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How to File Income Tax Return or ITR for NRIs in India
Key Takeaways
Filing the correct ITR form, determining residency status, and meeting deadlines are crucial steps for a smooth tax filing process.
- NRIs are not eligible for the Section 87A tax rebate, which is now available only to resident Indian taxpayers.
- NRIs can still claim deductions under Sections like 80C, 80D, 80E, 80G, and 80TTA of the Income Tax Act, 1961 when filing their ITR.
- The basic exemption limit for NRIs is ₹2.5 lakh as per old tax regime and ₹3 lakh according to the new/default tax regime.
NRIs need to be well-informed about income tax rules in India to avoid surprises during filing. Recent budget changes have raised Section 87A of the Income Tax Act, 1961, rebate limits significantly, but that benefit remains exclusive to resident taxpayers. For NRIs, the exemption threshold, deduction eligibility, and tax slabs continue to apply differently. Knowing your residency status under Section 6 of the Income Tax Act, the correct ITR form, and which incomes (interest, rent, capital gains) are taxable helps you file accurately. This clarity ensures compliance and maximises any deductions you qualify for.
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Can NRIs claim a tax rebate under the new income tax regime?
The tax rebate under Section 87A of the Income Tax Act 1961, is only available for resident Indians. As an NRI, you cannot use this section to reduce your tax liability even if you opt for the new income tax regime. It is, however, important to note that the basic exemption limits (₹2.5 lakh under the old regime and ₹3 lakh under the new one) apply to NRIs as well, without the additional rebate benefit. You also need to file Income Tax Return (ITR) if your taxable income exceeds these exemption limits or if other filing conditions like capital gains or TDS deductions are triggered.
Other tax rebates available for NRIs
Although you are not allowed to claim a tax rebate under Section 87A, you may avail certain tax deductions under Sections 80C, 80D, 80E, 80G, and 80TTA of the Income Tax Act, 1961, subject to applicable conditions.
The table below depicts the maximum tax deduction allowed under these sections in a financial year.
Section |
Maximum tax deduction | Conditions |
| Section 80C | ₹1.5 lakh | Only applies to eligible investments/principal repayment, etc |
| Section 80D | ₹50,000 | Only for medical insurance premiums, subject to applicable rules |
| Section 80G | Subject to conditions | Only donations to qualifying institutions, with specified percentages, etc |
| Section 80E | No limit | For interest on education loan, subject to conditions |
| Section 80TTA | Rs 10,000 | Only for interest on savings in NRO accounts |
Accuracy in NRI ITR filing depends on knowing your status and understanding which incomes are taxable and what deductions are available for NRIs
How to file your ITR?
Filing ITR for NRIs is a bit different than for resident Indians. Here’s what you need to do -
Step 1
Your tax liability in India depends on your residential status under the Income Tax Act, 1961. For the financial year 2025–26, your status is determined as follows:
Resident: In case of Individuals, the person will be a resident in India if
1. He/she spends 182 days or more in India during the financial year or
2. He/she spends 365 days or more in total in preceding four years other than current financial year and spends 60 days or more during the current financial year.
a. If an individual is a citizen of India and leaves during the current financial year as a member of crew of an Indian ship, or for the purpose of employment outside India, the "60 days" mentioned above becomes "182 days".
b. If an individual is a citizen of India, or a person of Indian origin who, being outside India, comes on a visit to India, "60 days" mentioned above becomes "182 days".
c. If an individual is a citizen of India, or a person of Indian origin who, being outside India, comes on a visit to India, having total income, other than the income from foreign sources, exceeding Rs. 15 lakhs during current financial year, "60 days" mentioned above becomes "120 days".
Non-Resident: A person who is not a "Resident" as per above.
Deemed Resident: A person who is not covered under the definition of resident and a citizen of India, having total income, other than the income from foreign sources, exceeding Rs. 15 lakhs during the current financial year shall be deemed to be resident in India, if he/she is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.
Not Ordinarily Resident:
1. An individual who has been a non-resident in India in 9 out of the 10 previous years preceding that year or has during the 7 previous years preceding that year been in India for a period of, or periods amounting in all to, 729 days or less.
2. A citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding Rs. 15 lakhs during the year, who has been in India for a period or periods amounting in all to 120 days or more but less than 182 days; or
3. A citizen of India who is deemed to be resident in India.
Remarks:
1. Residential status differs with regard to nature of the person such as HUF, company, etc.
2. Both the Day of Arrival into India and the Day of Departure from India are counted as the days of stay in India.
Residents are taxed on their global income, while non-residents are taxed only on their income earned or received in India.
Person not ordinarily resident in India, the income which accrues or arises to him outside India shall not be taxable in India unless it is derived from a business controlled in or a profession set up in India
Tip: Track your days in India and consult a tax advisor to confirm your status, as it significantly impacts your tax obligations.
Step 2
Calculate your taxable income with income tax calculator. Consider incomes from all sources, including property rent, salary, business, interest, capital gains from investments, etc. Then proceed to subtract applicable deductions.
Step 3
Depending on your income sources, you may need to file for ITR-2, ITR-3, etc. Use the form as applicable and specified by the Income Tax Department.
You will need an Indian PAN card and an NRI bank account to complete the process.
Conclusion
Filing an income tax return as an NRI in demands awareness of recent changes and strict adherence to rules. Though Section 87A’s increased rebate limit is promising, it does not apply to NRIs. You can still claim deductions under Sections 80C, 80D, and others as per applicable conditions. Staying updated, correctly determining your residency, and using proper ITR forms are essential steps. By following these guidelines, you can ensure tax compliance, avoid penalties, and optimise your tax outgo.
To make your task easier, you can open an IDFC FIRST Bank NRI Savings Account. It allows you to earn tax-exempt income on your foreign earnings with NRE savings account and repatriate funds to your resident country fully and freely anytime. You can enjoy a full suite of NRI banking solutions while earning competitive interest rates, monthly interest payouts on NRE account and NRO account and an innovative mobile app to access and manage funds across borders. Apply today!
Disclaimer
Please note that the information provided in this article is strictly based on the provisions of the Income-tax Act, 1961. It does not reflect the amendments or provisions introduced under the newly enacted Income-tax Act, 2025, which will come into effect from 1 April 2026.
Readers are strongly advised to consult their professional Tax Advisor to obtain accurate guidance tailored to their specific circumstances and to ensure proper interpretation and applicability of the relevant tax laws.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.
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