NRI Income Tax Return Filing: Step-by-Step Guide 2026

Filing an NRI income tax return in India becomes mandatory when your Indian income exceeds the basic exemption limit of ₹2.5 lakh under the old tax regime or ₹4 lakh under the new tax regime for FY 2025-26. Different types of income earned in India, including salary, rental income, capital gains, and NRO account interest, are subject to specific tax rules.

Having the right information and following the correct approach can help you manage your tax obligations efficiently and reduce your tax burden. This guide covers the key aspects of income tax filing for NRIs in India, helping you avoid penalties and save money.

🟢 Please Note: Form 26AS is being renamed to Form 168 from Tax Year 2026-27. Read our Form 168 guide to understand the changes and when they will apply to you.

Key Takeaway

Understanding your income tax responsibilities in India can help you save money through effective tax planning and timely compliance. Here are the important points every NRI should understand:

• Establish your residential status first: You are generally considered an NRI if you stay in India for fewer than 182 days during the financial year. Your residential status directly affects your tax liability.
• Only income earned in India is taxable for NRIs: Income such as salary, rent, capital gains, and NRO account interest is taxable, whereas interest earned on NRE and FCNR accounts remains tax-free.
• Take advantage of DTAA benefits to reduce tax rates: Submit your Tax Residency Certificate and Form 10F to obtain lower TDS rates of 10–15% instead of 30%, wherever permitted under the applicable tax treaty.
• File using ITR-2 and avoid common errors: Do not use ITR-1, which is intended for residents. Ensure your PAN is linked with Aadhaar and report your Indian income even while living abroad.
• Manage advance tax payments carefully: If your tax liability exceeds ₹10,000, pay advance tax to avoid interest charges. File your ITR within the prescribed deadline to claim any eligible TDS refund.

Understanding NRI Taxation in India

Who Is Considered an NRI Under the Income Tax Act?

A Non-Resident Indian (NRI) refers to an individual who holds Indian citizenship or has Indian origins but does not meet the criteria for being a resident of India for tax purposes. Residential status is determined by the number of days an individual spends in India during a financial year, regardless of their citizenship or the purpose of their stay.

Under Section 6 of the Income Tax Act, an individual must not fulfil the prescribed residency conditions to be classified as an NRI. Since residential status can change depending on travel schedules and living arrangements, it is important to assess it separately for every financial year.

NRI, PIO (Person of Indian Origin), and OCI (Overseas Citizen of India) are distinct terms used in different contexts, although they are often treated as interchangeable. However, for Indian income tax purposes, the number of days spent in India determines residential status rather than citizenship alone.

Difference Between Resident, RNOR, and NRI

The Income Tax Act recognises three residential categories, each carrying different tax responsibilities:

Non-Resident Indian (NRI):

An NRI is generally liable to pay tax on income earned or received in India. Income generated outside India remains exempt from Indian taxation.

Resident but Not Ordinarily Resident (RNOR):

RNOR is a transitional residential category that provides certain tax benefits. An individual may qualify as an RNOR by satisfying any of the following conditions:

• Having been classified as an NRI in 9 of the previous 10 financial years.
• Spending 729 days or less in India during the preceding 7 financial years.
• Being an Indian citizen or PIO with Indian income exceeding ₹15 lakh and staying in India for 120–182 days.
• Qualifying as a deemed resident without being liable to pay tax in another country.

Similar to NRIs, RNOR individuals are generally taxed on their Indian income rather than their worldwide earnings.

Resident and Ordinarily Resident (ROR):

This category applies to individuals who do not meet the conditions for NRI or RNOR status. ROR individuals are required to pay Indian income tax on their worldwide income.

Individuals returning to India after living abroad generally remain classified as NRIs or RNORs during their initial two to three tax years. This provides time to manage their financial transition.

Knowing your residential category is essential for identifying your tax responsibilities and arranging your investments and income sources appropriately under India’s NRI tax filing rules.

Types of Income Taxable for NRIs

NRIs should understand which sources of income are subject to Indian taxation to meet their tax obligations and manage their finances efficiently.

Unlike resident Indians, who are generally taxed on their global income, NRIs are usually liable to pay tax only on income earned, accrued, or received in India.

1) Income from Salary in India

Salary income may become taxable in India under two particular circumstances. If you perform your job duties while physically present in India, the salary received for those services is taxable in India, irrespective of where the payment is made.

Salary may also attract Indian tax when it is directly credited to an Indian bank account, even if the income is earned abroad.

For example, consider someone working remotely from Dubai for an Indian company while performing all their professional duties outside India and receiving their salary outside India.

In this situation, the income remains non-taxable in India. However, any salary earned for work performed during visits to India is subject to Indian tax provisions.

Salary received by NRIs is generally taxed according to the applicable income tax slab rates. Employers typically deduct Tax Deducted at Source (TDS) before making salary payments.

2) Income from House Property

Owning property in India can result in taxable income, whether the property is rented out or remains vacant. Rental earnings are taxable at the applicable income tax slab rates. However, certain deductions can help lower the taxable amount:

• A standard deduction of 30% of the annual rental value.
• Municipal taxes paid during the financial year.
• Home loan interest payments, which are fully deductible for rented properties.

The provision of deemed rental income applies when an individual owns more than two residential properties that remain vacant. In such cases, notional rental income must be reported in the ITR from the third property onwards, even if no actual rent is received.

Under Section 195 of the Income Tax Act, tenants are responsible for deducting 30% TDS, along with applicable cess and surcharge, from rental payments. If the tenant fails to deduct TDS, the NRI may need to pay advance tax or self-assessment tax along with applicable interest.

3) Income from Capital Gains

When an NRI sells assets situated in India, the resulting capital gains are subject to Indian taxation. The applicable tax rate depends on the asset category and its holding period.

Short-Term Capital Gains (STCG):

• Listed shares and equity-oriented mutual funds held for less than 12 months: 20%.
• Property held for less than 24 months: Taxable at applicable slab rates.
• Unlisted shares, debt funds, and gold held for less than 24 months: Taxable at slab rates.

Long-Term Capital Gains (LTCG):

• Listed shares and equity-oriented mutual funds held for more than 12 months: 12.5% on gains exceeding ₹1.25 lakh.
• Property held for more than 24 months: 12.5% without indexation benefits.
• Unlisted shares held for more than 24 months: 12.5%.
• Debt mutual funds purchased on or after April 1, 2023: Taxed as short-term capital gains at the applicable slab rate, irrespective of the holding period under Section 50AA. Units purchased before this date and held for more than 24 months: 12.5% without indexation.

When an NRI sells property in India, the buyer is required to deduct TDS at the applicable rates, which are 12.5% for long-term capital gains and slab rates for short-term capital gains.

4) Income from Investments (FDs, Mutual Funds, Shares)

NRIs are subject to specific taxation rules on income earned from investments held in India.

Fixed Deposits: Interest earned on NRO fixed deposits is fully taxable and generally attracts 30% TDS. However, interest earned on NRE and FCNR accounts is completely tax-free.

Mutual Funds: The applicable tax rate depends on the type of mutual fund and its holding period:

• Equity funds held for more than 1 year: 12.5% tax on gains exceeding ₹1.25 lakh.
• Equity funds held for 1 year or less: 20% tax.
• Debt funds purchased on or after April 1, 2023: Treated as short-term capital gains and taxed at the applicable slab rate, regardless of the holding period under Section 50AA. Units purchased before April 1, 2023 and held for more than 2 years: 12.5% without indexation benefits.

Dividends: Dividends received from Indian companies are taxable according to the applicable income tax slab rate. TDS is generally deducted at 20%, unless a lower rate is available under the applicable Double Taxation Avoidance Agreement (DTAA).

TDS is deducted from most investment-related income before the amount is credited to your account. However, filing an Income Tax Return (ITR) is still necessary to claim any eligible tax refunds.

5) Other Sources of Taxable Income

Apart from salary, property, and investment earnings, NRIs may also have to pay Indian taxes on other income sources, including:

• Freelancing or professional service payments received from Indian clients.
• Royalties earned from intellectual property located in India.
• Interest generated from savings accounts held with Indian banks.
• Business earnings from activities established or managed in India.
• Gifts received from individuals who are not relatives when their value exceeds the prescribed limits.

Income originating in India should be credited to your NRE or NRO account for appropriate repatriation. Such earnings remain subject to applicable taxes and must be disclosed in your Income Tax Return (ITR).

Understanding these tax rules allows NRIs to handle their finances more efficiently. Benefits under the Double Taxation Avoidance Agreement (DTAA) are particularly useful when India has an agreement with your country of residence, as they help prevent the same income from being taxed twice.

Exemptions and Deductions Available to NRIs

Knowing which exemptions and deductions are available under Indian tax laws can help NRIs reduce their overall tax liability.

Although foreign income generally remains outside India’s tax scope for NRIs, several provisions allow eligible non-resident taxpayers to lower the tax payable on their Indian income.

1) Section 80C Deductions (Eligible Investments for NRIs)

Similar to resident Indians, NRIs can claim deductions of up to ₹1.5 lakh annually under Section 80C. Various eligible investments and payments can help reduce taxable income, including:

• Life Insurance Premiums: Premiums paid for life insurance policies held in your name or in the name of your spouse or children are eligible. The premium must not exceed 10% of the sum assured.
• Children’s Tuition Fees: Tuition fees paid to Indian educational institutions for full-time education of up to two children qualify for deductions.
• Home Loan Principal Repayment: Principal repayments made towards a home loan for residential property in India are eligible. Stamp duty and registration charges can also be included.
• ELSS Mutual Funds: Equity Linked Savings Schemes offer the shortest lock-in period of three years among tax-saving investment options.
• ULIPs: Unit Linked Insurance Plans provide a combination of life insurance coverage and investment opportunities.

Many eligible NRIs overlook these tax-saving opportunities and end up paying more tax than necessary. Planning investments strategically before the financial year closes can help make better use of the available deductions.

2) Section 80D: Understanding Medical Insurance Benefits

Section 80D of the Income Tax Act allows eligible taxpayers to claim deductions on health insurance premiums paid for themselves and their family members. The applicable deduction limits are outlined below:

Deduction Limits According to Age

• For Self, Spouse and Dependent Children (below 60 years): Up to ₹25,000.
• For Parents (below 60 years): An additional ₹25,000.
• For Parents (60 years or above): An additional ₹50,000.
• For Self, Spouse and Children (60 years or above): Up to ₹50,000.

Maximum Deduction Available

• If you and your parents are both below 60 years: Up to ₹50,000.
• If you are below 60 but your parents are senior citizens: Up to ₹75,000.
• If both you and your parents are senior citizens: Up to ₹1,00,000.

3) Additional Tax Exemptions and Deductions

Apart from Sections 80C and 80D, several other provisions can help eligible taxpayers reduce their taxable income:

• Section 80E: Allows a full deduction on education loan interest without an upper monetary limit for a maximum period of eight years.
• Section 80G: Provides deductions ranging from 50% to 100% for donations made to qualifying charitable organisations in India.
• Section 80TTA: Offers a deduction of up to ₹10,000 on interest earned from savings accounts.
• Section 24(b): Allows a deduction of up to ₹2 lakh on home loan interest for self-occupied residential properties.
• Section 80CCD(1B): Provides an additional deduction of ₹50,000 for contributions to the National Pension System (NPS), over and above the ₹1.5 lakh limit under Section 80C.

Certain capital gains can also qualify for tax exemptions when the proceeds are reinvested according to the applicable conditions.

For example, proceeds from selling a property may be reinvested in another residential house within the prescribed period. Similarly, long-term capital gains can be invested in government-approved bonds to claim eligible exemptions.

Deductions That NRIs Are Not Eligible to Claim

Although Indian tax laws provide several deductions to NRIs, certain tax benefits are restricted to resident taxpayers or specific eligible categories.

The following deductions and benefits are generally unavailable to NRIs:

• Restrictions on Investments: NRIs cannot claim deductions for investments in new Public Provident Fund (PPF) accounts, National Savings Certificates, Post Office 5-Year Deposit Schemes, or Senior Citizen Savings Schemes.
• Disability-Related Deductions: Tax benefits under Sections 80U, 80DD, and 80DDB for differently-abled individuals are not available to NRIs.
• Section 80CCG Investments: The Rajiv Gandhi Equity Savings Scheme is not available to non-resident taxpayers.

The new tax regime under Section 115BAC, introduced through the Finance Act, 2020, and made effective from FY 2021-22, has removed most deductions available under Chapter VIA, including Section 80D.

Therefore, selecting the appropriate tax regime is important, as your choice can directly affect the deductions available and your overall tax liability.

Step-by-Step Process for Filing NRI Income Tax in India

Step 1: Identify Your Residential Status

Your residential status is determined by the number of days you remain in India during a particular financial year. You may qualify as an NRI if your stay in India is below 182 days during the financial year or below the applicable 60/120-day threshold, depending on your Indian income, along with fewer than 365 days of stay during the previous four years.

Maintaining an accurate record of your international travel is important when calculating your stay in India. Both arrival and departure dates are counted while determining the number of days spent in the country.

Step 2: Gather All Necessary Documents

Before beginning the income tax filing process, keep the following documents ready:

• PAN Card (mandatory) and Aadhaar Card (if available).
• Passport containing entry and exit stamps to establish your stay duration in India.
• Form 16 or Form 16A showing applicable TDS deductions.
• Bank statements for NRO, NRE, and FCNR accounts.
• Investment records and capital gains calculations.
• Rental receipts and property-related documents, wherever applicable.
• Tax Residency Certificate (TRC) if you intend to claim benefits under DTAA.

Step 3: Select the Appropriate ITR Form (ITR-2 / ITR-3)

The correct Income Tax Return form depends on the nature of your income earned in India:

• ITR-2: Applicable to individuals earning salary, rental income, capital gains, and investment-related income.
• ITR-3: Suitable for individuals earning business income or professional income from activities in India.

As per the applicable income tax regulations, NRIs cannot use ITR-1 for filing their returns.

Step 4: Access the Income Tax e-Filing Portal

Visit the official Income Tax Department e-filing website and sign in using your PAN and password. If you are registering for the first time, create an account by entering your basic information and providing a mobile number for verification.

Check that your personal details are accurate and updated, particularly your overseas residential address and contact information.

Step 5: Declare All Income Sources Correctly

While completing your ITR, enter details of every income source earned or received in India in the relevant sections. The return contains separate schedules for different income categories, including salary, house property, capital gains, and other income.

Ensure that the income and TDS information you report matches the details available in Form 26AS.

All taxable income sources must be disclosed, even when TDS has already been deducted. Missing or incorrectly reporting income may result in income tax notices.

Step 6: Apply Eligible Deductions and DTAA Benefits

Investments and eligible expenses made in India may qualify for deductions under Sections 80C, 80D, and other applicable provisions.

To claim DTAA benefits, select the relevant treaty country and submit your Tax Residency Certificate (TRC) along with the electronically filed Form 10F details. From tax year 2026-27 onwards, Form 10F has been renumbered as Form No. 41 under the Income-tax Rules, 2026. The self-declaration continues under the updated form number and rule reference.

Keeping the necessary supporting documents ready can help lower your overall tax liability.

Step 7: Check Tax Details Through Form 26AS and AIS

Before submitting your return, review Form 26AS and the Annual Information Statement (AIS) available on the income tax portal. These documents provide details about your tax credits and reported financial transactions.

Form 26AS contains information about TDS deducted, advance tax payments, and high-value transactions associated with your PAN. In case of differences between Form 26AS and AIS, Form 26AS currently takes precedence.

Step 8: E-Verify and Submit Your Income Tax Return

After submitting your ITR, you must complete the verification process within 30 days to ensure that your return is considered valid.

You can verify your return using any of the following methods:

• Aadhaar OTP, provided your mobile number is linked to Aadhaar.
• Net Banking.
• Digital Signature Certificate (DSC).
• Electronic Verification Code (EVC) through a pre-validated bank account.

For NRIs living abroad, net banking is often a convenient verification option because it does not require access to an Indian mobile number.

Once the verification process is completed successfully, you will receive a confirmation through email and SMS, completing the ITR filing process.

Advance Tax and TDS Regulations for NRIs

NRIs need to understand the advance tax requirements and Tax Deducted at Source (TDS) provisions applicable to their income in India. These regulations differ in certain respects from those followed by resident taxpayers and ensure that tax is collected according to the applicable rules.

TDS on Various Income Sources

Tax Deducted at Source (TDS) applies to most income earned by NRIs in India. The person making the payment is responsible for deducting the applicable tax before transferring the amount. In many cases, NRIs are subject to higher TDS rates than resident Indians.

Under Section 195 of the Income Tax Act, payments made to NRIs generally attract TDS without a minimum threshold limit. However, eligible taxpayers can seek lower withholding rates under DTAA provisions by providing the required Tax Residency Certificate and Form 10F.

How NRIs Can Claim Excess TDS Refunds

In many cases, TDS is deducted at fixed rates without taking into account the taxpayer’s actual income or eligible exemptions. As a result, NRIs may end up paying more tax through TDS than their final tax liability.

To recover the excess amount, you must submit an Income Tax Return for the relevant financial year and claim the eligible refund.

For example, suppose your total taxable income in India is below the basic exemption limit of ₹2.5 lakh under the old tax regime or ₹4 lakh under the new regime, but TDS has been deducted from your NRO account interest. You may be eligible to claim a full refund of the deducted tax.

Income Tax Slab Rates for NRIs (FY 2025-26 / AY 2026-27)

NRIs generally follow the same income tax slab rates as resident individuals for their taxable Indian income, although certain residency-based benefits and exemptions differ. The applicable tax slabs for FY 2025-26 (AY 2026-27) are given below:

Old Tax Regime:

• Income up to ₹2.5 lakh: No tax.
• ₹2.5 lakh to ₹5 lakh: 5%.
• ₹5 lakh to ₹10 lakh: 20%.
• Income above ₹10 lakh: 30%.

New Tax Regime (Section 115BAC):

• Income up to ₹4 lakh: No tax.
• ₹4 lakh to ₹8 lakh: 5%.
• ₹8 lakh to ₹12 lakh: 10%.
• ₹12 lakh to ₹16 lakh: 15%.
• ₹16 lakh to ₹20 lakh: 20%.
• ₹20 lakh to ₹24 lakh: 25%.
• Income above ₹24 lakh: 30%.

Both tax regimes are subject to applicable surcharge and a 4% Health and Education Cess on the calculated tax amount.

An important provision for NRIs concerns the Section 87A rebate. Although resident individuals with income up to ₹12 lakh may qualify for a rebate under the new tax regime, this benefit is restricted to resident individuals. NRIs cannot claim this rebate to reduce their tax liability, even when their income falls within the specified limit.

The procedure for claiming a TDS refund generally involves the following steps:

1. Submit the applicable ITR form, usually ITR-2.
2. Review the TDS deductions recorded in Form 26AS.
3. Work out your actual tax liability using the applicable tax rates.
4. Complete e-verification within 30 days after filing your return.

Refund processing generally takes around six months. Eligible taxpayers may also receive interest at 6% annually, calculated from the end of the financial year.

Common Tax Filing Mistakes NRIs Should Avoid

Filing income tax returns in India can become complicated for NRIs, particularly when they have income from multiple sources. Being aware of frequent filing errors can help prevent unnecessary penalties and ensure that available tax benefits are not missed.

Overlooking Indian Income While Living Abroad

Many NRIs assume that moving to another country removes their responsibility to pay taxes in India. However, income arising in India can remain taxable regardless of where you currently live. Common examples include interest from NRO accounts, rental earnings, capital gains, and dividend income.

You must also report applicable financial transactions, including deposits exceeding ₹1 crore during a financial year or foreign travel expenditure exceeding ₹2 lakh.

Selecting an Incorrect ITR Form

Choosing ITR-1 (Sahaj) is a common mistake among NRIs, as this return form is intended for eligible resident individuals and cannot be used by non-residents.

For NRIs earning salary, rental income, capital gains, or investment income, ITR-2 is generally the appropriate form. Those earning income from business or professional activities must use ITR-3.

Selecting an incorrect ITR form may result in a defective return notice under Section 139(9). It can also create refund processing problems and potential penalties.

Failing to Link PAN with Aadhaar

An unlinked PAN may become inoperative, potentially resulting in higher TDS deductions under Section 206AA. Although NRIs are not required to obtain an Aadhaar card, they should ensure that their residential status is correctly updated with the Income Tax Department.

Overlooking DTAA Tax Benefits

Not submitting the necessary DTAA documents, including a Tax Residency Certificate (TRC) and Form 10F, may result in higher tax deductions.

Without the required documentation, you may end up paying standard TDS rates of 20–30% instead of benefiting from the lower rates available under the applicable Double Taxation Avoidance Agreement.

Conclusion

Filing income tax returns as an NRI becomes more manageable when you understand the applicable Indian tax rules. Your residential status is the starting point for determining your tax obligations. The number of days you spend in India during a financial year helps establish whether you qualify as an NRI, RNOR, or resident taxpayer.

Understanding the different categories of taxable income is equally important. Rental earnings, capital gains, NRO account interest, and dividends are among the income sources that may attract Indian taxes. Meanwhile, NRE and FCNR accounts offer tax-free interest benefits under the applicable conditions.

NRIs can also take advantage of several deductions under Sections 80C and 80D, subject to eligibility and the selected tax regime. DTAA provisions provide additional relief by helping prevent the same income from being taxed in two countries.

Maintaining accurate records and supporting documents makes the filing process easier. Important documents include your PAN card, international travel records, TRC for DTAA claims, and updated financial statements. Selecting the appropriate ITR form, generally ITR-2 for eligible income sources, also helps avoid filing complications.

Since TDS rates for NRIs are often higher than those applicable to residents, effective tax planning is essential. Filing your return within the prescribed deadline allows you to claim refunds when excess TDS has been deducted.

Avoiding common errors, such as overlooking Indian income, choosing an incorrect ITR form, or failing to claim DTAA benefits, can help prevent unnecessary tax expenses and compliance issues.

Overall, managing NRI taxation requires proper planning, accurate documentation, and awareness of applicable tax provisions. Following these practices can help you fulfil your Indian tax responsibilities while managing your tax liability efficiently.