If you are an NRI and you have been told that “non-residents do not have to file in India,” set that aside. It is one of the most common pieces of bad advice in this area, and it has cost people refunds, triggered notices, and in some cases blocked the repatriation of their own money. The rule is simpler than the rumour: an NRI tax return in India is required whenever Indian income, Indian-sourced gains, or specific transactions cross the lines drawn in the Income Tax Act. This post sets out exactly when you must file, what you must report, and where the traps sit.
Quick answer
An NRI must file an income tax return in India if total income from Indian sources exceeds the basic exemption limit, if tax has been deducted that needs to be claimed back, or if specified high-value transactions have taken place — regardless of whether tax is finally payable.
Before deciding not to file, check:
- Is your residential status correctly determined for the financial year?
- Have you earned any Indian-source income — rent, interest, capital gains, professional fees?
- Has TDS been deducted on any Indian payment to you?
- Are you claiming a refund, a DTAA benefit, or carrying forward a loss?
Why residential status decides everything
Indian tax law does not tax you based on your passport. It taxes you based on your residential status for that specific financial year, determined under Section 6 of the Income Tax Act 1961. The same person can be a resident in one year and an NRI in the next, depending on physical days in India.
Broadly, an individual is a non-resident for a financial year if they do not satisfy either of the two basic conditions in Section 6 — primarily, staying in India for 182 days or more in the year, or 60 days in the year combined with 365 days in the preceding four years. Special carve-outs apply to Indian citizens leaving for employment abroad and to crew members of Indian ships. A separate “deemed resident” rule, introduced in recent years, can pull in Indian citizens with high India-sourced income who are not tax-resident in any other country.
The takeaway: do not assume your status. Count your days for the financial year (1 April to 31 March) before doing anything else. A miscount here is the single most common mistake in NRI filings.
To determine your residential status, do check outout Residential status calculator.
What income is taxable in India for an NRI
For a non-resident, only income that is received in India, accrues in India, or is deemed to accrue in India is taxable here. Foreign salary, foreign rental income, foreign investments — none of these are taxable in India for an NRI, provided they are genuinely earned and received outside India.
The Indian-source income that an NRI typically must report includes:
- Rent from property in India, after the standard 30% deduction and municipal taxes.
- Interest from NRO accounts, which is taxable in India. Interest from NRE and FCNR accounts is exempt for as long as the person remains a non-resident under FEMA.
- Capital gains on Indian shares, mutual funds, and immovable property, with separate rates for short-term and long-term gains.
- Dividend income from Indian companies, taxable at applicable rates with TDS deducted at source.
- Professional fees, consultancy, or business income sourced from India.
- Pension received in India for past employment in India.
Each of these has its own TDS treatment, often at higher rates than for residents, which is precisely why filing a return — even when not strictly mandatory — is often the only way to recover excess tax deducted.
When an NRI tax return in India is mandatory
An NRI must file an Indian income tax return in any of these situations:
- Total Indian income exceeds the basic exemption limit. For NRIs, the basic exemption is the standard threshold available to individuals — the higher slabs available to senior and super-senior citizens do not apply to non-residents, even if the person is over 60.
- TDS has been deducted and a refund is claimed. If a tenant deducted TDS on rent, a buyer deducted TDS on property sale proceeds, or a bank deducted TDS on NRO interest, the only way to claim back any excess is by filing a return.
- A capital gain has arisen, even if reinvested under Section 54 or 54F. The exemption is claimed in the return; without filing, the exemption cannot be substantiated.
- High-value transactions have occurred — for example, depositing ₹50 lakh or more in savings accounts, electricity bills above ₹1 lakh, or foreign travel spend above ₹2 lakh in the year — which independently trigger filing under the seventh proviso to Section 139(1).
- A loss is to be carried forward, such as a capital loss on Indian shares. Carry-forward is only allowed if the return is filed within the original due date.
- A DTAA benefit is being claimed, which requires the return along with Form 10F and a Tax Residency Certificate (TRC).
Old regime versus new regime for NRIs
NRIs can opt for either the old regime (with deductions) or the new regime (lower slab rates, fewer deductions). The new regime is the default from AY 2024-25 onwards.
A few specific points NRIs often miss:
- Section 80C deductions (life insurance, ELSS, principal repayment on a home loan) are available to NRIs under the old regime, but not under the new regime.
- Section 80D health insurance deduction for premiums paid in India is available to NRIs under the old regime.
- Section 80TTA / 80TTB — the savings interest deduction is available to NRIs only under the old regime, and the higher 80TTB limit for senior citizens is not available to NRIs at all.
- Standard deduction on house property (the 30% standard deduction on rental income) is available under both regimes, because it sits inside the head of income, not as a Chapter VI-A deduction.
- Section 87A rebate — generally not available to NRIs. This is a frequent point of confusion. The rebate is for resident individuals only.
If you have meaningful Indian deductions — home loan principal, health insurance for parents in India, long-term insurance — the old regime may still produce a lower tax outgo. Run both calculations before opting in.
How DTAA relief works on the same income
If your country of residence has a Double Taxation Avoidance Agreement (DTAA) with India, you can avoid being taxed twice on the same income. Two methods exist:
- Exemption method — the income is taxable only in one country.
- Credit method — the income is taxable in both, but the country of residence gives credit for tax paid in India (or vice versa).
To claim DTAA benefit on Indian income, you generally need a valid Tax Residency Certificate (TRC) from your country of residence and Form 10F filed on the Indian e-filing portal. Without these, the payer in India will deduct TDS at the higher domestic rate, and you will need to claim the excess back through a return.
How to file an NRI tax return in India
Filing is done through the Income Tax e-filing portal using a PAN registered with an Indian address proof or with a foreign address. Most NRIs use ITR-2 (where there is no business or professional income) or ITR-3 (where there is). Here is the practical sequence:
Variations on this main path
- Senior citizen NRIs: The age-based higher exemption thresholds for residents do not extend to NRIs. The basic limit applies.
- NRIs with only NRE/FCNR interest and no other Indian income: Generally not required to file, since this interest is exempt under FEMA-resident-status rules — but filing may still be useful to maintain a clean record on the e-filing portal.
- NRIs selling Indian property: TDS is deducted by the buyer at a high rate on the sale value. Filing is the only route to recover excess TDS where the actual capital gain is much lower.
When you should not rush to file
A few situations where stopping to think saves trouble:
- You are unsure of your residential status. Filing as an NRI when you were actually a resident for the year (or vice versa) creates a mismatch with AIS data and invites scrutiny. Confirm the day-count first.
- Your only Indian income is exempt NRE or FCNR interest. Filing without need adds compliance overhead each year. Consider whether voluntary filing actually serves you.
- Your TRC is not yet ready. If you are claiming DTAA relief, filing without the TRC and Form 10F means the benefit is denied at the assessment stage. Wait for the documents.
- Your foreign income has been mistakenly reported in AIS. AIS data is sometimes incorrect for cross-border cases. Reconcile before filing, not after.
- You are a “returning Indian” mid-year. Your status may change to RNOR or resident; the filing approach is different. This is not a do-it-yourself situation.
Documents to keep ready
Before starting an NRI tax return, gather:
- PAN and Aadhaar (where available)
- Passport, visa, and a record of arrival and departure dates for the financial year
- Indian bank statements (NRO, NRE, FCNR) for interest details
- Form 16A and Form 26AS / AIS / TIS for TDS reconciliation
- Sale deeds and purchase deeds for any property transactions
- Demat and broker statements for capital gains
- Tax Residency Certificate from the country of residence, if claiming DTAA
- Form 10F submitted on the Indian e-filing portal
- Foreign bank account details if claiming foreign tax credit
Final takeaway
For an NRI, Indian filing is not about whether you live here. It is about whether India has a tax claim on a slice of your income — through rent, interest, capital gains, professional fees, or specific high-value events. Get the residential status right, list every Indian-source income honestly, decide between the old and new regimes on a numbers basis, and use DTAA where it applies. Most NRI filing problems are not about complex law; they are about missed days, missed documents, and missed deadlines.
NRI tax return-related confusion or need expert help with residential status, DTAA relief, or Indian property sale TDS recovery? eTaxMate can help you review your situation, identify what applies to you, and handle filing or compliance correctly.
This blog post is for general information only and does not constitute professional advice. Tax laws are subject to change and their application depends on individual facts and circumstances. Readers should consult a qualified professional before taking any action based on this content. eTaxMate accepts no liability for any action taken based on the information in this post.
Frequently Asked Questions
Do NRIs have to file an income tax return in India every year?
No. An NRI must file only if Indian-source income exceeds the basic exemption limit, if TDS has been deducted and a refund is being claimed, if a capital gain has arisen, if a loss is to be carried forward, if a DTAA benefit is being claimed, or if specified high-value transactions have taken place during the financial year. In years where none of these apply, filing is not mandatory.
Is foreign income of an NRI taxable in India?
For a non-resident, only income received in India, accruing in India, or deemed to accrue in India is taxable. Foreign salary, foreign rental income, and foreign investments earned and received outside India are not taxable in India for an NRI. The position is different for residents and for residents but not ordinarily resident, so confirming the residential status for the year is the first step.
Can NRIs claim the Section 87A rebate?
Generally no. The Section 87A rebate is available to resident individuals whose total income is within the prescribed limit. Non-residents are not eligible, even if their Indian income is small. This is a frequent source of confusion because online tax calculators sometimes apply the rebate by default. NRIs should verify that the rebate has not been incorrectly added when reviewing their computed tax.
Which ITR form should an NRI use?
Most NRIs use ITR-2, which covers salary, multiple house properties, capital gains, and other sources but excludes business or professional income. NRIs with business or professional income from India use ITR-3. ITR-1 is not available to non-residents. The ITR form must be filed through the Income Tax e-filing portal and e-verified within the prescribed window after submission.
How can an NRI recover excess TDS deducted on Indian property sale?
The buyer is required to deduct TDS at a prescribed rate on the sale value, which is often much higher than the actual tax on the capital gain. The only way to recover the excess is by filing an Indian tax return for that financial year, computing the actual gain (with indexation where applicable), claiming any reinvestment exemption, and requesting the refund. The refund is credited to a verified Indian bank account.
Is interest on an NRE account taxable in India?
Interest on NRE and FCNR accounts is exempt from Indian income tax for as long as the person remains a non-resident under FEMA. Interest on NRO accounts is fully taxable in India and is subject to TDS at a rate that is typically higher than for residents. If the actual tax liability is lower, the difference can be claimed as a refund by filing a return.