NRI Taxation
NRI Income Tax Filing in India 2025: Who Must File and How
If you are an NRI with NRO fixed deposits, rental property, Indian stocks, or mutual funds — India almost certainly has a tax claim on some of your income. But NREs are tax-free, DTAA treaties can halve your TDS, and RNOR status gives returning NRIs a 2-year buffer. Here is everything you need to know to file correctly and claim every benefit you are entitled to.
182 days
NRI status threshold
30%
TDS on NRO interest
90+
DTAA countries
₹2.5L
ITR filing threshold
Who Is an NRI for Income Tax Purposes? The 182-Day Rule
India's Income Tax Act and the Foreign Exchange Management Act define NRI differently, and this creates confusion. For income tax purposes, your residency status is determined by physical presence in India during the financial year (April 1 to March 31).
The primary test: if you spend fewer than 182 days in India during a financial year, you are an NRI for that year. Period — regardless of where you live, what passport you hold, or whether you have a visa. This is a purely day-count based test.
There is a secondary test under Section 6(1)(c): even if you spend 182 or more days in India in the current year, you may still qualify as NRI if you spent fewer than 365 days in India over the previous 4 financial years combined AND spent fewer than 60 days in the current year. This secondary test primarily applies to persons who have been coming back to India frequently after long periods abroad.
Important exception: Indian citizens living abroad for employment or as crew members of Indian ships have a higher threshold — 182 days applies to them (not the 60-day rule). This exception covers most Indian diaspora in the US, UK, Middle East, etc.
Non-Resident Indian (NRI)
Less than 182 days in India in the FY. Taxable only on India-sourced income.
Resident but Not Ordinarily Resident (RNOR)
Was NRI for 9 of 10 previous years, OR was in India ≤729 days in previous 7 years. Taxable on India income + some foreign income controlled from India.
Resident and Ordinarily Resident (ROR)
182+ days in India and does not qualify for RNOR. Full global income is taxable in India.
What Income Is Taxable in India for NRIs?
NRIs are taxed only on income that accrues, arises, or is deemed to accrue or arise in India. Income from foreign sources is not taxable in India for NRIs. Here is a comprehensive breakdown:
| Income Source | Indian Tax Rate | Exempt? | DTAA Benefit |
|---|---|---|---|
| NRO Fixed Deposit Interest | 30% flat (TDS at source) | No | DTAA can reduce to 10–15% |
| NRE Fixed Deposit Interest | Nil — fully exempt | Yes | Not applicable (exempt in India) |
| Rental Income from Indian Property | Slab rate (30% TDS at source) | No | DTAA may cap effective rate |
| Equity LTCG (above ₹1.25 lakh) | 12.5% (TDS deducted by AMC/broker) | No | Some treaties may exempt |
| Equity STCG | 20% (TDS deducted at source) | No | Taxable in most treaties |
| Dividend from Indian Stocks/MFs | 20% (TDS deducted at source) | No | DTAA may reduce dividend rate |
| Capital Gains on Property (LTCG) | 12.5% without indexation | No | Buyer deducts 20% TDS at source |
Rates as of FY 2025–26. Surcharge and cess apply on TDS for NRIs — effective rate on NRO interest can be up to 34.32% at peak income. DTAA benefit requires Tax Residency Certificate submission.
Which ITR Form to File and How
Most NRIs with Indian income will file ITR-2. This form covers all NRI-relevant income categories: salary, house property income, capital gains from all asset types (equity, property, debt MF), income from other sources (FD interest, dividends), and crucially, foreign assets and foreign income disclosure.
ITR-2 includes a mandatory Schedule FA (Foreign Assets) for residents and RNORs — NRIs filing ITR-2 are exempt from disclosing foreign assets unless they qualify as RNOR. NRIs must, however, disclose all their Indian assets and income accurately. The Income Tax Department cross-references Form 26AS (auto-populated from TDS deductions) to verify income reported.
Filing can be done online at the Income Tax e-filing portal (incometax.gov.in). NRIs need a PAN card — if you do not have one and have taxable Indian income, apply for PAN immediately using Form 49A. A PAN is mandatory for opening NRO accounts, buying property, mutual fund investments, and filing returns.
When You Must File Even Below ₹2.5 Lakh Threshold
Even if your total Indian income is below ₹2.5 lakh, filing an ITR is mandatory if: (a) TDS was deducted and you want a refund, (b) you have capital gains below the basic exemption but want to carry forward losses, (c) you have foreign assets to disclose as RNOR, or (d) you have a home loan in India (interest deduction claimed under 80C/24b). Failure to file when required can trigger notices and penalties.
Filing Timeline
Gather documents: Form 16, NRO FD interest certificates, capital gains statements from brokers/AMCs, rent receipts, property sale details
Obtain TRC from foreign country tax authority if claiming DTAA benefit. Verify TDS deducted in Form 26AS on the Income Tax portal.
File ITR-2 (or ITR-3 for business income) on incometax.gov.in. Include Foreign Asset schedule if you have overseas investments. Verify return within 30 days.
If refund due (excess TDS), expect credit to NRO/NRE account within 60–90 days. If tax due, pay online via Challan 280 before filing.
DTAA: How to Claim Double Taxation Relief
India has Double Taxation Avoidance Agreements with over 90 countries. These treaties are legally binding bilateral agreements that determine which country has taxing rights on specific types of income and at what rates. For NRIs, DTAA is the primary tool to avoid paying tax twice on the same income.
DTAA works in two ways: first, by reducing the TDS rate in India on NRO income (e.g., interest taxed at 15% instead of 30% under the India-US treaty); second, by providing credit in the country of residence for taxes paid in India, so the same income is not taxed at full rates in both countries.
To claim DTAA benefits on NRO income in India, you need two documents: a Tax Residency Certificate (TRC) from the tax authority of your country of residence, and Form 10F, a self-declaration form available on the Indian Income Tax portal. Submit these to your bank before the TDS deduction for prospective benefit, or file an ITR to claim a refund for excess TDS already deducted.
Step-by-Step DTAA Claim Process
Obtain Tax Residency Certificate (TRC)
Apply to the tax authority in your country of residence. In the US, this is Form 6166 from the IRS. In the UK, it is issued by HMRC. In the UAE, it is from the UAE Ministry of Finance. Specify the financial year for which you need the TRC.
Complete Form 10F
Download Form 10F from incometax.gov.in. Fill in your details: name, PAN, country of residence, Tax ID in that country, period of residential status, and address. Sign and keep a copy — submit one to your Indian bank.
Submit TRC and Form 10F to Indian Bank
Submit to your NRO account bank before the FD renewal or at least before TDS deduction date. The bank will then apply the DTAA TDS rate on future interest payments.
File ITR for Excess TDS Refund
If TDS was already deducted at 30% before DTAA claim, file ITR-2 declaring NRO income and the DTAA rate applicable. The refund of excess TDS is credited to your NRO account typically within 60–90 days.
RNOR Status: The 2-Year Buffer for Returning NRIs
RNOR — Resident but Not Ordinarily Resident — is one of the most valuable and least understood provisions in Indian tax law for returning NRIs. When you return to India after living abroad for an extended period, you do not immediately become a fully taxable resident. You first pass through the RNOR status, which provides significant tax relief during the transition.
Under RNOR, your tax treatment is closer to NRI than resident. Only income that accrues or arises in India, or income from a business controlled or profession set up in India, is taxable. Foreign income remains exempt — your US 401(k) distributions, UK pension, Singapore CPF withdrawals, and UAE rental income are not taxable in India during the RNOR period.
You qualify as RNOR in the current year if you were NRI for 9 or more out of the 10 preceding financial years, OR if you were in India for 729 days or fewer during the 7 preceding financial years. The RNOR status typically lasts 1–2 years after return, giving you a crucial window to restructure foreign investments without incurring Indian tax.
Practical implication: if you are returning to India, plan your asset realisation timeline around your RNOR window. Liquidate foreign investments during the RNOR period when foreign income is tax-exempt in India, rather than after you become fully resident when all global income becomes taxable in India.
What Qualifies for RNOR
Was NRI in 9 of 10 previous financial years
OR was in India for ≤729 days in previous 7 financial years
Is now resident (182+ days) in the current financial year
Count all years carefully — the window typically lasts 1–2 return years
RNOR Tax Benefits
Foreign income not taxable in India (unlike full resident)
Foreign investments (401k, CPF, foreign FDs) — gains not taxed
Only Indian-sourced income subject to Indian tax
No obligation to report foreign assets in Schedule FA of ITR
Advance Tax, TDS on NRO FD, and Getting Refunds
Most NRIs do not need to pay advance tax separately because TDS is deducted at source on almost all their Indian income. NRO FD interest has TDS at 30% deducted quarterly by the bank. Equity gains have TDS deducted by brokers and AMCs at the point of redemption. Property rental income has TDS deducted by the tenant (technically required by law, though often not followed in practice).
If your total tax liability after TDS deductions exceeds ₹10,000, you are technically required to pay advance tax in four installments: June 15 (15%), September 15 (45%), December 15 (75%), and March 15 (100% of estimated liability). However, since most NRI income is covered by TDS, advance tax is rarely an issue unless you have large rental income where the tenant does not deduct TDS.
Refund process for excess TDS: file your ITR by July 31, select the refund bank account (NRO or NRE), and verify the return within 30 days using Aadhaar OTP (for Aadhaar-PAN-linked returns) or net banking verification. The refund is typically processed within 60–90 days of ITR verification and credited directly to the selected bank account.
TDS on NRO FD Interest
30% TDS deducted quarterly by the bank. If total Indian income is below ₹2.5 lakh, file ITR to get full refund. With DTAA, TDS is deducted at treaty rate — file ITR to verify and claim any excess.
TDS on Property Sale (as NRI seller)
When you sell Indian property as an NRI, the buyer is required to deduct TDS at 20% (LTCG rate) or slab rate (STCG) before paying you. File ITR and apply to AO (Assessing Officer) for lower TDS certificate if your actual tax liability is less.
Refund Timeline
ITR filed by July 31 → verified within 30 days → refund within 60–90 days. Refund credited to bank account specified in ITR. Delays are common for first-time NRI filers — follow up via e-filing portal grievance section.
Frequently Asked Questions
Who is considered an NRI for income tax purposes?
You are NRI in a financial year if you spend fewer than 182 days in India. Indian citizens working abroad or as ship crew members also use the 182-day threshold. Residency status must be re-evaluated every financial year.
What Indian income is taxable for NRIs?
NRIs are taxed only on India-sourced income: NRO FD interest (30% TDS), rental income (30% TDS), capital gains from Indian stocks/MFs/property, dividends (20% TDS). NRE account interest is completely exempt. Income earned abroad is not taxable in India for NRIs.
Does an NRI need to file an ITR in India?
Yes, if total Indian income (before TDS) exceeds ₹2.5 lakh. Also file if TDS was deducted and a refund is due, or if you have capital losses to carry forward. NRIs with only NRE income and no other India-sourced income typically do not need to file.
Which ITR form do NRIs file?
ITR-2 for most NRIs — covers salary, house property, capital gains, other income, and foreign assets (for RNORs). ITR-3 for NRIs with business income in India. ITR-1 is available only if income is below ₹50 lakh with no capital gains.
What is DTAA and how do NRIs claim it?
DTAA prevents double taxation between India and your country of residence. Claim it by submitting a Tax Residency Certificate (TRC) from your country's tax authority + Form 10F to your Indian bank. This reduces TDS from 30% to the treaty rate (typically 10–15%).
What is RNOR status and who qualifies?
RNOR (Resident but Not Ordinarily Resident) is a transitional status for returning NRIs — NRI in 9 of 10 previous years OR in India ≤729 days in previous 7 years. RNOR: only Indian income is taxable (foreign income exempt), typically lasts 1–2 years after return.
How do I get a refund of excess TDS on NRO FD interest?
File ITR-2 by July 31 declaring NRO interest income and applicable DTAA rate or deductions. Select NRO/NRE account for refund. Refund is typically credited within 60–90 days of ITR verification.
What is the due date for NRI income tax filing?
July 31 of the assessment year — same as residents. For FY 2024–25 income (April 2024 – March 2025), file by July 31, 2025. Late filing allowed till December 31 with penalty. Business income requiring audit: October 31 deadline.
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