A Complete Guide for NRIs on How to File Their Income Tax Returns in India

Non-Resident Indians (NRIs) must file income tax returns (ITRs) for compliance, refunds, and loss carryovers if earning taxable Indian income, like NRO account interest, rent, or capital gains. Disclosures include Indian income, assets, and TDS details, with a pre-validated Indian bank account required for refunds. NRIs can claim deductions (e.g., under Sections 80C, 80D) and avoid double taxation through DTAA provisions by filing Form 67. Most NRIs use Form ITR-2. Accurate form selection ensures smooth processing and refund approval.

Non-Resident Indians (NRIs) who earn money in India must file income tax returns (ITRs) to make sure they are following the rules, get refunds, and carry over any losses. Some types of income, such interest generated on Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) accounts, don't have to pay taxes. But interest on Non-Resident Ordinary (NRO) accounts does have to pay taxes.

Also, income from rental properties in India, capital gains from Indian assets, and dividends paid out by Indian firms are all taxable. However, NRIs whose only source of income is investment income and/or long-term capital gains that are taxed at certain rates under Chapter XIIA of the Income-tax Act, 1961, and who have previously had taxes taken out at the source, do not have to file an ITR.

Important Information for NRIs When Filing Their ITR

NRIs must give a lot of information regarding their Indian income when they file their ITRs. This includes rent, interest, salary, and capital gains. They also have to tell the government where they live and what Indian assets they own. People who are not residents and do not normally live in the country do not have to report their foreign assets and income. If that's the case, you also need to fill out the extra Schedule FA.

NRIs should use Form 26AS to record tax deducted at source (TDS) and other tax credits correctly. They also need to give information about an Indian bank account in order to get a refund, since international bank accounts can't be used to process refunds. Taxpayers who want benefits under a Double Taxation Avoidance Agreement (DTAA) must send in a Tax Residency Certificate (TRC), complete Form 10F online, and tell the government about the foreign taxes they paid and where they live.

Sandeep Sehgal, a partner at AKM Global, says that having a pre-validated Indian bank account, such an NRO account, is very important for getting tax refunds. He says, "This step is necessary because refunds can't be sent to a foreign bank account."

Under the old tax system, NRIs could get a number of tax breaks. These are:

- Section 80C: Money put into life insurance premiums, education fees, equity-linked savings plans, and the Public Provident Fund (PPF).

- Section 80D: The amount of money you pay for health insurance.

But NRIs can't use deductions from sections like 80TTB (for seniors) and 80U.

India has made DTAA agreements with a number of countries to avoid being taxed twice. These deals help by giving people tax breaks or tax credits. Tax breaks mean that income is only taxed in one nation, while tax credits mean that income is taxed in both countries but you get a credit for the taxes you paid in the other country. To get overseas tax credit benefits, you need to file Form 67 before the end of the assessment year.

Sanjoli Maheshwari, the executive director of Nangia & Co LLP, says that NRIs must file Form 10F and have a Tax Residency Certificate in order to get DTAA advantages. She says, "If NRIs choose to take advantage of the DTAA's helpful provisions, they may still have to file their taxes in India."

 Picking the Right ITR Form

Most NRIs need to file their returns using Form ITR-2 for the Assessment Year 2025–26. This form is for those who make money from things like their job, their house, capital gains, and other things like interest on NRO accounts and dividends.

NRIs can't use Form ITR-1 (Sahaj) because it is only for residents with simpler income profiles. Form ITR-3 may apply in rare cases when an NRI makes money from their own business or profession in India. But for most NRIs, Form ITR-2 is still the most common choice.

Sonam Chandwani, the managing partner at KS Legal & Associates, says to be careful when choosing the right form. "Using the wrong form to file the return could make it look like it was filed incorrectly." This could slow down processing and potentially cause refund requests to be turned down. She says that before filling out the ITR form, it is very important to look at income sources and where you live.