NRI Income Tax Filing in India: A Step-by-Step Guide

A lot of NRIs assume that no tax owed means no return required — and that assumption quietly costs them money. TDS on NRO interest gets deducted at a flat rate that's usually well above what an NRI actually owes once slab rates apply, capital losses that could offset future gains expire unused if they're never reported, and refunds sitting with the department simply don't move until a return asks for them. Filing isn't only for people who owe tax; for most NRIs with any Indian income, it's the only way to get back what's already been taken.

What Counts as Taxable Indian Income for an NRI

As a non-resident, India only taxes you on income that is earned, received, or deemed to arise within India — genuinely foreign income stays outside India's reach entirely. The line isn't always where people expect it, though. Salary is taxable in India if the underlying services were performed here, even if it's paid into a foreign account, while NRE and FCNR account interest stays exempt in India for as long as NRI status is maintained — the opposite of how NRO account interest is treated. Interest on a genuinely foreign bank account, or salary from a foreign employer for work performed entirely outside India, isn't taxable in India at all — it never enters the Indian return in the first place.

• Salary for services actually rendered in India, even when paid into an overseas account
• Rental income from any house property located in India
• Capital gains on the sale of Indian assets — property, listed or unlisted shares, mutual fund units
• Interest on NRO savings and fixed deposit accounts, and on most Indian bonds and debentures
• Dividends paid by Indian companies
• Income from a business connection or a profession carried on in India
• Any other India-sourced income not specifically exempted, such as royalty or fees for technical services

When Filing Is Mandatory, Even If You Owe Zero Tax

Filing becomes mandatory once your gross Indian income before deductions crosses the basic exemption threshold for the regime you're in — roughly ₹2.5 lakh under the old regime, or ₹4 lakh under the new one — but several other triggers apply even below that line. If you want to carry forward a capital loss to set off against a future gain, you must file the return for the loss year itself, on time. If any TDS has been deducted on your Indian income, filing is usually the only route to a refund, since NRO interest in particular gets taxed at a flat rate that rarely matches your real liability. One point trips up a lot of NRIs specifically: the Section 87A rebate that brings resident taxpayers' bills down to zero on income up to a fairly high threshold does not apply to non-residents at all, so an income level at which a resident friend pays nothing can still leave an NRI with real tax due. For instance, an NRI with roughly ₹6 lakh of taxable rental income in India under the new regime would owe tax on the slabs above the basic exemption with no rebate to zero it out, while a resident with identical income would likely pay nothing at all. This filing logic applies whether the income falls in a tax year governed by the erstwhile Act's previous-year framework or by the Income Tax Act, 2025's unified tax-year framework — the residency-driven rules themselves haven't changed.

The Filing Process, Step by Step

1. Confirm your residential status for the year first — it determines whether you report only Indian income or your worldwide income.
2. Pull your Form 26AS and Annual Information Statement (AIS) from the e-filing portal to see every TDS entry and reported transaction linked to your PAN.
3. Gather supporting records: NRO and NRE account statements, property sale and purchase documents, broker or mutual fund capital gains statements, and your TRC and Form 10F if you're claiming treaty relief.
4. Pick the right ITR form — typically ITR-2 for salary, house property, and capital gains without business income, or ITR-3 if you have business or professional income in India.
5. Choose your tax regime for the year and compute tax on your India-sourced income, or your worldwide income if you happen to qualify as ROR for that year.
6. Claim credit for every TDS entry recorded against your PAN, and claim DTAA relief where it applies.
7. File and e-verify the return — net-banking EVC or a Digital Signature Certificate tend to work better for NRIs than Aadhaar-OTP, which needs a live Indian mobile number.

NRE, NRO, and FCNR: Getting the Taxability Right

Two habits save NRIs the most trouble at filing time: sorting out e-verification before the deadline crunch, since a lapsed Indian mobile number can strand an otherwise-complete return, and arranging a lower TDS certificate before selling Indian property, since buyers are otherwise required to withhold tax on the full sale value rather than just the gain. Treat the return as an annual checklist tied to your residential status and your India income, not something you think about only when tax is actually due — the refund sitting in TDS you've already paid usually makes the filing worthwhile on its own. Keep your Form 26AS, AIS, and capital gains statements on file for a few years after filing — they're the first thing you'll need if the department ever raises a query on a return.