As global mobility increases, a significant number of Indians live abroad while maintaining financial interests in India—be it property, investments, or bank accounts. For Non-Resident Indians (NRIs), understanding how income earned in India is taxed is crucial, especially when it comes to filing their Income Tax Return (ITR).
An individual is classified as a Non-Resident Indian (NRI) for income tax purposes if they:
Stay in India for less than 182 days in a financial year, or
Are present in India for less than 60 days in a year and for less than 365 days over the last 4 years.
However, the threshold for Indian citizens or Persons of Indian Origin (PIOs) earning more than ₹15 lakh from Indian sources is reduced to 120 days. If such individuals have no tax liability in any other country, they may be considered deemed residents.
Filing ITR becomes mandatory for NRIs if:
Their total taxable income from India exceeds ₹2.5 lakh during the financial year.
However, even if not compulsory, filing a return is strongly recommended for several reasons:
Claim excess TDS refunds deducted by banks, tenants, or buyers.
Carry forward capital losses.
Maintain NRI status officially to avoid scrutiny.
Use as income proof for loans, repatriation, or visa documentation.
Fully taxable at 30% plus surcharge and cess.
TDS is deducted at the same rate by banks.
NRE and FCNR interest is completely tax-free.
Taxed under ‘Income from House Property’.
You can deduct:
Municipal taxes actually paid.
30% standard deduction on net rent.
Tenants must deduct TDS at 31.2% on rent paid to NRIs.
Long-Term Capital Gains (LTCG) (holding >24 months):
Taxed at 20% with indexation, or
From July 2024, possibly 12.5% without indexation.
Short-Term Capital Gains (STCG):
Taxed as per slab rates if holding <24 months.
Buyers must deduct TDS at 20% on sale proceeds.
Dividends: Taxed at 20%.
Royalties and technical fees: 10–30% depending on DTAA.
Lottery winnings: Taxed at 30%.
| Income Type | TDS Rate |
|---|---|
| NRO Interest | 30% |
| Rent | 31.2% |
| Property Sale | 20% |
| Dividends | 20% |
Actual tax liability is often much lower. Filing ITR allows you to claim refunds of the excess TDS. To do this:
File ITR-2 (if no business income).
Match income details in Form 26AS and Annual Information Statement (AIS).
Keep documents like Form 16A, rent agreements, sale deeds, and bank statements.
India has Double Taxation Avoidance Agreements (DTAA) with several countries to help NRIs avoid being taxed twice. To avail benefits:
Obtain a Tax Residency Certificate (TRC) from your country of residence.
File Form 10F, if required.
Declare DTAA treaty rates in the ITR.
To claim foreign tax credit, submit Form 67 before filing your return.
Collect documents: PAN, passport, bank statements, Form 16A, property and investment records.
Login to www.incometax.gov.in.
Select the correct form and AY: Use ITR-2 for AY 2025–26.
Enter income details:
House Property: Deduct municipal taxes and 30%.
Capital Gains: Provide sale details, cost, holding period.
Other Sources: NRO interest, dividends, etc.
Claim deductions under:
Section 80C: LIC, ELSS, PPF.
Section 80D: Health insurance.
Section 54/54EC: Reinvestment of LTCG.
Check TDS in Form 26AS. Pay any shortfall via Challan 280.
Submit and e-verify the return using Aadhaar OTP, net banking, or other modes.
An NRI earns:
₹8 lakh from rent
₹2 lakh NRO interest
₹15 lakh LTCG from property sale
Breakdown:
Rent: ₹5.6 lakh taxable → Tax: ₹24,500 → TDS deducted: ₹2.49 lakh
NRO Interest: Tax: ₹60,000 → TDS deducted: ₹60,000
LTCG: Tax: ₹3 lakh → TDS deducted: ₹15 lakh
➡️ Total tax due: ₹3.99 lakh
➡️ Total TDS deducted: ₹18.09 lakh
✅ Refund: ₹14.1 lakh (only claimable by filing ITR)
Incorrect Residential Status: Misapplication leads to wrong ITR form.
Missing Form 67: Mandatory for claiming foreign tax credits.
Ignoring AIS/26AS: Mismatches may trigger notices.
Choosing wrong ITR Form: ITR-1 not valid for rent, capital gains.
Late Filing: Delays refunds and may invite penalties.
Due Date for Filing: 15 September 2025 (for AY 2025–26)
Late Filing Penalties:
₹1,000 if filed by 31 Dec 2025
₹5,000 if filed after 31 Dec 2025
Interest at 1% per month on unpaid tax
Filing ITR is not just about paying taxes—it’s also your opportunity to claim refunds, maintain clean tax records, and comply with Indian laws. For NRIs with rental income, NRO interest, or capital gains, a well-prepared tax return ensures peace of mind and protects your long-term financial interests in India.
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