NRI ITR Filing: Which Return, and Tax on Which Income?
An NRI is taxed in India only on income that arises here. Which ITR form to use, what counts as Indian income, TDS on NRI payments, and how DTAA relief works.
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 within the prescribed limit. Above that limit, a 120-day threshold applies instead. If you fail all the applicable tests, you are a non-resident for that year.
Count carefully. A long visit home can change your status and, with it, your entire tax position. Keep passport stamps and travel records.
What is taxable in India
| Income | Taxable for an NRI? |
|---|---|
| Salary earned in India, or for services rendered in India | Yes |
| Rent from Indian property | Yes |
| Capital gains on Indian shares, mutual funds or property | Yes |
| Interest on an NRO account | Yes |
| Interest on an NRE or FCNR account | No, exempt while you are an NRI |
| Indian business or professional income | Yes |
| Salary earned abroad | No |
| Foreign bank interest, foreign investments, foreign rent | No |
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.
ITR-1 Sahaj is not available to a non-resident. Filing it as an NRI produces a defective return under Section 139(9).
Your deadline is 31 July 2026 if you file ITR-2, which has passed for AY 2026-27, or 31 August 2026 if you file ITR-3 in a non-audit case. Belated returns run to 31 December 2026.
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.
| Payment | TDS |
|---|---|
| Rent paid to an NRI | Deducted under Section 195, at rates well above the 5 per cent that applies to residents |
| Sale of property by an NRI | Deducted on the entire sale consideration, not on the gain |
| NRO interest | High rate under Section 195 |
| Dividends, mutual fund redemptions | Under Section 195 |
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.
The fix exists and is under-used: a lower or nil deduction certificate under Section 197, applied for BEFORE the transaction. Obtained in advance, it reduces the deduction to something near your real liability. Obtained after, it is worthless, and your only route is to file a return and wait for a refund. If you are selling Indian property, deal with this before you sign anything.
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.