NRI Tax Filing in India: A Guide to Rent, Capital Gains & Interest Income

NRI Tax Filing

NRI Tax Filing in India: A Guide to Rent, Capital Gains & Interest Income

NRI Tax Filing

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).

Who Qualifies as an NRI for Tax Purposes?

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.

When Must NRIs File ITR in India?

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.

Key Sources of Taxable Income for NRIs

1. NRO Account Interest

  • 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.

2. Rental Income

  • 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.

3. Capital Gains from Property Sale

  • 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.

4. Other Income

  • Dividends: Taxed at 20%.

  • Royalties and technical fees: 10–30% depending on DTAA.

  • Lottery winnings: Taxed at 30%.

TDS and Tax Refunds: Why Filing ITR Matters

NRIs often face high TDS rates:

Income TypeTDS Rate
NRO Interest30%
Rent31.2%
Property Sale20%
Dividends20%

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.

Avoiding Double Taxation: DTAA Benefits for NRIs

India has Double Taxation Avoidance Agreements (DTAA) with several countries to help NRIs avoid being taxed twice. To avail benefits:

  1. Obtain a Tax Residency Certificate (TRC) from your country of residence.

  2. File Form 10F, if required.

  3. Declare DTAA treaty rates in the ITR.

  4. To claim foreign tax credit, submit Form 67 before filing your return.

Step-by-Step ITR Filing Guide for NRIs (FY 2024–25 / AY 2025–26)

  • 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.

NRI Tax Filing

Illustrative Example

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)

Common Filing Mistakes NRIs Should Avoid

  1. Incorrect Residential Status: Misapplication leads to wrong ITR form.

  2. Missing Form 67: Mandatory for claiming foreign tax credits.

  3. Ignoring AIS/26AS: Mismatches may trigger notices.

  4. Choosing wrong ITR Form: ITR-1 not valid for rent, capital gains.

  5. Late Filing: Delays refunds and may invite penalties.

Read More: Foreign Tax Credit in India: A Guide for NRIs

Key Dates & 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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Foreign Tax Credit in India: A Guide for NRIs

Foreign Tax Credit

Foreign Tax Credit in India: A Guide for NRIs

Foreign Tax Credit

As cross-border employment, freelancing, and global investments become increasingly common, a growing number of Indians are earning income from foreign sources. However, this also brings with it the challenge of double taxation, particularly for those who return to India and become tax residents again. Fortunately, India’s Foreign Tax Credit (FTC) mechanism provides relief from this burden.

What Is Foreign Tax Credit (FTC)?

India’s Income Tax Rules (Rule 128) allow residents to claim credit for taxes paid abroad on income that is also taxable in India. This is referred to as Foreign Tax Credit (FTC). FTC applies to foreign-sourced income such as:

  • Salary and consultancy income

  • Freelancing or professional fees

  • Capital gains from overseas investments

  • Foreign dividends and interest

  • Royalties and licensing income

⚠️ Important: FTC is available only to taxpayers classified as Resident and Ordinarily Resident (ROR). NRIs and RNORs (Resident but Not Ordinarily Resident) are generally taxed only on their Indian-sourced income and typically don’t need FTC.

Role of DTAA (Double Tax Avoidance Agreement)

India has signed Double Tax Avoidance Agreements (DTAA) with over 90 countries, including the USA, UK, UAE, Canada, and Australia, to prevent the same income from being taxed twice.

DTAA offers two relief methods:

  1. Exemption Method – Income is taxed in only one of the two countries.

  2. Credit Method – Income is taxed in both countries, but credit is given in one (usually India) for taxes paid abroad.

If no DTAA exists with a particular country, Section 91 of the Income Tax Act provides unilateral relief, allowing credit for foreign taxes paid even without a treaty.

Step-by-Step: How to Claim FTC in India via Form 67

To claim FTC, taxpayers must submit Form 67 online before or on the same day as filing their Income Tax Return (ITR). Follow these steps:

Step 1: Gather Required Documents

Collect documents that validate your foreign income and taxes paid abroad:

  • Salary slips, bank credits, or invoices

  • Certificate or statement of tax deducted abroad

  • Foreign tax return (if filed)

  • Tax Residency Certificate (TRC)

  • Foreign TDS certificates or employer statements

Step 2: Login to the e-Filing Portal

Visit the Income Tax India e-Filing Portal and log in using your PAN credentials.

Navigate to:
e-File → Income Tax Forms → File Income Tax Forms → Select Form 67

Select Assessment Year: 2025–26

Step 3: Fill Form 67

Enter the following details:

  • PAN, full name, and address

  • Foreign country details and type of income (salary, business, capital gains, etc.)

  • Amount of income and foreign tax paid

  • Convert foreign income and tax into INR using RBI TT buying rate on the last day of the previous month in which income was received

Step 4: Upload Supporting Documents

Attach these documents to support your FTC claim:

  • Foreign tax payment certificates

  • Tax receipts or employer-deduction certificates

  • Foreign tax return (if applicable)

  • Tax Residency Certificate (TRC) for claiming DTAA relief

Step 5: Submit & Verify Form 67

Submit the completed Form 67 using Aadhaar OTP, Net Banking, or Digital Signature Certificate (DSC).

Once Form 67 is submitted, proceed to file your ITR—usually ITR-2 or ITR-3—ensuring the following:

  • Schedule FSI shows your foreign income

  • Schedule TR reflects the FTC claimed

  • All data in Form 67 exactly matches the ITR entries

Example: How FTC Works

Let’s say you earned $60,000 during FY 2024–25 by freelancing for a US client and paid $9,000 in US federal tax.

  • ₹ Conversion: $60,000 × ₹83 = ₹49,80,000 (foreign income)

  • Foreign tax paid in INR: $9,000 × ₹83 = ₹7,47,000

Your total tax liability in India on this income is ₹8,10,000. You can claim an FTC of ₹7,47,000, and pay the balance ₹63,000 in Indian taxes. Ensure that this is all properly declared via Form 67 and your ITR.

Foreign Tax Credit

Common Mistakes to Avoid

❌ Late Filing of Form 67: Must be submitted before or along with your ITR. Filing afterward may lead to disallowance of FTC.

❌ Wrong Currency Conversion: Always use RBI TT buying rate on the last day of the previous month.

❌ Lack of Proof: You must attach proper documentation—self-declarations are not accepted.

❌ Mismatch of Data: Ensure details in Form 67 and ITR match exactly, particularly income and tax figures.

Read More: Have You Reported Your Foreign Assets in Your Income Tax Return?

Final Thoughts

For residents earning foreign income, understanding and using Foreign Tax Credit provisions is essential to prevent double taxation. The correct and timely filing of Form 67 and related schedules in your ITR ensures smooth processing and optimum tax relief. As globalization grows, so does the importance of cross-border tax compliance, and the FTC is one of the most powerful tools at your disposal.

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Top 10 Tax Filing Rules for FY 2024-25

Tax Filing

Top 10 Tax Filing Rules for FY 2024-25

Tax Filing

Filing your Income Tax Return (ITR) is more than just a statutory formality — it’s a crucial step for financial transparency, refund claims, and avoiding penalties. For the Financial Year 2024–25 (Assessment Year 2025–26), the Income Tax Department has introduced key rule changes that affect salaried employees, freelancers, business owners, NRIs, and even crypto investors.

Here’s a comprehensive breakdown of the latest ITR filing rules and compliance requirements every taxpayer must be aware of:

1. New Tax Regime Becomes Default Choice

Starting FY 2024–25, the new tax regime is the default option for all taxpayers unless they actively choose to switch to the old regime. This system offers lower tax rates but disallows common deductions such as those under Section 80C (e.g., LIC, PPF), HRA, and home loan interest.

What’s New:

  • Standard deduction raised to ₹75,000 (from ₹50,000).

  • Employer NPS contribution limit increased to 14%.

  • Section 87A rebate ensures zero tax up to ₹7 lakh income.

📝 Tip: If you have significant deductions (e.g., 80C, 80D, housing loan), evaluate both regimes before choosing.

Tax Filing

2. More Detailed Disclosures for Deductions

ITR forms now require specific details for each deduction you claim. Supporting documentation is mandatory for every benefit availed.

Key Disclosure Updates:

  • Section 80C: LIC/PPF policy numbers & account details.

  • HRA: Rent amount, city category, landlord’s PAN (if rent > ₹1 lakh/year).

  • Section 80D: Health insurer name & policy number.

  • Loan Deductions: Account number, lender name, sanction date for education/home/EV loans.

✅ Ensure you collect all supporting documents before filing.

3. Capital Gains Filing Eased (Up to ₹1.25 Lakh)

Taxpayers earning long-term capital gains (LTCG) up to ₹1.25 lakh from listed equity shares or mutual funds can now file returns using ITR-1 or ITR-4 — simplifying the process for small investors.

Previously, even small gains required ITR-2, which was more complex.

4. Capital Gains Rules Split After July 23, 2024

A new set of rules applies for capital gains from July 23, 2024, particularly affecting unlisted debentures, bonds, and share buybacks.

Changes to Note:

  • Unlisted bonds sold on/after July 23 are now treated as short-term capital gains, regardless of holding period.

  • Buybacks from listed companies will be treated as dividend income, not capital gains.

5. Mandatory Crypto and Foreign Asset Reporting

All taxpayers must now disclose cryptocurrency transactions via Schedule VDA, even if no trading occurred this year.

Crypto Reporting Includes:

  • Dates of acquisition and sale

  • Cost & sale price

  • TDS deduction (1%)

  • Wallet or exchange used

If crypto is held in foreign exchanges, it must also be reported under Schedule FA (Foreign Assets).

⚠️ Non-disclosure can attract severe penalties. The Income Tax Department is actively issuing notices to past defaulters.

6. TDS Section & AIS Cross-Verification

ou must now specify the relevant TDS section (e.g., 194A for interest, 194H for commission) while claiming TDS credits.

The IT Department closely matches your ITR with your Annual Information Statement (AIS) — which includes:

  • Bank interest

  • Dividend income

  • Mutual fund activity

  • Foreign remittances

  • High-value purchases

🧾 Cross-check your ITR with your AIS to avoid mismatch notices.

7. PAN-Aadhaar Linking Now Mandatory

You can no longer file your return unless your PAN is linked with Aadhaar. Submission of Aadhaar Enrolment ID is no longer permitted.

An unlinked PAN is considered inactive, and filing can resume only after paying the penalty and restoring the PAN.

8. Expanded Limits for Presumptive Taxation

Freelancers and small business owners can now opt for presumptive taxation under relaxed limits.

New Thresholds:

  • Business turnover up to ₹3 crore (previously ₹2 crore)

  • Professional income up to ₹75 lakh (previously ₹50 lakh)

  • Cash transactions must be within 5% of total receipts

Presumptive tax allows declaring income at a fixed rate (6%/8% for businesses, 50% for professionals) without maintaining books.

9. Assets & Liabilities Reporting Limit Hiked

Schedule AL (Assets & Liabilities) is now applicable only for individuals whose annual income exceeds ₹1 crore, up from ₹50 lakh.

This move reduces the compliance burden on salaried individuals and middle-income earners.

10. New ITR Deadline: September 15, 2025

The due date for most taxpayers has been extended to September 15, 2025. However, delaying your return can still be costly.

Late Filing Consequences:

  • Penalty of ₹1,000–₹5,000 under Section 234F

  • Loss carry-forward benefits denied

  • Risk of refund delays and notices

⏳ Start early to ensure smooth filing and avoid last-minute errors.

Why Professional Help is Essential in 2025

The new ITR forms and tax rules bring more opportunities for savings — but only if handled correctly.

A professional tax consultant will:

  • Compare old vs new regimes to pick the optimal one

  • Ensure deduction claims are valid and supported

  • Accurately report capital gains, crypto transactions, and AIS items

  • Minimize chances of rejection, delay, or penalties

Read More: Income Tax Filing 2025: 6 Easy Ways to e-Verify Your ITR Online

Why Professional Help is Essential in 2025

The new ITR forms and tax rules bring more opportunities for savings — but only if handled correctly.

A professional tax consultant will:

  • Compare old vs new regimes to pick the optimal one

  • Ensure deduction claims are valid and supported

  • Accurately report capital gains, crypto transactions, and AIS items

  • Minimize chances of rejection, delay, or penalties

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