NRI ITR Filing: Which Return, and Tax on Which Income?

The single most useful thing to understand about NRI taxation in India is this: an NRI is taxed here only on income that arises or is received in India. Salary earned in Dubai, a US brokerage account, rent from a London flat — none of it is taxable in India.

Most of the confusion, and most of the overpayment, comes from not applying that one rule.

First, are you actually an NRI this year?

Residential status is determined every year, separately. You are not an NRI permanently; you are an NRI for a given financial year.

You are a resident for FY 2025-26 if you were in India for 182 days or more during the year, or for 60 days or more during the year and 365 days or more across the four preceding years.

The 60-day test is relaxed to 182 days for an Indian citizen leaving India for employment, and for an Indian citizen or person of Indian origin visiting India, where total Indian income is up to ₹15 lakh. Above ₹15 lakh, a visiting citizen or person of Indian origin faces a 120-day threshold instead, and is treated as not ordinarily resident if resident only because of it. If you fail all the applicable tests, you are a non-resident for that year.

What is taxable in India

The NRE and NRO distinction is where a lot of tax gets paid unnecessarily. NRE interest is exempt. NRO interest is taxable and suffers TDS at a high rate.

Which ITR form

ITR-2 for most NRIs: salary, house property, capital gains, other sources. This covers the large majority. ITR-3 if you have income from an Indian business or profession.

For AY 2026-27 the due date was 31 July 2026 for ITR-2 and 31 August 2026 for ITR-3 in a non-audit case. Both have passed. A belated return can still be filed until 31 December 2026, with the Section 234F late fee.

Do you have to file at all?

Yes, if your Indian income exceeds the basic exemption limit before deductions. But there are two situations where filing is worth it even when you are not obliged.

You are owed a refund. TDS on NRI payments is deducted at rates that frequently exceed the actual liability. The only way to recover the excess is to file, and a great many NRIs simply leave that money with the department.

You want to carry forward a loss. Capital losses on Indian assets can be carried forward only if you file by the due date.

TDS on NRI income is the real issue

This is where NRIs overpay most. Section 195 is the 1961-Act reference used for FY 2025-26; for payments from 1 April 2026, TDS on payments to non-residents sits in Section 393(2) of the Income-tax Act, 2025.

Property sale is the painful one. TDS is computed on the full sale price rather than on your actual capital gain. Sell a flat for ₹1 crore that you bought for ₹80 lakh, and tax gets deducted against ₹1 crore even though your gain is ₹20 lakh.

DTAA: not paying tax twice

India has Double Taxation Avoidance Agreements with most countries where NRIs live. Where income is taxable in both places, the DTAA either exempts it in one country or gives credit for tax paid in the other.

To claim treaty benefit you generally need a Tax Residency Certificate from your country of residence, Form 10F, and a declaration that you do not have a permanent establishment in India, where relevant.

Treaty rates frequently sit well below domestic TDS rates. Producing the TRC and Form 10F to your Indian payer before payment gets you the lower rate at source. Producing them afterwards means claiming a refund instead.

Common mistakes

• Filing ITR-1. Not available to a non-resident.
• Declaring foreign income. Not taxable for an NRI, and declaring it invites questions.
• Not claiming NRE exemption. NRE interest is exempt and should not be offered to tax.
• Not reconciling Form 26AS. TDS under Section 195 shows there, and a mismatch invites a notice.
• Missing the Section 197 certificate on a property sale. The most expensive omission on this list.
• Assuming NRI status carries over. It is tested every year.

What we need from you

Passport with entry and exit stamps for day counting, Form 26AS and AIS, NRE and NRO statements separately, property and capital gains documents, TDS certificates, the Tax Residency Certificate from your country of residence, and Form 10F.