Many NRIs filing their Indian income tax return reach for the simplest-looking form — ITR-1 (Sahaj) — because it seems designed for individuals with straightforward income. Others assume that ITR-4 applies if their earnings in India are small. Both assumptions are wrong. NRIs are explicitly excluded from ITR-1 and ITR-4 by the instructions to those forms, regardless of how simple the income is. The real question is not which form looks easiest but which ITR form for NRI income actually applies — and that comes down to one distinction: whether you have business or professional income from India. This post deep dives into which ITR form should an NRI file.
Quick answer
NRIs must file either ITR-2 (for salary, capital gains, house property, and other sources) or ITR-3 (for business or professional income from India). ITR-1 and ITR-4 are not available to NRIs under any circumstances. The choice between ITR-2 and ITR-3 depends solely on whether you have income from business or profession in India.
Before acting, check:
- Whether you have any business or professional income from India — even a small consultancy fee from an Indian client can push you from ITR-2 to ITR-3.
- Whether your status for the year is NRI, RNOR (Resident but Not Ordinarily Resident), or ROR — the form selection and schedule requirements differ.
- Whether TDS has been deducted on your Indian income — if yes, you need to file to claim the refund even if total income is below the taxable threshold.
Why NRIs Cannot Use ITR-1 or ITR-4
ITR-1 (Sahaj) is available only to resident individuals with income up to ₹50 lakh from salary, one house property, and other sources (excluding capital gains and business income). The form explicitly restricts itself to residents. An NRI with only a salary from an Indian employer and nothing else still cannot use ITR-1 — the residential status disqualifies them outright.
ITR-4 (Sugam) is for individuals, HUFs, and firms opting for presumptive taxation under Sections 44AD (business), 44ADA (professionals), or 44AE (transport). These presumptive schemes are available only to residents. An NRI cannot opt for Section 44AD or 44ADA, and therefore has no use for ITR-4. This is a critical point: even if your business turnover from India is small, you cannot use the simpler presumptive route as an NRI and must use ITR-3 instead.
ITR-2 for NRIs: The Standard Choice
ITR-2 is the correct form for NRIs who have income from any combination of: salary or pension from an Indian employer, income from house property in India, capital gains (on shares, mutual funds, property, or other assets), interest income, dividend income, and other sources — but no business or professional income.
Most NRIs filing an Indian return will use ITR-2. It accommodates the most common NRI income types, and it contains the key schedules that NRIs need:
Schedule S (Salary): If you have a salary from an Indian employer, this is where it is reported. NRIs employed by Indian companies, or those on deputation who retained Indian payroll, report salary here.
Schedule HP (House Property): If you own house property in India and earn rental income, or if you claim the interest deduction on a home loan, this schedule applies.
Schedule CG (Capital Gains): This is one of the most important schedules for NRIs. Capital gains on sale of property, listed equity shares, equity mutual funds, debt mutual funds, and unlisted shares are all reported in Schedule CG.
Schedule OS (Other Sources): Interest on fixed deposits, savings accounts, and bonds; dividends; and any other income not covered elsewhere.
Schedule FSI (Foreign Source Income): If you also have income from a country outside India that is taxable in India (unusual for NRIs, but possible in some cases), it is reported here. Most NRIs leave this blank.
Schedule TR (Tax Relief): Used to claim relief under a DTAA for income taxed in both India and the country of residence.
Under the Income Tax Act 1961, the obligation to file ITR-2 arises when total income from Indian sources exceeds the basic exemption limit, or when TDS has been deducted and a refund is due. Under the Income Tax Act 2025, applicable from AY 2026-27, the filing obligation has been carried forward; section references should be confirmed against the current bare Act.
ITR-3 for NRIs: When Business Income Is Involved
ITR-3 applies to individuals and HUFs with income from business or profession, including NRIs. If an NRI runs a business with operations or income sourced in India — for example, an NRI who is a partner in an Indian firm, who provides professional consultancy to Indian clients under an Indian contract, or who has proprietary business income from India — ITR-3 is the required form.
ITR-3 contains everything ITR-2 does, plus the business income schedules (Schedule BP for business or profession, Schedule P&L for profit and loss, and Schedule BS for balance sheet). NRIs using ITR-3 must also maintain books of accounts in India for their business income if turnover exceeds the relevant threshold under Section 44AA.
Old Regime vs New Regime: What NRIs Need to Know
NRIs can opt for either the old tax regime (with deductions) or the new tax regime (with lower slab rates, no Chapter VI-A deductions) under Section 115BAC of the Income Tax Act 1961. The new regime is the default from AY 2024-25 onward; the old regime must be explicitly opted into at the time of filing.
For NRIs, the regime choice primarily affects non-special-rate income — salary and interest, for example. Capital gains taxed at special rates are taxed at those rates regardless of which regime is chosen: short-term equity under Section 111A, long-term assets under Section 112, and long-term listed equity, which for an NRI is taxed under Section 115AD (the equivalent of Section 112A that applies to residents). The rate and the ₹1.25 lakh annual exemption on equity LTCG are the same; only the operative section differs for an NRI.
Under the old regime, NRIs can claim deductions under Chapter VI-A — for example, Section 80C (insurance, ELSS, PPF) and Section 80D (health insurance premiums) — if the underlying investment or premium is paid from Indian income or Indian bank accounts. Under the new regime, these deductions are not available.
Schedule FA: What NRIs Do Not Have to File
This is one of the most common misconceptions in NRI tax filing. Schedule FA (Foreign Assets) requires disclosure of foreign bank accounts, foreign equity, foreign immovable property, and other foreign assets. However, this schedule is applicable only to Resident and Ordinarily Resident (ROR) individuals. NRIs and RNORs (Resident but Not Ordinarily Residents) are not required to disclose foreign assets in Schedule FA.
If you are an NRI filing ITR-2 or ITR-3, you do not need to fill Schedule FA, even if you hold substantial assets abroad. Incorrectly leaving it blank out of confusion — rather than out of legal entitlement — can create unnecessary anxiety; it is legally correct for NRIs to omit it.
Section 87A Rebate: Not Available to NRIs
Section 87A of the Income Tax Act 1961 provides a rebate that reduces tax liability to nil for resident individuals whose total income is within a specified limit. For FY 2025-26 (AY 2026-27), the rebate is up to ₹12,500 under the old regime (for taxable income up to ₹5 lakh) and up to ₹60,000 under the new regime (for taxable income up to ₹12 lakh).
NRIs are not entitled to this rebate under either regime. The rebate is restricted to resident individuals, so an NRI pays tax from the first rupee above the basic exemption limit, with no rebate to bring it down to zero.
The basic exemption limit does apply to NRIs: ₹2.5 lakh under the old regime, and ₹4 lakh under the new regime for FY 2025-26 (raised from the earlier ₹3 lakh). But the exemption limit and the rebate are two different things — an NRI gets the former and not the latter.
One more precision that matters even for residents: the Section 87A rebate cannot be set against tax on special-rate income such as long-term capital gains under Section 112A. So the “no tax up to ₹12 lakh” headline does not extend to capital gains, for residents or NRIs.
How to Decide Which ITR Form to File
The flowchart below captures the decision for most NRIs. Two points to note before reading it: neither ITR-1 nor ITR-4 is available to NRIs regardless of income level, and both ITR-2 and ITR-3 can accommodate capital gains, house property, salary, and other income types.
When You Should Not File Without Professional Help
When you have sold property or unlisted shares. Capital gains on immovable property or unlisted equity involve complex computations — cost of acquisition, improvement costs, indexation choices (for eligible assets), reinvestment exemption claims, and TDS credit reconciliation. An error in any of these affects the refund calculation or creates a demand notice.
When you have income in both India and your country of residence that you believe is exempt under a DTAA. Incorrectly claiming treaty exemption without the right documentation (TRC and Form 10F) or without understanding the applicable article of the treaty is a common filing error that attracts scrutiny.
When your residential status is borderline. If your stay in India during the year was close to the thresholds that determine NRI, RNOR, or ROR status (182 days, 60 days with look-back rules), your status may not be clear-cut. Filing with the wrong status affects which schedules apply and whether foreign assets need to be disclosed.
When you are filing for the first time after returning to India. Returning NRIs transitioning through RNOR status have a limited window during which their foreign income remains exempt from Indian tax. Filing incorrectly during the RNOR years can mean paying Indian tax on income that was genuinely exempt.
Documents to Keep Ready
- ✅ Form 16 or salary certificate from Indian employer (for salary income)
- ✅ Form 26AS and Annual Information Statement (AIS) downloaded from the e-filing portal — to reconcile TDS credits
- ✅ Capital gains computation statements from the broker or mutual fund (for equity/MF gains)
- ✅ Sale deed and purchase deed for property transactions, with registered dates
- ✅ Bank statements for Indian accounts, showing interest credited
- ✅ Tax Residency Certificate (TRC) and Form 10F if claiming DTAA relief
- ✅ Proof of residential status — travel history, passport stamps, or employer certificate confirming deputation dates
- ✅ PAN card (mandatory for filing; NRIs without PAN must obtain one before filing)
Final Takeaway
Which ITR form for NRI income? ITR-2 or ITR-3 — nothing else. The choice between them is simple: business or professional income from India means ITR-3; everything else (salary, capital gains, house property, interest) means ITR-2. No NRI can legally file ITR-1 or ITR-4, regardless of income level or simplicity. The more important decisions come inside the form — which regime to opt for, whether Schedule FA applies (it does not for NRIs), and how to compute and declare capital gains correctly. Getting the form selection right is just the starting point.
Need help choosing the right ITR form or filing your NRI tax return correctly? eTaxMate can review your income sources, determine the right form and schedules, and handle the full ITR filing with regime selection and refund optimisation.
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
1. Can NRIs file ITR-1 in India?
No. ITR-1 (Sahaj) is available only to resident individuals with income up to ₹50 lakh from salary, one house property, and other sources. NRIs are explicitly excluded from ITR-1, regardless of how simple their Indian income is. An NRI with only a salary from an Indian employer must still file ITR-2, not ITR-1.
2. Which ITR form should an NRI file for capital gains?
ITR-2. Capital gains from sale of property, listed equity shares, equity mutual funds, debt mutual funds, or unlisted shares are reported in Schedule CG of ITR-2. If the NRI also has business or professional income from India, they would file ITR-3 instead, which also contains the capital gains schedule.
3. Do NRIs need to declare foreign assets in their Indian ITR?
No. Schedule FA (Foreign Assets) is mandatory only for Resident and Ordinarily Resident (ROR) individuals. NRIs and RNORs are not required to disclose foreign bank accounts, foreign property, or overseas investments in their Indian income tax return. Leaving Schedule FA blank is legally correct for NRIs.
4. Can NRIs claim the Section 87A rebate in India?
No. The Section 87A rebate is available only to resident individuals. NRIs are not eligible under either regime, even the new one. NRIs do get the basic exemption limit — ₹2.5 lakh under the old regime and ₹4 lakh under the new regime for FY 2025-26 — but not the additional rebate. So an NRI pays tax from the first rupee above the exemption limit, with no rebate to reduce it to nil.
5. What is the due date for NRI income tax return filing in India?
The standard due date for NRIs is July 31 of the assessment year, the same as for resident individuals not subject to tax audit. If the NRI’s Indian business income is subject to tax audit, the due date extends to October 31. Late filing attracts a fee under Section 234F. Note also that NRIs do not get the advance-tax relief given to resident senior citizens, so if your estimated tax liability is ₹10,000 or more, advance tax applies regardless of age.
6. Can NRIs use presumptive taxation (ITR-4) in India?
No. Presumptive taxation under Sections 44AD and 44ADA — which allows simplified income computation for small businesses and professionals — is available only to resident individuals, HUFs, and firms. NRIs cannot opt for these schemes and must instead maintain regular books of account for any business income and file ITR-3 rather than ITR-4.