How to File ITR for NRIs in 2026: Step-by-Step Guide

Filing an NRI income tax return in India may be mandatory when an NRI’s taxable income or certain financial transactions meet the conditions prescribed under Indian tax laws. Income such as salary earned in India, rental income, capital gains, and interest from certain Indian bank accounts may be taxable.

Understanding the applicable tax rules can help NRIs report their income correctly, claim eligible tax benefits, and avoid interest or penalties. This guide explains the important points NRIs should know when filing an income tax return in India.

How to File ITR for NRIs in 2026: Step-by-Step Guide

Key Points for NRI ITR Filing

Check your residential status first: Your residential status is determined based on your stay in India during the relevant financial year and other conditions. It plays an important role in deciding which income is taxable in India.
Understand which income is taxable: Income earned or received in India may be taxable for an NRI. This can include salary for work performed in India, rental income from Indian property, capital gains from Indian assets, and interest from certain bank accounts. The tax treatment of different types of income can vary.
Check DTAA benefits: If you are a tax resident of another country, a Double Taxation Avoidance Agreement (DTAA) may provide relief from being taxed twice on the same income. NRIs should check the applicable treaty conditions and required documents before claiming any benefit.
Choose the correct ITR form: NRIs need to select the income tax return form applicable to their residential status and sources of income. The appropriate form depends on factors such as salary, property income, capital gains, investments, and other sources of income.
Check your tax liability and TDS: Review the tax already deducted from your Indian income and compare it with your actual tax liability. If excess tax has been deducted, an eligible refund can generally be claimed through the income tax return.
Pay advance tax when applicable: If your estimated tax liability after considering TDS is above the applicable threshold, advance tax may be payable. Paying the required tax on time can help avoid additional interest.
Keep your documents ready: Before filing, check your PAN, bank details, Form 26AS, Annual Information Statement (AIS), income records, TDS details, property documents, and investment information, as applicable.

Understanding NRI Taxation in India

Who Is Considered an NRI Under Indian Tax Laws?

A person may be treated as a Non-Resident Indian (NRI) for income tax purposes when they do not meet the conditions required to qualify as a resident of India. Residential status is mainly determined by the individual’s stay in India during the relevant financial year and other conditions prescribed under Indian tax laws.

Residential status is checked separately for each financial year. Therefore, a person’s status can change from one year to another depending on how long they stay in India and their individual circumstances.

NRI, PIO, and OCI are terms used in different legal and administrative contexts. For income tax purposes, however, residential status is determined mainly according to the conditions specified under the Income Tax Act rather than simply by citizenship.

Difference Between NRI, RNOR and ROR

Indian tax laws generally classify individuals into three residential categories: Non-Resident (NRI), Resident but Not Ordinarily Resident (RNOR), and Resident and Ordinarily Resident (ROR). The tax treatment of income differs for each category.

Non-Resident Indian (NRI)

An NRI is generally taxed in India on income that is earned, received, or arises in India. Foreign income is generally not taxable in India for an NRI, subject to the applicable tax rules.

Resident but Not Ordinarily Resident (RNOR)

RNOR is a separate residential category that can apply to certain individuals who have recently become residents of India or have spent limited time in India in previous years.

An individual may qualify as an RNOR when the prescribed conditions are met, such as having been a non-resident for a specified number of previous years or having stayed in India for less than the required number of days during earlier years.

In certain cases, an Indian citizen or person of Indian origin who has Indian income above the prescribed limit and stays in India for the specified period may also qualify as an RNOR.

An RNOR is generally taxed on income earned or received in India. Certain foreign income may also become taxable if it is derived from a business controlled in India or a profession set up in India.

Resident and Ordinarily Resident (ROR)

An individual who does not qualify as an NRI or RNOR may be treated as a Resident and Ordinarily Resident (ROR), subject to the applicable conditions.

RORs are generally taxable in India on their worldwide income. This means income earned both in India and outside India may be subject to Indian tax, subject to applicable relief under tax laws and tax treaties.

Why Is Residential Status Important?

Determining your residential status is one of the first steps in understanding your Indian tax obligations. It helps establish which income needs to be reported in India and which tax rules may apply.

Since residential status can change from year to year, NRIs and returning Indians should review their status for each financial year before filing their income tax return.

Types of Income Taxable for NRIs

NRIs are generally taxed in India on income that is earned, received, or arises in India. Knowing which income is taxable can help NRIs meet their tax filing requirements and avoid mistakes.

1. Salary Income

Salary can be taxable in India when the services are performed in India. The place where the salary is paid does not by itself decide whether it is taxable. Tax may also apply to salary connected with services performed in India, subject to the applicable rules.

2. Income from House Property

Rental income from property located in India is generally taxable for an NRI. Certain deductions may be available, including the standard deduction, eligible municipal taxes, and interest on a qualifying home loan.

If an NRI owns multiple residential properties, the applicable rules for vacant or deemed-let-out properties should also be considered.

3. Capital Gains

Profit from selling property, shares, mutual funds, or other Indian assets may be taxable as capital gains. The tax treatment depends on the type of asset, the holding period, and the applicable tax rules.

NRIs should also check the TDS requirements that may apply when selling certain assets in India.

4. Investment Income

Interest from NRO accounts, dividends, and income from investments in India may be taxable. Interest earned on eligible NRE and FCNR accounts may be exempt subject to the applicable conditions.

Tax may be deducted at source from certain investment income, and the deducted amount can be considered while calculating the final tax liability.

5. Other Income

Other Indian-source income may also be taxable, including:

Professional or freelance income from India
Royalty income
Interest from Indian bank accounts
Business income connected with India
Certain gifts received from specified persons

NRIs should also check whether a Double Taxation Avoidance Agreement (DTAA) applies to their income. A DTAA may provide relief when the same income is taxable in both India and another country.

Exemptions and Deductions Available to NRIs

NRIs can claim certain deductions and exemptions under Indian tax laws, depending on their income, investments, and the tax regime they choose. Knowing the available benefits can help reduce taxable income.

1. Section 80C Deductions

Eligible NRIs can claim deductions under Section 80C for certain investments and payments, such as:

Life insurance premiums
Children’s tuition fees in India
Principal repayment of a home loan
Eligible tax-saving investments

The deduction is subject to the conditions prescribed under the Income Tax Act.

2. Section 80D: Health Insurance

NRIs may claim a deduction for eligible health insurance premiums paid for themselves, their family, or parents. The amount available depends on the age of the insured persons and the applicable tax rules.

3. Other Deductions

Depending on the circumstances, NRIs may also be eligible for deductions relating to:

Interest paid on education loans
Eligible charitable donations
Savings account interest
Interest on a home loan
Eligible pension contributions

Certain capital gains may also qualify for exemption when the sale proceeds are reinvested in permitted assets within the specified time and conditions.

NRIs should check the eligibility requirements for each deduction before claiming it, as some benefits may not be available under the chosen tax regime.

What Deductions NRIs Cannot Claim

NRIs cannot claim every deduction available to resident taxpayers. Some deductions and investment benefits may not be available to NRIs, depending on the applicable tax rules and tax regime.

Certain benefits related to specific savings schemes and disability-related expenses may be restricted. Some deductions are also not available when an individual chooses the new tax regime.

Therefore, NRIs should check their eligibility before claiming any deduction in the income tax return.

Step-by-Step Guide to Filing an NRI Tax Return

Step 1: Check Your Residential Status

First, determine whether you qualify as an NRI for the relevant financial year. Your residential status mainly depends on your stay in India and other conditions under the Income Tax Act. Keep your travel records available to support the calculation.

Step 2: Keep Your Documents Ready

Common documents include:

PAN and Aadhaar, where applicable
Passport and travel details
Form 16 and Form 16A
Bank statements
Investment and capital gains statements
Property and rent-related documents
Tax Residency Certificate, if claiming DTAA benefits

Step 3: Select the Correct ITR Form

The correct ITR form depends on your sources of income.

ITR-2: Generally used for salary, house property, capital gains, and other investment income.
ITR-3: Generally used when there is business or professional income.

NRIs should select the form applicable to their income and circumstances.

Step 4: Enter Your Income Details

Report all taxable income earned or received in India, including salary, rent, interest, capital gains, and other applicable income. Check the details against your tax statements and bank records.

Step 5: Claim Eligible Deductions and Tax Relief

Enter the deductions you are eligible to claim under the applicable tax regime. If you qualify for DTAA relief, provide the required documents and information to claim the benefit.

Step 6: Check Tax Credits

Review your Form 26AS and Annual Information Statement (AIS) to check TDS, advance tax, and other reported transactions. Resolve any major differences before submitting the return.

Step 7: Submit and Verify the Return

After completing the return, submit it through the income tax e-filing system and complete the required verification within the prescribed time. Verification may be completed through available electronic methods or other permitted methods.

Once the return is successfully verified, the ITR filing process is complete.

Advance Tax & TDS Rules for NRIs

NRIs need to understand TDS and advance tax rules when earning income from India. The tax treatment depends on the type of income and the applicable provisions.

TDS Rules for NRIs

Tax may be deducted at source (TDS) from payments made to NRIs. This can apply to income such as rent, interest, dividends, and certain capital gains. The applicable TDS rate depends on the nature of the income and the relevant tax rules.

NRIs may also be able to claim relief under a Double Taxation Avoidance Agreement (DTAA) if they meet the required conditions and submit the necessary documents.

How to Claim a TDS Refund

TDS may sometimes be higher than the actual tax payable. In such cases, an NRI can claim an eligible refund by filing an income tax return.

The basic process is:

File the applicable ITR.
Check TDS details in Form 26AS and AIS.
Calculate the actual tax liability.
Claim the excess TDS as a refund.
Complete the required verification of the return.

Advance Tax for NRIs

An NRI may need to pay advance tax when the estimated tax liability, after considering TDS and other tax credits, crosses the applicable threshold. Paying advance tax on time can help avoid interest for late or insufficient payment.

Income Tax Rates for NRIs

NRIs generally follow the applicable individual income tax slab rates under the selected tax regime. However, certain types of income, such as capital gains, may be taxed at specific rates.

The applicable surcharge and health and education cess may also need to be considered while calculating the final tax liability.

NRIs should check the tax rules applicable to their income and residential status before filing their return.

Common Mistakes NRIs Should Avoid

NRIs can face tax problems when they misunderstand Indian tax rules. Avoiding these common mistakes can make tax filing easier and help prevent unnecessary issues.

1. Not Reporting Indian Income

Living outside India does not mean that Indian income is automatically exempt from tax. Income such as rent, interest, dividends, and capital gains from India may need to be reported and taxed.

2. Choosing the Wrong ITR Form

NRIs should select the ITR form based on their income and residential status. The wrong form can lead to errors, delays, or notices from the tax department.

3. Not Checking PAN and Aadhaar Details

NRIs should ensure that their PAN and other tax records contain correct information. If Aadhaar is applicable, its status should also be checked before filing the return.

4. Missing DTAA Benefits

NRIs who are tax residents of another country may be eligible for relief under a Double Taxation Avoidance Agreement (DTAA). The required documents, such as a Tax Residency Certificate and other prescribed details, should be submitted when claiming treaty benefits.

Conclusion

NRI tax filing mainly depends on residential status, Indian income, and the applicable tax rules. Rental income, capital gains, interest, dividends, and other Indian-source income may be taxable.

Keeping proper records, selecting the correct ITR form, checking TDS details, and claiming eligible DTAA benefits can help NRIs file their returns correctly and avoid unnecessary tax problems. Timely filing and accurate information are important for maintaining tax compliance in India.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.