NRI Income Tax Guide: Who Should File and When?

For Non-Resident Indians (NRIs), understanding your tax obligations in India can feel overwhelming. With evolving rules and cross-border income involved, it’s essential to stay informed and compliant. Whether you’re working abroad, running a business, or simply earning income from Indian investments — here’s everything you need to know about NRI income tax filing in India.

Who Is an NRI for Tax Purposes?

The Income Tax Act of India, under Section 6, determines your residential status. You are considered a Non-Resident Indian (NRI) for tax purposes if:

• You stay in India for less than 182 days during the financial year OR

• You don’t satisfy other conditions related to cumulative presence over 2 or more years

Your residential status is reviewed each financial year, and it plays a crucial role in determining your tax liability in India.

When Must NRIs File an ITR?

As an NRI, you are required to file an Income Tax Return (ITR) in India if your total income earned or accrued in India exceeds:

• ₹2.5 lakh (under the old tax regime)

• ₹3.0 lakh (under the new tax regime)

You should also file a return if you want to:

Claim a refund on excess TDS deducted

Carry forward capital losses or other losses for future adjustment

Note: Even if your income is below the threshold, filing may be wise to maintain compliance and financial documentation.

What Types of Income Are Taxable for NRIs?

Not all your global income is taxable in India — only what is earned or received in India. Key sources of taxable income include:

• Salary for work performed in India

• Rental income from property located in India

• Capital gains from sale of Indian assets (shares, real estate, mutual funds)

• Interest income on NRO accounts and Indian bank deposits

Exemptions: Interest from NRE or FCNR accounts is tax-free in India, as long as you maintain NRI status.

Applicable ITR Forms for NRIs

NRIs are no longer allowed to file using the simplified ITR-1 (Sahaj) or ITR-4 (Sugam) forms. You must use:

• ITR-2 – if you have income from salary, house property, capital gains, or other sources

• ITR-3 – if you have income from business or profession

Also note: If your income in India exceeds ₹50 lakh, you must report Indian assets and liabilities under Schedule AL (sometimes applicable at ₹1 crore threshold depending on context).

Understanding DTAA: Avoiding Double Taxation

The Double Taxation Avoidance Agreement (DTAA) helps NRIs avoid paying tax twice on the same income — once in India and again in their country of residence.

To claim relief under DTAA, NRIs usually need:

• A valid Tax Residency Certificate (TRC) from their country of residence

• Form 10F and self-declaration

Claiming DTAA benefits can significantly reduce your tax burden.

NRI Tax Rates, Surcharge & Cess

NRIs are taxed as per the same slab rates as resident Indians:

• No special exemption or lower slabs

• No benefit of basic exemption for senior citizens who are NRIs

Surcharge:

• Applied if total income exceeds ₹50 lakh

• Ranges from 10% to 37%, depending on the income bracket

Health & Education Cess:

• 4% on the tax and surcharge amount

Filing Your ITR: Step-by-Step Guide

Filing as an NRI is straightforward if you follow these key steps:

1. Check your residential status (each financial year)

2. Reconcile income & TDS using Form 26AS

3. Choose the correct ITR form (usually ITR-2 or ITR-3)

4. File online via the Income Tax e-filing portal

5. Claim DTAA relief if eligible

6. Compute taxable income, apply deductions (like 80C, 80D)

7. Pay advance tax if liability > ₹10,000 to avoid interest

8. E-verify your return within 120 days

As an NRI, your tax responsibilities in India can be managed smoothly with proper planning and awareness. Always stay updated with the latest regulations, consult a tax expert if needed, and file your returns on time.

For more information reach out to CA Neetu Jain