type	TDS Rate (Base)	With Surcharge + Cess	DTAA Benefit?
NRO Interest	30%	31.2%	Yes (10-15% in some treaties)
Rental Income	30%	31.2%	Limited
Property Sale (Buyer’s TDS)	20% (LTCG) or 30% (STCG)	20.8% / 31.2%	No
Dividend	20%	20.8%	Yes (10-15% for US, UK, etc.)
Professional Fees	10% or 20%	10.4% / 20.8%	Yes
Royalty / FTS	10%	10.4%	Yes (10-15%)
LTCG on Listed Equity	10% (if >₹1.25L)	10.4%	No
STCG on Listed Equity	15%	15.6%	No

Key TDS Points:

✅ TDS is advance tax (not final tax)
✅ Actual tax may be lower (due to deductions, exemptions)
✅ File ITR to claim refund if TDS > actual tax
✅ DTAA can reduce TDS (need Form 10F + TRC)

6. Documents Required for NRI ITR Filing (Comprehensive Checklist)

✅ Basic Documents (Always Required):

1. PAN Card
Mandatory for all ITR filings.

2. Passport

For travel date calculation (residency status)
Copy of all stamped pages

3. Aadhaar

Not mandatory for NRIs (exemption available)
But useful for faster processing, linking bank accounts

4. Bank Statements

NRE account statements
NRO account statements
Foreign bank statements (if claiming DTAA)

✅ Income Proof Documents:

5. Form 16 / 16A

Form 16: If you had India employment
Form 16A: TDS certificates (rent, interest, professional fees, dividends)

6. Form 26AS (Annual Tax Statement)

Download from Income Tax portal
Shows all TDS deducted against your PAN
Verify before filing ITR

7. AIS (Annual Information Statement)

New (from AY 2021-22)
Shows: interest, dividends, securities transactions, mutual funds, property transactions
More comprehensive than Form 26AS

8. TIS (Taxpayer Information Summary)

Subset of AIS after your feedback/corrections

✅ Property-Related Documents:

9. Rental Income:

Rent agreement
Rent receipts
Tenant PAN (if TDS deducted)
Form 16C (TDS certificate from tenant)
Property tax receipts
Home loan interest certificate

10. Property Sale:

Sale deed
Purchase deed (original acquisition)
Cost Inflation Index (CII) for indexation
Improvement cost bills
Brokerage/legal fee receipts
Form 16B (TDS certificate from buyer)
CA certificate (if lower TDS claimed under Section 197)

✅ Capital Gains Documents:

11. Shares / Mutual Funds:

Broker statements (buy/sell)
Contract notes
Demat account holding statement
Dividend statements
Capital gains statement (from broker/AMC)

12. ESOPs:

ESOP grant letter
Exercise/vesting details
Form 16 (if TDS deducted)

✅ DTAA-Related Documents:

13. Tax Residency Certificate (TRC)

From your country of residence tax authority
Certifies you’re tax resident there

14. Form 10F

Self-declaration about DTAA benefits
Must be filed online on Income Tax portal before filing ITR

15. Foreign Tax Returns

Copy of tax return filed in country of residence
For claiming Foreign Tax Credit

✅ Other Documents:

16. Business/Professional Income:

P&L statement
Balance sheet
GST returns (if applicable)

17. Foreign Income Details:

Foreign salary slips
Foreign bank interest statements
Foreign investment statements
(Even if not taxable in India, needed for DTAA claims)

7. Which ITR Form Should NRIs File?

ITR form selection depends on income sources and status.

ITR-1 (Sahaj):

NOT for NRIs. This form is only for residents.

ITR-2: ⭐ Most NRIs Use This

Use ITR-2 if you have:

✅ Salary income
✅ Rental income (house property)
✅ Capital gains (property, shares, mutual funds)
✅ Other sources (interest, dividends)
❌ But NO business/professional income

Covers: 99% of NRI salaried professionals, retirees, investors.

ITR-3:

Use ITR-3 if you have:

✅ Business income (proprietorship)
✅ Professional income (consultancy as individual)
✅ Partnership firm share

Example:
NRI running consultancy practice in India remotely → ITR-3.

ITR-4 (Sugam):

NOT for NRIs with capital gains or foreign income. Designed for small businesses under presumptive taxation.

ITR-5:

For: Firms, LLPs, AOPs with NRI partners.

Individual NRIs don’t file ITR-5; the firm/LLP does.

ITR-6:

For: Companies (not individuals).

ITR-7:

For: Trusts, political parties, institutions (not individual NRIs).

Quick Decision Tree:

Do you have business/professional income?
→ Yes → ITR-3
→ No → ITR-2 (for salary, rent, capital gains, other sources)

8. DTAA Benefits for NRIs (Reducing Double Taxation)

DTAA (Double Taxation Avoidance Agreement) = Bilateral treaties between India and 90+ countries preventing income from being taxed twice.

How DTAA Helps NRIs:

Benefit 1: Lower TDS Rates

Example (India-USA DTAA):

Default NRO interest TDS: 30%
DTAA rate: 15%
Savings: 50% lower TDS

To claim: Submit Form 10F + TRC to bank before interest credit.

Benefit 2: Avoiding Double Tax on Salary

Scenario:
NRI works in UK, visits India for 30 days on project.

Without DTAA:

UK taxes full salary (global income)
India taxes 30-day proportionate salary

With DTAA (India-UK):

If stay <183 days + salary paid by UK employer → India may not tax (or gives credit)

Benefit 3: Foreign Tax Credit (FTC)

Mechanism:
Tax paid in one country = credit in other country.

Example:

Rental income from India: ₹10L
Indian tax paid: ₹1.5L
USA also taxes rental income
FTC in USA: Get credit for ₹1.5L paid in India → reduce US tax

Requirement: File Form 67 in India (if claiming FTC for foreign tax in Indian return) OR claim in foreign return (if claiming Indian tax credit there).

Benefit 4: Exemption for Certain Incomes

Example (India-UAE DTAA):

Salary earned in UAE → exempt in India (even if remitted)
(UAE has no income tax, so India doesn’t double-tax non-existent foreign tax)

Common DTAA Rates (Interest/Dividend):

Country	Interest (NRO)	Dividend	Notes
USA	15%	15%	Lower than 30% default
UK	15%	15%	Significant savings
UAE	12.5%	10%	Very favorable
Singapore	15%	10%	Popular NRI destination
Canada	15%	15%	Standard
Australia	15%	15%	Standard
Germany	10%	10%	Best rates

How to Claim DTAA Benefits:

Step 1: Obtain TRC from country of residence
(E.g., IRS Form 6166 for USA)

Step 2: File Form 10F on Income Tax portal
(Details: name, address, TIN, residency period)

Step 3: Submit TRC + Form 10F to payer
(Bank for interest, tenant for rent, company for dividend)

Step 4: Payer deducts TDS at lower DTAA rate

Step 5: File ITR in India reporting income + DTAA benefit

Step 6: Claim FTC in country of residence (if applicable)

9. Common NRI Tax Scenarios (Step-by-Step)

Scenario A: NRI with Rental Property in India

Facts:

Rent: ₹50,000/month (₹6L/year)
Property tax paid: ₹20,000
Home loan interest: ₹1,50,000
Tenant deducted TDS: ₹1,87,200 (31.2%)

Tax Calculation:

Gross Rent: ₹6,00,000
Less: Municipal taxes: ₹20,000
Net Annual Value (NAV): ₹5,80,000
Less: 30% standard deduction: ₹1,74,000
Balance: ₹4,06,000
Less: Home loan interest: ₹1,50,000
Taxable Income (House Property): ₹2,56,000

Tax (if only income):
₹2,56,000 – ₹2,50,000 (exemption) = ₹6,000 taxable
Tax: 5% of ₹6,000 = ₹300
Add: 4% cess = ₹312

TDS deducted: ₹1,87,200
Actual tax: ₹312
Refund due: ₹1,86,888

Action: File ITR-2 to claim refund.

Scenario B: NRI Selling Property in India

Facts:

Purchase (2010): ₹50 lakhs
Sale (2025): ₹1.5 crores
Improvements (2015): ₹10 lakhs
Brokerage/legal: ₹3 lakhs
Buyer deducted TDS @20%: ₹30 lakhs

LTCG Calculation:

Sale consideration: ₹1,50,00,000
Less: Transfer expenses: ₹3,00,000
Net consideration: ₹1,47,00,000

Cost of Acquisition (Indexed):
Purchase cost: ₹50,00,000
CII for 2010-11: 167
CII for 2024-25: 363 (assumed)
Indexed cost: ₹50L × (363/167) = ₹1,08,68,263

Improvement cost (Indexed):
₹10L × (363/280) = ₹12,96,429

Total indexed cost: ₹1,08,68,263 + ₹12,96,429 = ₹1,21,64,692

LTCG: ₹1,47,00,000 – ₹1,21,64,692 = ₹25,35,308

Tax @20%: ₹5,07,062
Add 4% cess: ₹5,27,344

TDS deducted: ₹30,00,000
Actual tax: ₹5,27,344
Refund due: ₹24,72,656

Action: File ITR-2 to claim massive refund!

Scenario C: NRI with NRO Interest + Dividend

Facts:

NRO FD interest: ₹2,50,000 (TDS ₹78,000 deducted)
Dividend from Indian shares: ₹1,00,000 (TDS ₹20,800 deducted)
No other income

Tax Calculation:

Total income: ₹3,50,000
Less: Basic exemption: ₹2,50,000
Taxable income: ₹1,00,000

Tax:
5% of ₹1,00,000 = ₹5,000
Add 4% cess = ₹5,200

TDS deducted: ₹78,000 + ₹20,800 = ₹98,800
Actual tax: ₹5,200
Refund: ₹93,600

Action: File ITR-2 to get refund.

Scenario D: NRI Claiming DTAA (USA)

Facts:

NRI in USA
NRO interest: ₹5,00,000
Bank deducted TDS @31.2% = ₹1,56,000
India-USA DTAA: Interest taxable @15%

With DTAA (If claimed upfront):

Should have deducted: 15% of ₹5L = ₹75,000
Actually deducted: ₹1,56,000
Excess: ₹81,000

Steps:

File Form 10F + TRC with bank (for future)
File ITR-2 claiming DTAA benefit
Show effective rate: 15% (DTAA)
Claim refund: ₹81,000

Also: Declare in US tax return, claim Foreign Tax Credit for ₹75,000 paid in India.

10. Penalties & Late Fees NRIs Must Avoid

Penalty 1: Late ITR Filing Fee (Section 234F)

If ITR filed after due date (July 31):

Income	Late Fee	Maximum
>₹5 lakhs	₹5,000	Up to Dec 31
	₹10,000	After Dec 31
≤₹5 lakhs	₹1,000	Always

Can be avoided: File before July 31 (or applicable due date).

Penalty 2: Interest on Late Tax Payment

Section 234A: 1% per month on unpaid tax (if filed late)
Section 234B: 1% per month on shortfall in advance tax
Section 234C: 1% per month on deferment of advance tax installments

For NRIs: Usually not applicable (TDS covers most tax), but if self-assessment tax payable, pay before filing.

Penalty 3: Incorrect Residency Status

Problem: Claiming NRI status when actually Resident → understating income (if global income not disclosed).

Penalty: Up to 200% of tax evaded + prosecution (in extreme cases).

Penalty 4: Non-Disclosure of Foreign Assets (For Residents/RNOR)

If you become Resident:
Must disclose foreign assets in Schedule FA of ITR.

Non-disclosure penalty: ₹10 lakhs under Black Money Act (for willful default).

NRIs (non-residents) exempt from Schedule FA.

Penalty 5: Reassessment (Section 148)

If income escaped assessment: Department can reopen up to 7 years (if escaped income >₹50 lakhs).

Common triggers:

Property sale not reported
High-value transactions in AIS not explained
Foreign remittances not accounted

11. Step-by-Step NRI Tax Compliance Framework

Phase 1: Determine Status (April-May)

Step 1: Calculate days in India (use passport)

Step 2: Apply residency test (Section 6)

Step 3: Determine status: Resident / RNOR / Non-Resident

Phase 2: Gather Documents (May-June)

Step 4: Collect all income proof

Bank statements (NRE/NRO)
Form 16/16A
Property documents (if sale/rent)
Investment statements

Step 5: Download Form 26AS, AIS, TIS

Step 6: Reconcile:

Your records vs. 26AS vs. AIS
Identify mismatches (report to payer if wrong)

Phase 3: Compute Tax (June-July)

Step 7: Prepare income summary

Salary (India portion)
House property (rent)
Capital gains
Other sources (interest, dividend)

Step 8: Calculate deductions

30% on house property
Home loan interest
Standard deduction (salary)

Step 9: Apply tax rates

Step 10: Check if refund due (TDS > actual tax)

Phase 4: File ITR (Before July 31)

Step 11: Select correct ITR form (usually ITR-2)

Step 12: Fill online on Income Tax portal
(Or use offline utility + upload JSON)

Step 13: Verify ITR within 30 days

Aadhaar OTP (if Aadhaar linked)
EVC (e-verify)
Physical ITR-V (send to CPC Bangalore)

Phase 5: Post-Filing (August onwards)

Step 14: Track refund status (if applicable)
Usually processed within 60-90 days.

Step 15: Respond to notices (if any)
142(1) – information request
143(1) – intimation (assessment)

Step 16: Plan for next year

Adjust NRE/NRO mix
Claim DTAA benefits upfront (Form 10F)
Explore tax-saving investments (if becoming resident)

12. How to Claim Refunds (Step-by-Step)

Most NRIs have refunds due (TDS > actual tax).

Refund Process:

Step 1: File ITR showing:

Actual taxable income
TDS deducted (auto-fetched from Form 26AS)
Tax payable
Refund amount (TDS – Tax payable)

Step 2: Verify ITR within 30 days
Critical: Refund processing starts only after verification.

Step 3: Pre-validate bank account
On Income Tax portal: My Account → Pre-validate Bank Account
(Ensures refund goes to correct account)

Step 4: Track refund status
Portal: Services → Refund Status
Or SMS: REFUNDIRS<space>PAN to 56161

Step 5: Receive refund

Usually within 60-90 days
Credited directly to validated bank account
Includes interest @0.5% per month (from April 1 to refund date)

Common Refund Delays & Solutions:

Delay 1: ITR not verified
Solution: Verify immediately (Aadhaar OTP fastest).

Delay 2: Bank account not pre-validated
Solution: Complete validation on portal.

Delay 3: Mismatch in ITR vs. 26AS
Solution: File revised return correcting mismatch.

Delay 4: Outstanding demand in past years
Solution: Adjust demand, then refund released.

13. Practical Tips for NRIs

✅ Tip 1: File Even If No Tax Due

Why:

Creates audit trail
Required for property transactions/loans
Avoids future notices
Enables refund claims
Proves income for visa/immigration

✅ Tip 2: Use DTAA Proactively

Don’t wait for refund: Submit Form 10F + TRC to bank/tenant before TDS deduction.

✅ Tip 3: Separate NRE and NRO Smartly

NRE: Foreign earnings, tax-free interest, full repatriation
NRO: India income, taxable interest, limited repatriation

Don’t mix: Deposit foreign salary in NRE, rent in NRO.

✅ Tip 4: Maintain Day-Count Records

Keep: Flight tickets, passport copies, hotel bookings
Why: Prove residency status if questioned.

✅ Tip 5: Plan Property Sale Carefully

Strategies:

Claim indexation benefit (reduces LTCG)
Consider Section 54 exemption (reinvest in another property)
File Form 13 for lower TDS (if actual gain lower than assumed)

✅ Tip 6: Link PAN-Aadhaar (If Possible)

Even if NRI: Linking helps with faster refunds, EVC-based ITR verification.

Exception: NRIs without Aadhaar can still file (use alternate verification).

✅ Tip 7: Hire NRI-Specialized CA

Generic CAs miss:

DTAA nuances
FEMA linkages
Repatriation planning
Multi-country tax coordination

NRI-specialized CAs understand cross-border complexities.

14. When to Consult an Expert

DIY is risky for:

Property sale (complex capital gains calculations)
Multiple income sources
DTAA claims (first time)
Residency status unclear (borderline 182 days)
High-value transactions (>₹50L)
Received notice from Income Tax Dept
Planning to return to India (status change year)

Engage expert when:

Total Indian income >₹10 lakhs
Property transactions involved
Business/professional income
Past years’ ITRs not filed
Need FEMA compliance (Form 15CA/15CB) for repatriation

Cost: ₹5,000 – ₹25,000 for standard NRI ITR; ₹25,000 – ₹1,00,000 for complex cases (property sale, business income, DTAA).

ROI: Often recover 10x-100x fees in refunds + avoid penalties.

15. Conclusion: Why NRI Tax Compliance is Non-Negotiable

NRI tax filing is not just compliance—it’s financial protection.

What proper ITR filing gives you:

✅ Refunds (lakhs stuck with govt released)
✅ Clean record (for property, loans, visa)
✅ Audit trail (proves income legitimacy)
✅ DTAA benefits (lower tax rates)
✅ Repatriation ease (Form 15CA/15CB supported by ITR)
✅ Peace of mind (no future notices)

What non-filing costs:

❌ Refunds lost (3-5 years then time-barred)
❌ Late fees + interest (₹5K-10K + 1%/month)
❌ Property transaction delays (buyer’s lawyer demands ITR)
❌ Reassessment risk (Section 148—up to 7 years back)
❌ Penalties (₹5K to ₹10L depending on violation)
❌ Stress and legal hassles

Key Takeaways:

✅ Determine residency status EVERY year (use passport, count days)
✅ File ITR if any Indian income >₹2.5L (or if TDS deducted)
✅ Use correct ITR form (ITR-2 for most NRIs)
✅ Claim DTAA benefits (Form 10F + TRC → lower TDS)
✅ Maintain separate NRE/NRO accounts (tax planning)
✅ File before July 31 (avoid ₹5K-10K late fee)
✅ Verify ITR within 30 days (refund processing starts only then)
✅ Keep documents 6+ years (audit trail)
✅ Hire NRI-specialized CA (for complex cases)
✅ Plan property sales carefully (indexation, Section 54, Form 13)

FAQs: NRI Income Tax Filing (30 Essential Questions)

Q1: Who is considered an NRI under Indian tax law?

A: You’re an NRI (Non-Resident Indian) if you stay in India for <182 days in a financial year (with exceptions for Indian citizens working abroad or visiting—60-day rule becomes 182 days for them). Residency status is determined every year, not once permanently.

Q2: Do NRIs need to file income tax returns in India?

A: Yes, if:

Total Indian income >₹2.5 lakhs
TDS deducted and refund is due
You have capital gains (property, shares, MF)
Rental income from Indian property
Interest from NRO account
You want to claim DTAA benefits

If only NRE/FCNR interest (tax-free) and no other Indian income: No ITR needed.

Q3: What income is taxable for NRIs in India?

A: Only India-sourced income:

✅ Salary for services in India
✅ Rental income (Indian property)
✅ Interest on NRO accounts
✅ Capital gains (property, shares, MF in India)
✅ Business/professional income in India
✅ Dividend from Indian companies

Not taxable:

❌ Foreign salary (for work abroad)
❌ Foreign interest/capital gains
❌ NRE/FCNR interest (tax-exempt)

Q4: What is the difference between NRE, NRO, and FCNR accounts?

NRE: Foreign earnings, tax-free interest, fully repatriable
NRO: India-sourced income, taxable interest @30% TDS, repatriable up to $1M/year
FCNR: Fixed deposit in foreign currency, tax-free interest, fully repatriable

Tax-wise: NRE and FCNR interest = no tax; NRO interest = taxable.

Q5: What is the TDS rate on NRO interest for NRIs?

A: 30% (base rate) + surcharge + cess = ~31.2% total.

DTAA benefit: Can be reduced to 10-15% (e.g., India-USA: 15%, India-Germany: 10%) by submitting Form 10F + TRC to bank.

Q6: Which ITR form should NRIs file?

A: ITR-2 for most NRIs (salary, rental income, capital gains, interest, dividends).

ITR-3 if you have business/professional income (consultancy, proprietorship).

ITR-1 (Sahaj) NOT applicable to NRIs.

Q7: What is the due date for NRI ITR filing?

A: July 31 of the assessment year (for individuals without audit).

Example: For FY 2024-25 (AY 2025-26), due date is July 31, 2025.

If missed: Can file belated return up to Dec 31 (with late fee ₹5,000/₹1,000).

Q8: Can NRIs claim refund if excess TDS was deducted?

A: Yes! This is the #1 reason NRIs should file ITR.

Example: Property sale TDS @20% (₹20L), actual tax after indexation only ₹6L → Refund: ₹14L.

Process: File ITR → Verify within 30 days → Refund processed in 60-90 days.

Q9: What is DTAA and how does it benefit NRIs?

A: DTAA (Double Taxation Avoidance Agreement) = treaty between India and 90+ countries preventing double taxation.

Benefits:

Lower TDS rates (e.g., NRO interest: 15% instead of 30% for USA)
Foreign Tax Credit (tax paid in India credited in home country)
Avoiding tax on salary earned abroad

Requirements: Form 10F + Tax Residency Certificate (TRC).

Q10: How do I claim DTAA benefits?

A: Step 1: Obtain TRC from country of residence
Step 2: File Form 10F on Income Tax portal
Step 3: Submit TRC + Form 10F to payer (bank/tenant/company)
Step 4: They deduct TDS at lower DTAA rate
Step 5: File ITR showing DTAA benefit

Q11: What documents are required for NRI ITR filing?

A: Essential docs:

PAN, Passport (travel dates)
Form 26AS, AIS (tax credit statement)
Bank statements (NRE/NRO)
Form 16/16A (TDS certificates)
Property documents (if sale/rent)
Capital gains statements (shares/MF)
TRC + Form 10F (if claiming DTAA)

Q12: How is rental income taxed for NRIs?

A: Gross rent
Less: Municipal taxes
= Net Annual Value
Less: 30% standard deduction
Less: Home loan interest (if any)
= Taxable rental income

TDS: Tenant deducts 31.2% if rent >₹50,000/month.

Refund possible: If TDS > actual tax (after deductions), file ITR to claim refund.

Q13: How is property sale taxed for NRIs?

A: If held >24 months: LTCG @20% (with indexation benefit)
If held ≤24 months: STCG @30% (per slab)

TDS by buyer: 20% (LTCG) or 30% (STCG)

Refund: If actual tax after indexation < TDS, file ITR for refund.

Exemption: Section 54 (reinvest in another property within specified time → save tax).

Q14: Can NRIs claim deductions like 80C, 80D?

A: Generally NO. Most deductions under Chapter VI-A (80C, 80D, 80E, etc.) not available to NRIs as they require “resident” status.

Exception: Standard deduction on salary (₹50,000), house property deductions (30% + home loan interest).

Q15: What is the penalty for late ITR filing for NRIs?

If income >₹5 lakhs: ₹5,000 (filed by Dec 31) or ₹10,000 (after Dec 31)
If income ≤₹5 lakhs: ₹1,000

Plus: Interest @1% per month on unpaid tax (Sections 234A, 234B, 234C).

Q16: Can NRIs file ITR online from abroad?

A: Yes! ITR can be filed online from anywhere via Income Tax e-filing portal (incometax.gov.in).

Verification: Use Aadhaar OTP (if Aadhaar linked to PAN) or EVC (e-verify code) or physical ITR-V (mail to CPC Bangalore).

Q17: What if I stayed in India for exactly 182 days?

A: You are RESIDENT (not NRI) if you stay ≥182 days.

At exactly 182 days: Resident (must declare global income if ordinary resident).

Tip: If planning to stay ~180 days, track carefully—one extra day changes your entire tax status.

Q18: Do NRIs need to link Aadhaar with PAN?

A: Not mandatory for NRIs (exemption available).

But recommended for:

Faster ITR verification (Aadhaar OTP)
Instant refunds
Easier bank operations

Exemption: If no Aadhaar, can still file ITR using alternate verification.

Q19: Can NRIs invest in mutual funds and how are they taxed?

A: Yes, NRIs can invest in Indian mutual funds (except few schemes restricted to residents).

Taxation:

Equity MF (held >1 year): LTCG @12.5% (gains >₹1.25L)
Equity MF (held ≤1 year): STCG @20%
Debt MF: Per slab rates (no indexation post-2023)

TDS: Applicable; can claim refund if excess.

Q20: What is Form 26AS and how to check it?

A: Form 26AS = Annual Tax Credit Statement showing:

TDS deducted by all payers
Advance tax/self-assessment tax paid
Refunds received
High-value transactions

How to check: Login to Income Tax portal → Services → View Form 26AS (Part A-F)

Critical: Verify 26AS before filing ITR; report mismatches.

Q21: What is AIS and how is it different from Form 26AS?

A: AIS (Annual Information Statement) = More comprehensive than 26AS.

Includes:

All TDS (like 26AS)
Plus: Interest income, dividends, securities transactions, mutual funds, property transactions, foreign remittances

Difference:

26AS: Only TDS/tax payments
AIS: Full financial information (360° view)

Check: Income Tax portal → Services → AIS

Q22: Can NRIs carry forward capital losses?

A: Yes, if ITR filed before due date (July 31).

Types:

STCG loss: Carry forward 8 years (set off against STCG/LTCG)
LTCG loss: Carry forward 8 years (set off against LTCG only)

Critical: Cannot carry forward if belated return filed.

Q23: Do NRIs need to pay advance tax?

A: Generally NO, because most NRI income has TDS deducted.

Exception: If you have business/professional income with no TDS, must pay advance tax quarterly (June, Sept, Dec, March).

Penalty: Interest @1% per month on shortfall.

Q24: Can NRIs claim home loan interest deduction?

A: Yes!

For self-occupied property: Up to ₹2 lakhs/year
For let-out property: Full interest (no limit)

Deduction: Under “Income from House Property” head.

Q25: What if I forget to file ITR for previous years?

A: Belated return: Can file up to 3 years from end of relevant assessment year.

Example: For FY 2021-22 (AY 2022-23), can file until March 31, 2026.

Consequences:

Late fee: ₹5,000 or ₹10,000
Cannot carry forward losses
Interest on unpaid tax

Solution: File immediately (better late than never for refund claims).

Q26: How do I repatriate funds from NRO account?

A: Limit: $1 million per financial year.

Process: Step 1: CA certificate (Form 15CB)—certifying tax compliance
Step 2: Form 15CA (online filing on Income Tax portal)
Step 3: Submit both + ITR copies to bank
Step 4: Bank processes repatriation

Requirements: ITR for relevant years must be filed.

Q27: Can NRIs use ESOPs from Indian companies?

A: Yes. ESOPs taxed at:

At exercise: Difference between FMV and exercise price = Perquisite (taxed per slab if you were employee in India)

At sale: Capital gains:

If listed shares, LTCG @12.5% / STCG @20%
If unlisted, per slab rates

TDS: Applicable at both stages (employer deducts on perquisite, broker on sale).

Q28: What if TDS certificate (Form 16A) is not issued?

A: Check Form 26AS first—TDS may be credited even without certificate.

If not in 26AS:

Contact payer (bank/tenant/company) to file correction
If they don’t, file grievance on TRACES portal
In ITR, report as per actuals (not 26AS); attach proof

Income Tax will reconcile during processing.

Q29: Can NRIs be tax residents of both India and another country?

A: Yes, dual residency possible under domestic laws of both countries.

Resolution: Use DTAA tie-breaker rules (permanent home, center of vital interests, habitual abode, nationality).

Example: NRI stayed 185 days in India (Resident per Indian law) + 190 days in USA (Resident per US law) → DTAA determines which country has primary taxing rights.

Contact AdvoFin Consulting to ensure your NRI tax compliance is perfect and you claim every refund you deserve.

Disclaimer: This blog is for informational purposes only and does not constitute legal, tax, or financial advice. Indian tax laws are subject to amendments. NRI tax situations vary significantly by country of residence and individual circumstances. Please consult a qualified Chartered Accountant or tax advisor specializing in NRI taxation for personalized guidance. AdvoFin Consulting is not liable for actions taken based solely on this content.