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Who Counts as an NRI Under the Income Tax Act, 1961
Your residential status is decided year by year, not once for life. Under Section 6 of the Act, you are treated as a Non-Resident Indian for a given financial year if you were physically present in India for less than 182 days during that year, and also less than 60 days in that year combined with less than 365 days across the four immediately preceding years. If either condition fails, you may be classified as Resident and Ordinarily Resident or as Resident but Not Ordinarily Resident, both of which carry different tax consequences.
This distinction matters more for Bangalore-connected professionals than most realise. A senior architect at a Bay Area company who flies home three or four times a year to visit ageing parents in Basavanagudi, spends two weeks working remotely from a coworking space in Indiranagar, and attends a wedding in Malleshwaram can cross day-count thresholds without noticing. That one crossing changes the entire filing exercise for that assessment year. Our first task on every engagement is to compute your day count precisely and lock your residential status before any income schedule is prepared.
When Are You Legally Required to File an ITR as an NRI?
You must file an Indian Income Tax Return for a financial year if your gross Indian-sourced income before deductions exceeds ₹2.5 lakh, if TDS has been deducted anywhere on your PAN and you wish to reclaim any portion of it, if you have realised capital gains from Indian securities or property, or if you need an acknowledged return for visa, loan, or repatriation purposes. You should also file if you have brought-forward losses to carry into future years, or if you hold assets that require Schedule FA disclosure.
The most common misconception among Bangalore tech professionals is that STT paid on their equity trades or the 30% TDS on their NRO interest closes the loop. It does not. TDS is a collection mechanism, not a filing substitute. Without the return, the department has no reconciled record of what you actually owed versus what was withheld, and any refund due sits unclaimed in the system.
Filing Deadlines You Cannot Afford to Miss
The standard due date for NRIs whose accounts do not require audit is 31 July for the April to March financial year. If a tax audit under Section 44AB applies, the deadline extends to 31 October. A belated return can still be filed until 31 December, subject to a late fee of up to ₹5,000 under Section 234F plus 1% monthly interest on unpaid tax. After 31 December, the door closes for that year, with only the narrow updated-return provision under Section 139(8A) available for genuine corrections.
Categories of Income Taxable for NRIs in India
As an NRI, only income earned, accrued, or received in India falls within Indian tax jurisdiction. Your foreign salary, employer stock grants that vested after your relocation, overseas brokerage interest, and international rental income remain outside Indian tax entirely. The categories most relevant to Bangalore-linked NRIs are:
Rental income from residential and commercial units: If you lease out a 2 BHK in Marathahalli or a villa in Sarjapur, your tenant is required to deduct 30% TDS at source. Filing your return lets you claim the flat 30% standard deduction under Section 24, deduct home loan interest paid during the year, and recover the excess TDS.
Capital gains from Indian shares, mutual funds, ESOPs, and property: For those who joined Indian tech companies early and now hold appreciated positions, this is often the largest annual reporting item. Listed equity held over 12 months qualifies as long-term, with LTCG taxed at 12.5% above the ₹1.25 lakh threshold from FY 2024-25 onwards, while short-term gains attract 20%. Property gains use a 24-month holding period, with LTCG taxed at 12.5% without indexation under the revised regime.
Interest on NRO accounts and Indian fixed deposits, which is fully taxable and subject to 30% TDS at source. Interest on NRE and FCNR deposits stays exempt as long as your NRI status is maintained.
Salary attributable to services rendered in India during any part of the year, and any consulting or professional fees invoiced by an Indian entity for work you performed while physically present in India.
Business or profession income where the enterprise is controlled or substantially operated from India. This is a common consideration for founders who moved abroad but still run India-registered entities.
Sale proceeds of property: When you sell a flat in HSR Layout or a plot off Kanakapura Road, the buyer deducts TDS at either 20% for long-term assets or 30% for short-term, computed on the full sale consideration rather than the actual gain. Return filing is the only mechanism to recover the excess.
Filing Errors We Correct Most Often for New Clients
Every filing season we take on clients who arrive after a notice, a rejected return, or a delayed refund. The recurring patterns are almost identical: residential status incorrectly self-declared, ITR-1 used instead of ITR-2 or ITR-3 which triggers an immediate defective return, NRO interest omitted because the client assumed TDS was final, ESOP perquisite value from the exercise year not carried into the cost of acquisition when the shares were later sold, property TDS treated as final tax rather than a withholding, DTAA relief skipped because no Tax Residency Certificate was obtained, and Schedule FA left blank despite reportable foreign assets, which carries a ₹10 lakh per-asset penalty under the Black Money Act.
Documents Required for NRI ITR Filing
We share a personalised checklist after the discovery call, but the core set typically includes:
- PAN card and passport, plus a stamp-verified record of days spent in India during the year
- Form 16 or salary certificate for any Indian salary component
- NRO, NRE, and FCNR bank statements covering the full financial year
- Form 26AS, AIS, and TIS downloaded from the income tax portal against your PAN
- Form 16A TDS certificates from banks, tenants, and property buyers
- Rent agreement and receipts for any leased property
- Sale deed, original purchase documents, and improvement cost proofs for any property sold
- Consolidated Account Statement from CAMS or KFintech for mutual fund transactions
- Broker statements and ESOP grant, exercise, and perquisite records for equity activity
- Tax Residency Certificate from your country of residence if we are claiming DTAA relief
How MostlyNRI Files Your Return, Step by Step
Step 1. Free discovery call: We map your income sources, residential status, and reporting obligations for the year at no cost and no commitment.
Step 2. Tailored checklist: You receive an exact document list generated from what we learned in the discovery call, not a generic template.
Step 3. Secure upload: Documents come through our encrypted client portal. Nothing sensitive moves over email or courier.
Step 4. Computation and DTAA analysis: We calculate taxable income across every schedule, credit TDS accurately from Form 26AS, and apply treaty relief based on your country of residence and the type of income.
Step 5. Draft review: You receive a plain-English summary of the return before submission. We adjust anything you want re-examined.
Step 6. E-filing and acknowledgement: After your explicit sign-off, we file on the income tax portal, send you the ITR-V immediately, and guide you through e-verification.
Step 7. Refund tracking and notice support: We monitor refund credit through to your NRO account and respond to any departmental notice on the return we filed at no additional cost.
What Non-Compliance Actually Costs
The Income Tax Department cross-references PAN-linked data from banks, registrars, brokers, employers, and mutual fund houses in near real time. When AIS shows income and no return sits against it, an automated intimation is issued without manual review. Responding from Sunnyvale, Reading, or Dubai across a 10 or 12 hour time difference is expensive and disruptive.
Beyond the ₹5,000 late fee under Section 234F, unpaid tax attracts 1% monthly interest under Sections 234A, 234B, and 234C. Capital losses cannot be carried forward once the return is late. Undisclosed foreign assets attract a ₹10 lakh penalty per asset. Chronic non-filing can block repatriation and complicate future property sales or PAN-based KYC updates.
Why NRIs from Bangalore Choose MostlyNRI
Our practice is 100% NRI-focused. Every process is built for your specific rule set, not adapted from resident work. We operate a fully remote workflow from San Jose to Zurich, apply the correct treaty relief across the US, UK, UAE, Canada, Australia, Singapore, Germany, and every jurisdiction in our footprint, quote flat pricing that is disclosed before work begins, and include post-filing notice response for the returns we file. Founded by Pryank Agrawal, an IIT Roorkee alumnus with corporate leadership experience at Infosys and Mahindra, MostlyNRI serves clients in 33 countries and maintains a working footprint across 13 Indian cities, giving Bangalore clients confidence that both sides of every cross-border question are handled by advisors who have seen the exact situation before.
Ready to File Your NRI Income Tax Return?
Get started today with a free consultation. MostlyNRI is ready to help you file your ITR correctly, claim your refunds, and stay fully compliant with Indian tax laws from wherever you are in the world.
Frequently Asked Questions
Do I still need to file an ITR if my only Indian income is NRO interest below ₹2.5 lakh?
Filing is not strictly mandatory in that scenario, but it is strongly advisable if TDS was deducted. Without a return, the 30% withheld on your NRO interest cannot be recovered even when your actual liability is nil.
Which ITR form applies to me as an NRI in Bangalore?
Most NRIs file ITR-2, which covers salary, house property, capital gains, and other sources. Founders and consultants running Indian entities use ITR-3. ITR-1 is legally unavailable to NRIs, and its use immediately triggers a defective return notice from the department.
Are ESOPs I received while working in India taxable when I sell them abroad?
Yes, where the shares are of an Indian company or the gain relates to services rendered in India. The perquisite value taxed at exercise forms your cost of acquisition, and gains from the eventual sale are taxable in India as capital gains from an Indian asset.
Is interest on my NRE fixed deposit taxable in India?
No. NRE savings and fixed deposit interest are fully exempt while your NRI status is maintained. Only NRO account interest and Indian resident fixed deposit interest are taxable in India and require disclosure in your annual return.
Can I claim DTAA benefits when filing from the United States?
Yes. The India-US treaty allows credit for taxes paid in one country against the liability in the other, subject to timely Form 67 disclosure and a valid Tax Residency Certificate. We prepare the credit computation and file Form 67 within the prescribed window.
I sold my apartment near ORR last year. What TDS was applied, and how do I recover the excess?
The buyer was required to deduct TDS at 20% on the full sale consideration for a long-term asset. Your real liability sits on the indexed gain, typically far lower. Filing your ITR is the only route to compute the correct tax, apply Sections 54 or 54EC, and claim the refund.
Can MostlyNRI file returns for years I have already missed?
Yes, subject to belated and updated return provisions. Section 139(8A) permits updated returns within 48 months of the end of the relevant assessment year for genuine corrections and prior omissions. We assess each missed year and confirm what remains filable.
How long does the full filing process take once documents are uploaded?
Straightforward cases with salary, interest, and one property usually complete within 3 to 5 business days. Files with multiple capital gains transactions, DTAA claims, or property sales may extend to 7 to 10 business days. You will always know the timeline before we start.
Do I need an Aadhaar to file my NRI ITR?
Aadhaar is not mandatory for Non-Resident Indians. Your PAN and passport are sufficient for filing, and e-verification can be completed through net banking, EVC generated by your bank, or a signed ITR-V posted to Bengaluru CPC.
What happens if I miss the 31 July deadline?
You can still file a belated return by 31 December with a late fee up to ₹5,000 under Section 234F plus 1% monthly interest on unpaid tax. Carry-forward of most losses is lost. Filing on time avoids all of it, which is why we open outreach in early June.
Are gifts I send to my parents in Bangalore taxable in India?
Gifts from a Non-Resident Indian to close relatives, including parents, are fully exempt from income tax in the recipient's hands under Section 56, and no return is triggered by the gift itself. Any income the parents later earn from investing that gift is taxable in their hands.
How much does NRI ITR filing cost with MostlyNRI?
Fees depend on the complexity of your income profile, typically the number of income heads, capital gains events, and treaty computations involved. Every package is fixed-fee and quoted upfront during the discovery call, with no add-ons after filing.
