ITR Filing for NRIs: Which Form and What Income Is Taxable

Short answer: Non-Resident Indians (NRIs) must file an Income Tax Return (ITR) in India for income that is earned or received in India. The correct form is typically ITR-2 for salary, rental income, or capital gains, and ITR-3 for business income. NRIs cannot use ITR-1. Your global income is not taxed in India, and you can claim benefits under a Double Taxation Avoidance Agreement (DTAA) to prevent paying tax twice on the same income.

What income is taxable for an NRI in India?

Only income that accrues, arises, or is received in India is taxable for an NRI. Your income earned outside India is not subject to Indian income tax. Common examples of taxable income for NRIs include:

• Salary: Salary received in India or salary for services rendered in India.
• Rental Income: Rent earned from a property situated in India.
• Capital Gains: Profit from the sale of assets located in India, such as property, shares, or mutual funds.
• Interest Income: Interest earned from Indian bank accounts (specifically NRO accounts) and fixed deposits.
• Business Income: Income from a business controlled or a profession set up in India.

Interest earned on Non-Resident External (NRE) accounts and Foreign Currency Non-Resident (FCNR) accounts is tax-exempt.

Which ITR form should an NRI use?

NRIs must use either ITR-2 or ITR-3, as they are not eligible to file the simpler ITR-1 (Sahaj) form. The choice between ITR-2 and ITR-3 depends entirely on whether you have income from a business or profession.

Feature	ITR-2	ITR-3
Who can use it?	Individuals & HUFs not having business/professional income.	Individuals & HUFs with business/professional income.
NRI Applicability	Yes	Yes
Income from Salary/Pension	Yes	Yes
Income from House Property	Yes	Yes
Capital Gains	Yes	Yes
Income from Business/Profession	No	Yes

For a detailed comparison of forms, see our guide on ITR-1 vs ITR-2 vs ITR-3.

Are NRIs eligible for the tax rebate under Section 87A?

No, NRIs are not eligible for the tax rebate under Section 87A. This rebate, which makes income up to ₹12 lakh tax-free for residents under the new regime, does not apply to non-residents. This is a critical point; an NRI with a taxable income of, for example, ₹8 lakh will have a tax liability, whereas a resident with the same income would pay zero tax due to the rebate. For more on this, read our guide to the Section 87A rebate.

What deductions can an NRI claim?

NRIs can claim several deductions to reduce their taxable income, although some popular options are restricted. Here are the key deductions available:

• Section 80C: Up to ₹1.5 lakh for investments in ELSS, life insurance premiums, tuition fees for children in India, and home loan principal repayment. Note that NRIs cannot invest in PPF, NSC, or the Senior Citizens Savings Scheme.
• Section 80D: For health insurance premiums paid for self, spouse, children, and parents residing in India.
• Section 80E: For interest paid on an education loan taken for higher education of self, spouse, or children.
• Section 80TTA: Deduction up to ₹10,000 on interest income from an NRO savings account.
• Section 54/54EC/54F: To claim exemption from long-term capital gains on sale of property or other assets by reinvesting the proceeds. Learn more about the Section 54 capital gains exemption.

How does a Double Taxation Avoidance Agreement (DTAA) help NRIs?

A DTAA helps an NRI avoid being taxed on the same income in both their country of residence and India. India has DTAAs with over 90 countries. An NRI residing in a treaty country can claim DTAA relief, which typically works in one of two ways:

1. Exemption Method: The income is taxed in only one of the two countries.
2. Tax Credit Method: The NRI pays tax in both countries but can claim a credit in their country of residence for the tax already paid in India.

To claim DTAA benefits, you must furnish a Tax Residency Certificate (TRC) from your country of residence and file Form 10F in India.

Is ITR filing mandatory for NRIs?

Yes, ITR filing is mandatory for an NRI if their gross total income in India (before claiming any deductions) exceeds the basic exemption limit of ₹3 lakh for the financial year. Filing is also advisable in the following cases:

• To claim a refund of excess Tax Deducted at Source (TDS).
• To carry forward losses (e.g., capital loss) to set off against future income.
• If you have sold property or equity shares, as reporting is often required regardless of profit or loss.

Worked example

Let's consider Mr. Sharma, an Indian citizen residing in Singapore. His income in India for FY 2025-26 (AY 2026-27) is as follows:

• Rental Income (Bengaluru): ₹8,40,000 per year
• Interest on NRO Savings Account: ₹45,000
• Long-Term Capital Gain (LTCG) on listed Indian shares: ₹1,20,000 (sold in Nov 2025)

He has paid a life insurance premium of ₹1,00,000.

Step 1: Calculate Income from House Property

• Gross Annual Value: ₹8,40,000
• Standard Deduction @ 30%: ₹2,52,000
• Net Taxable Rental Income: ₹8,40,000 - ₹2,52,000 = ₹5,88,000

Step 2: Calculate Income from Other Sources

• Interest on NRO Account: ₹45,000

Step 3: Calculate Total Income (before special rates and deductions)

• Total Normal Income: ₹5,88,000 (Rent) + ₹45,000 (Interest) = ₹6,33,000

Step 4: Apply Deductions

• Section 80C (Life Insurance): ₹1,00,000
• Section 80TTA (Savings Interest): ₹10,000
• Total Deductions: ₹1,10,000

Step 5: Calculate Taxable Income

• Net Taxable Normal Income: ₹6,33,000 - ₹1,10,000 = ₹5,23,000
• Taxable LTCG: ₹1,20,000

Step 6: Calculate Tax Liability (New Regime)

• Tax on LTCG: 12.5% on ₹1,20,000 = ₹15,000
• Tax on Normal Income of ₹5,23,000:
  • ₹0 to ₹3,00,000: Nil
  • ₹3,00,001 to ₹5,23,000: 5% on ₹2,23,000 = ₹11,150
• Total Tax before Cess: ₹15,000 (LTCG Tax) + ₹11,150 (Normal Tax) = ₹26,150
• Health & Education Cess @ 4%: 4% of ₹26,150 = ₹1,046
• Total Tax Liability: ₹26,150 + ₹1,046 = ₹27,196

Mr. Sharma will file ITR-2 to report this income.

Common mistakes

1. Using ITR-1: NRIs are explicitly barred from using ITR-1. Doing so will result in a defective return notice.
2. Forgetting NRO Account Interest: While NRE interest is exempt, interest from NRO savings and fixed deposit accounts is fully taxable and must be reported.
3. Claiming Section 87A Rebate: NRIs are not eligible for this rebate. Claiming it will lead to a demand notice from the tax department.
4. Assuming TDS is Final Tax: TDS is just an advance tax. You must file an ITR to declare the final income, calculate the correct tax, and claim a refund or pay the balance tax.
5. Ignoring Foreign Asset Reporting: While NRIs don't pay tax on global income in India, a person who qualifies as 'Resident and Ordinarily Resident' (ROR) must report foreign assets in Schedule FA of the ITR. An NRI does not need to do this.

How SP & SC helps

Navigating tax laws as an NRI can be complex. At SP & SC, we provide end-to-end assistance for NRI tax compliance. Our services include determining your residential status, identifying taxable income streams, choosing the correct ITR form, ensuring accurate reporting, and claiming eligible deductions and DTAA benefits to optimize your tax liability. We handle all paperwork and filings, ensuring you remain compliant while being abroad. For comprehensive support, explore our income tax filing services.

Frequently asked questions

H3: Can an NRI file ITR without an Aadhaar card?

Yes, an NRI is not required to have an Aadhaar card for filing an ITR. You can use your valid passport number for this purpose. However, if you have been allotted an Aadhaar, you must link it with your PAN.

H3: What is the due date for NRI ITR filing?

The due date for filing an ITR for an NRI is the same as for a resident. For the Assessment Year 2026-27, the due date is 31st July 2026, provided your accounts are not subject to a tax audit.

H3: Is interest on NRE and FCNR accounts taxable in India?

No, interest income earned on a Non-Resident External (NRE) account and a Foreign Currency Non-Resident (FCNR) account is completely exempt from income tax in India.

H3: Do NRIs get a standard deduction on salary?

Yes. If an NRI earns salary income in India (e.g., for services performed in India), they are eligible for the same standard deduction as residents. Under the new tax regime for AY 2026-27, this amount is ₹75,000.

H3: How can an NRI claim a tax refund?

An NRI can claim a tax refund by filing their Income Tax Return. You must have an Indian bank account (NRO is common) that is pre-validated on the income tax portal. The refund amount will be credited directly to this account.

Get a fixed-fee quote

Unsure about your tax obligations as an NRI? Share your documents with us for a confidential review, and we will provide a written fixed-fee quote for handling your tax filing from start to finish. Contact SP & SC via our form or on WhatsApp at +91 90356 74566. We take the complexity out of compliance, ensuring your peace of mind.