Income Tax Return Filing For NRIs – Fast, Accurate & Compliant

The applicable ITR form depends on the type of income you have in India:

• ITR-1 (Sahaj): Not applicable to NRIs.

• ITR-2: Most commonly used by NRIs with income from salary, pension, house property, capital gains, or other sources.

• ITR-3: Applicable if you’re an NRI with business or professional income in India.

• ITR-4 (Sugam): Generally not applicable to NRIs as it’s for residents with presumptive income.

So, for most salaried NRIs, ITR-2 is the go-to form. If you run a business or have freelance income in India, ITR-3 may apply.

For NRIs, the basic exemption limit is ₹2.5 lakhs for FY 2024-25 (AY 2025-26), just like resident Indians below age 60.

However, NRIs are not eligible for:

• Rebate under Section 87A

• Certain deductions available to residents (like for senior citizens)

• Certain exemptions like agricultural income, unless conditions are met

Income earned abroad (salary abroad, foreign interest, etc.) is not taxable in India, unless received or accrued in India.

While you can’t “avoid” taxes, you can reduce your tax liability legally by:

• Claiming DTAA (Double Taxation Avoidance Agreement) benefits if you’re taxed in both India and your resident country.

• Investing in tax-saving instruments (e.g., ELSS, PPF, NPS – wherever allowed for NRIs).

• Structuring your property sale properly to minimize TDS and capital gains tax.

• Using Section 54/54EC exemptions for reinvesting capital gains from property sale.

• Keeping NRE and FCNR accounts – income from these is often tax-free.

Consult a tax expert to ensure your strategies comply with Indian tax laws and FEMA.

Some recent updates and reminders for NRIs include:

• Residential Status Change: As per new rules, NRIs who spend 120 days or more in India and have Indian income exceeding ₹15 lakhs in a year may be treated as Residents (not ordinarily resident).

• Schedule FA: NRIs must disclose foreign assets and income held during the year.

• High TDS on property sale: If an NRI sells property in India, TDS at 20% (plus surcharge and cess) applies, even if actual tax liability is less.

• PAN-Aadhaar Linking is mandatory for compliance.

• Form 10IEA to switch tax regimes is required for certain NRIs with business income.

These rules aim to improve tax transparency and compliance for globally earning individuals.

Failing to declare NRI status can lead to:

• Wrong tax computation: Your income may be taxed as if you’re a resident, leading to higher taxes.

• Inaccurate ITR filing: Filing the wrong ITR form can result in notices or rejection.

• Penalties for false declarations under Section 270A or 277, which can go up to 200% of tax under-reported or imprisonment in serious cases.

• You may also lose out on DTAA benefits, TDS refunds, and deductions/exemptions specific to NRIs.

Always update your residential status correctly and disclose foreign assets if required.

There’s no tax on transferring money from abroad to India if:

• The money is transferred to your own NRE, NRO, or savings account

• The source of funds is legal and declared

• You are not bringing in money classified as income earned in India without declaring it

But once money is invested or earns income in India (interest, rent, capital gains), that income is taxable.

Using NRE accounts is the most common method for tax-free inward remittance, as interest earned is also tax-free in India.

Some key exemptions for NRIs under the Income Tax Act:

• Section 10(4)(ii): Interest earned on NRE accounts is tax-free in India (as long as you’re NRI).

• Section 10(15)(iv)(fa): Interest on FCNR deposits is tax-exempt.

• Section 54 / 54EC: Exemption on capital gains from property sale if reinvested properly.

• DTAA relief: Under Section 90/90A, NRIs can claim relief if tax has been paid in another country with a treaty.

Note: NRIs don’t get some benefits like Section 87A rebate, or certain deductions available to residents.

When an NRI returns to India, their tax status doesn’t change immediately. For tax purposes, you are classified based on your residential status in the financial year. If you do not meet the stay requirements for being a resident (182 days or more), you’ll still be treated as an NRI or Resident but Not Ordinarily Resident (RNOR). RNOR status offers certain exemptions for income earned outside India. Once you become a resident, your global income becomes taxable in India. Planning your return date and understanding the RNOR benefit can help reduce your tax burden.

For NRIs, only the income that is earned or received in India is taxable. This includes salary for work in India, rental income, capital gains, business income from Indian operations, and interest from NRO accounts. Interest from NRE and FCNR accounts is exempt. The basic exemption limit for NRIs is ₹2.5 lakh, meaning if your total taxable income in India is below this, you generally don’t owe tax. However, in certain cases, filing is still required for compliance or to claim TDS refunds.

If you live in the USA but have taxable income in India, you must file an ITR in India. The fact that you are a US resident doesn’t exempt you from Indian tax obligations for income arising in India. For example, if you earn rent from property in India or have capital gains from selling Indian shares, it will be taxed in India. You may also be eligible to claim relief under the India-USA Double Tax Avoidance Agreement (DTAA) to avoid paying tax on the same income twice.

In recent years, the government has tightened rules for determining NRI status and reporting requirements. One key change is the 120-day rule, which affects those with significant Indian income. Additionally, NRIs are now required to link PAN with Aadhaar (unless exempt), report certain foreign assets if they qualify as a resident, and comply with stricter TDS rules on property transactions. The focus has shifted toward ensuring better compliance and tracking of NRI investments and income.

The basic exemption limit for NRIs is ₹2.5 lakh per financial year, regardless of age. This is the same as for residents under 60 years old. If your total taxable income in India is below this threshold, you are not required to pay tax. However, if TDS has been deducted, filing an ITR is still necessary to claim a refund. Also, certain incomes, like capital gains, are taxable even if they are below the exemption limit.

Yes, declaring your NRI status is essential when filing your income tax return. The tax department needs to know whether you are an NRI, RNOR, or resident to determine which income is taxable and which exemptions apply. If you wrongly declare your status, it can lead to incorrect taxation, notices from the department, and even penalties. The declaration is made when you select your residential status in the ITR form.

It depends on the nature of the money received. If it’s a genuine gift from an NRI relative, it is tax-free in India. Gifts from non-relatives are tax-free only if their value in a financial year does not exceed ₹50,000. However, if the money is payment for services, business transactions, or investment income, it is taxable. Also, money transferred from an NRI’s overseas account to your Indian account is not taxable if it’s not income but a remittance.

The 120-day rule applies to Indian citizens or Persons of Indian Origin (PIOs) whose total Indian income exceeds ₹15 lakh in a financial year. Under this rule, if you spend 120 days or more (but less than 182 days) in India, you will be considered a resident for tax purposes. This change was introduced to prevent misuse of NRI status by high-income individuals spending long periods in India while avoiding tax residency.

If you fail to file your ITR by the due date, you can face a late filing penalty under Section 234F – ₹1,000 if your total income is below ₹5 lakh, and ₹5,000 if it exceeds ₹5 lakh. Additionally, you may have to pay interest on any unpaid tax under Sections 234A, 234B, and 234C. Non-filing can also attract scrutiny notices and affect your ability to claim refunds or carry forward capital losses.

Money sent from abroad as a remittance is not taxable in India if it is not income but simply a transfer of your own funds or a gift from a relative. If it’s a gift from a non-relative, it’s tax-free only if the value does not exceed ₹50,000 in a financial year. However, if the amount represents income earned abroad and you qualify as a resident for tax purposes, it could be taxable in India.

If excess TDS has been deducted on your income in India, you can claim a refund by filing an ITR. The process involves reporting your actual income, matching it with the TDS shown in Form 26AS, and submitting the return through the e-filing portal. Once processed, the refund is credited directly to your bank account. Filing is the only way to recover excess TDS—there is no automatic refund without it.