How NRIs Should File Their Indian Tax Return Income, Gains, DTAA Claims

Filing an Indian income tax return as an NRI is meaningfully different from filing as a resident Indian, not because the portal or the form changes, but because what you are required to declare, what you are not required to declare, what TDS has already been deducted on your behalf, and what treaty claims you may be entitled to make are all different. Many NRIs either skip the filing entirely on the mistaken belief that TDS deducted at source settles their Indian tax obligation, or they file incorrectly by treating their return like a resident's return with a different address.

Both approaches produce problems. The first forfeits refunds on excess TDS that may amount to tens of thousands of rupees per year. The second creates compliance exposure through incorrect income declarations, missed treaty claims, and omitted disclosures. A correctly filed NRI return, by contrast, is typically straightforward: NRIs are taxed only on India-sourced income, most tax is already withheld at source, and the return often results in a refund rather than additional payment.

This guide covers the full NRI ITR filing process for AY 2026-27: who must file, which form to use, what income to declare, how capital gains are reported, how DTAA claims are made and documented, and what specific schedules differ between an NRI and a resident's return.

An NRI is required to file an Indian ITR if their gross total income from Indian sources exceeds the basic exemption limit for the assessment year. For AY 2026-27, the basic exemption limit is Rs 2.5 lakh under the old tax regime and Rs 3 lakh under the new tax regime.

The income that counts toward this threshold for an NRI is only India-sourced income: rental income from Indian property, capital gains from Indian investments, interest on NRO accounts, dividends from Indian companies, income from a business or profession carried on in India, and salary for services rendered in India. Income earned abroad does not count toward the NRI's Indian tax threshold; an NRI is taxed in India only on income that arises in or is received in India.

Even if an NRI's gross Indian income is below the exemption threshold and filing is therefore not technically mandatory, there are three situations where filing is still strongly advisable.

• Excess TDS refund: If TDS has been deducted on redemptions, dividends, or NRO interest, and the NRI's actual Indian income is below the exemption limit, the entire TDS is refundable but can only be recovered through a filed return. An NRI who had Rs 10,000 TDS deducted on mutual fund dividends but whose total Indian income was Rs 1.5 lakh (below the exemption) has paid Rs 10,000 in tax that is not legally owed. Only a filed return recovers it.

• Capital gains from equity above the LTCG exemption threshold: Even if total Indian income is modest, LTCG from equity exceeding Rs 1.25 lakh per year is taxable. Filing is required to correctly compute and pay this tax, and to claim any excess TDS credit.

• Future compliance purposes: Many processes, including property transactions, visa applications to some countries, and bank account certifications, benefit from a documented history of ITR filing. Filing when not strictly required creates no obligation and establishes a useful compliance record.

Declaring Residential Status: The Most Important First Step

Residential status in the ITR is declared in the General Information or Personal Information section of the form. The options are Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR). An NRI should select Non-Resident.

The residential status selected has cascading effects through the return. Selecting Non-Resident means: the return will compute tax only on Indian-source income (not worldwide income), certain schedules that apply to residents (including Schedule FA for foreign assets) are not required, no Schedule AL (assets and liabilities) disclosure is required regardless of income level, and the applicable tax rates for certain income types may differ from resident rates.

The test for NRI status under the Income Tax Act for the purpose of the return is the physical presence test: how many days were you in India during the financial year (1 April 2025 to 31 March 2026 for AY 2026-27)? An individual who was outside India for 182 days or more in the financial year is generally non-resident. The test has additional conditions for individuals who have been non-resident for multiple prior years; a tax adviser should confirm the applicable test for each specific situation.

An NRI who has returned to India during the year and spent more than 182 days in India may have changed their residential status to resident for that year. If an NRI's physical presence in India exceeded 182 days in FY 2025-26, the return should reflect resident status rather than NRI status, and the worldwide income reporting obligation applies.

Which ITR Form: Almost Always ITR-2

For the vast majority of NRIs with Indian income from investments, the applicable form is ITR-2. ITR-2 is for individuals and HUFs with income from salary, house property, capital gains, and other sources, but without business or professional income.

An NRI cannot use ITR-1 regardless of how simple their income is. ITR-1 is explicitly restricted to residents and ordinarily residents. An NRI who tries to file ITR-1 will select the Non-Resident status in the personal information section and then find that ITR-1 becomes unavailable or generates an error. The correct form is always ITR-2 for NRIs with investment income.

ITR-3 is required if the NRI has business or professional income from India, such as income from a business maintained in India or professional services provided in India. ITR-3 accommodates both capital gains and business income in a single return.

NRI Income Situation	Correct ITR Form
Capital gains from mutual funds and shares; NRO interest; dividends; rental income	ITR-2
Capital gains plus income from a business or profession in India	ITR-3
Salary income from an Indian employer for services rendered in India	ITR-2 (if salary only and capital gains); ITR-3 if also has business income
NRI with only NRO savings account interest below exemption limit (no filing obligation but choosing to file for TDS refund)	ITR-2

An NRI declares only income that arises in India or is received in India. Foreign income is not declared and not taxable in India. This is a fundamental difference from a resident Indian's return, which must declare worldwide income.

Income Type	Taxable in India for NRI?	Where in the ITR
Interest on NRO savings and fixed deposits	Yes; taxed at 30% TDS at source; declarable as income from other sources	Schedule OS
Interest on NRE savings and fixed deposits	No; NRE interest is fully exempt from Indian tax	Not declared
Dividends from Indian companies and mutual funds (IDCW plans)	Yes; taxed at 20% TDS (or lower under DTAA)	Schedule OS
Capital gains from Indian equity mutual funds and listed shares	Yes; STCG at 20%, LTCG at 12.5% (subject to Rs 1.25 lakh exemption)	Schedule CG
Capital gains from debt mutual funds and other non-equity assets	Yes; at applicable rates (slab rate for post-April 2023 debt units; 20% or 12.5% for older units under transitional rules)	Schedule CG
Rental income from Indian property	Yes; taxed at applicable rates; deduction available for property tax and 30% standard deduction on NAV	Schedule HP
Salary from Indian employer for services in India	Yes; taxed at applicable rates; TDS deducted by employer under Section 192	Schedule S
Income from overseas employment or business conducted entirely abroad	No; not India-sourced income	Not declared
Capital gains from foreign property or overseas investments	No; not India-sourced income	Not declared

NRO account interest is a common source of confusion. The interest on NRO savings and fixed deposits is taxable in India because NRO accounts hold Indian-source funds (Indian income, Indian rental receipts, and so on) and the interest accrues in India. The standard TDS rate on NRO interest for NRIs is 30 percent. The interest is declared as income from other sources in Schedule OS, and the TDS is claimed as a credit.

NRE account interest, by contrast, is completely exempt from Indian income tax under Section 10(4) of the Income Tax Act. Interest on NRE savings accounts, NRE fixed deposits, and NRE recurring deposits need not be declared in the NRI's Indian return. This exemption applies as long as the investor maintains non-resident status.

An NRI is taxed in India only on income arising in India. NRO interest is taxable; NRE interest is fully exempt. Overseas income, overseas capital gains, and foreign salary are not declared in the Indian ITR at all.

Capital gains from Indian equity mutual funds and listed shares are declared in Schedule CG of the ITR-2 in the same structure as for a resident investor. The specific schedules within CG are identical: Section A1 for equity STCG under Section 111A, Section B1 for equity LTCG under Section 112A, and Schedule 112A for the fund-level or scrip-level detail required for LTCG.

The critical difference from a resident's return is the TDS treatment. A resident Indian computes capital gains tax through self-assessment and pays what is owed. An NRI has TDS already deducted by the AMC or broker on each sale. The NRI's capital gains return therefore typically shows a TDS credit that may exceed the computed tax liability, generating a refund.

The process for entering capital gains in Schedule CG is the same regardless of residential status: enter gross LTCG from equity in Section B1, let the portal apply the Rs 1.25 lakh annual exemption, complete Schedule 112A with fund or scrip level detail, enter STCG in Section A1, and enter any debt fund gains in the applicable slab-rate section. The residential status selection in the personal information section ensures the portal applies the correct tax computation rules.

For NRIs, the quarterly break-up of capital gains (required in Schedule CG for advance tax computation) remains technically required even though NRIs are often not expected to pay advance tax if all their income is subject to TDS. Complete the quarterly allocation as best you can using the transaction dates from your capital gains statement.

DTAA Claims: How to Reduce Your Indian Tax Liability Through Treaties

India has Double Taxation Avoidance Agreements with more than 90 countries, including most major countries where Indian diaspora is concentrated: the US, UK, Canada, Australia, Singapore, UAE, Germany, France, and many others. These treaties can reduce the Indian tax applicable to specific types of income, but they do not apply automatically. The NRI must actively assert the treaty claim in the return and provide supporting documentation.

The DTAA operates by allocating taxing rights between the two countries. For most types of passive income (interest, dividends), the treaty typically grants the country of source (India) the right to tax at a reduced rate, and the country of residence grants the investor a credit for the Indian tax paid. For capital gains, the treaty may grant taxing rights to India, to the country of residence, or to both with a credit mechanism.

How DTAA Benefits Are Claimed in the ITR

The DTAA claim is made in Schedule 90A (or the equivalent DTAA schedule) of the ITR-2. This schedule allows the taxpayer to specify the treaty being relied upon, the specific article of the treaty providing the benefit, and the amount of income for which the benefit is claimed.

To support the DTAA claim, the NRI must have the following documentation:

• Tax Residency Certificate (TRC): A certificate from the tax authority of the country of residence confirming that the investor was a tax resident of that country during the relevant year. The TRC must be for the financial year or period in which the income was earned. A US NRI would obtain this from the IRS; a UK NRI from HMRC; a Singapore NRI from IRAS.

• Form 10F: A self-declaration filed on the income tax portal by the NRI providing prescribed information required for the DTAA claim, including the country of residence, the tax identification number in that country, and the period of the TRC validity. Form 10F must be filed online on the income tax portal before or at the time the ITR is filed.

• Self-declaration of beneficial ownership: A statement confirming that the NRI is the beneficial owner of the income and that the income is not attributable to a permanent establishment in India.

Filing Form 10F on the income tax portal is the most commonly missed step in NRI DTAA claims. The form is available on the portal under the e-File menu, then Income Tax Forms, then File Income Tax Forms. Select Form 10F, fill in the relevant details for the applicable financial year, and submit. Once submitted, the Form 10F reference is available to support the DTAA claim in the ITR and in any queries from the AMC or the income tax department.

Common DTAA Benefits Available to NRIs	Applicable Treaty (examples)	Indian Tax Without Treaty	Indian Tax With Treaty
Reduced withholding on NRO interest	India-US (15%); India-UK (15%); India-Singapore (15%)	30% TDS	Reduced rate; depends on treaty article
Reduced withholding on dividends	India-Mauritius (5%); India-Singapore (10%); India-UAE (10%)	20% TDS	Reduced rate; requires TRC and Form 10F with AMC before payment
Capital gains from equity funds	Varies; many treaties give India primary taxing rights on capital gains	STCG 20%; LTCG 12.5%	Usually same rate; few treaties reduce Indian capital gains on listed equity
Elimination of double taxation	All DTAAs	India taxes India-source income; home country also taxes	Home country grants credit for Indian tax paid; total tax is the higher of the two countries' rates, not the sum

A common misconception about DTAAs is that they eliminate Indian tax entirely. They do not. They prevent double taxation by ensuring the investor pays tax in both countries combined equal to the higher of the two countries' applicable rates, not the sum of both. An NRI whose home country has a 25 percent tax rate on the same income type pays 25 percent in total, not 30 percent to India plus 25 percent to the home country.

NRO Interest: Declaring It and Claiming the Excess TDS

Interest on NRO accounts is one of the most significant sources of excess TDS for NRIs with Indian bank deposits. The standard TDS rate on NRO interest is 30 percent. For NRIs in the 10 or 20 percent income tax slab, this represents significant overpayment.

In the ITR, NRO interest is declared in Schedule OS under the category interest income from bank accounts. The full interest amount (before TDS) is declared as income, and the TDS is claimed as a credit in the TDS schedule. If the total Indian income is below the basic exemption limit (Rs 2.5 lakh under the old regime or Rs 3 lakh under the new regime), the entire TDS is refundable. If total income exceeds the exemption but falls in a lower bracket, the excess TDS above the applicable bracket rate is refundable.

The TDS on NRO interest appears in Form 26AS under Part A1 with the bank as deductor. The interest amount also appears in the AIS under the interest income category. Banks are required to issue Form 16A to NRI account holders for TDS deducted on NRO interest.

Reducing TDS at source for NRO interest: Under a DTAA, NRIs may be able to submit their TRC and Form 10F to the bank holding their NRO account, requesting TDS at the lower treaty rate rather than 30 percent. If the bank accepts the documentation and the treaty provides a lower rate, subsequent TDS is deducted at the reduced rate. This reduces the amount to be reclaimed through the ITR but requires proactive documentation submission before interest payments are made.

Rental Income from Indian Property: Schedule HP

An NRI who receives rental income from Indian property declares it in Schedule HP of the ITR-2. The taxation of rental income follows the same rules as for a resident: the annual value is the higher of the actual rent received and the fair market rent (or the municipal value). From the annual value, two deductions are available: the municipal tax actually paid during the year, and a standard deduction of 30 percent of the net annual value (which represents maintenance and other property-related expenses).

TDS on rental income paid by an Indian tenant to an NRI landlord: If the tenant is an individual or HUF not required to deduct TDS on rent, no TDS applies on rent paid to NRI landlords. However, if the tenant is a company or an individual required to deduct TDS (for rents above Rs 50,000 per month under Section 194-IB), TDS at 30 percent applies. In practice, the TDS compliance on rental payments to NRIs is inconsistent, and NRIs should declare rental income in the return regardless of whether TDS was deducted.

NRI property owners who have appointed an agent or property manager in India should verify whether that agent is complying with TDS requirements and whether any TDS certificates have been issued for rent collected.

What NRIs Do Not Declare: The Relief from Resident Obligations

Several disclosures and schedules that resident Indian investors must complete are not required of NRIs. Understanding what to leave blank is as important as knowing what to fill in.

• Schedule FA (Foreign Assets): Schedule FA requires resident Indians and RNORs to disclose details of foreign bank accounts, foreign financial assets, foreign trusts, and any foreign business interests. NRIs are explicitly exempt from Schedule FA. The schedule does not apply to non-residents.

• Schedule AL (Assets and Liabilities): Resident Indians whose total income exceeds Rs 50 lakh must disclose details of their assets and liabilities in Schedule AL. This schedule does not apply to NRIs.

• Overseas income: NRIs do not declare foreign salary, foreign business income, overseas capital gains, overseas interest, or any other income not arising in India. The NRI's return is limited to India-source income.

• 80C and most other deductions: Deductions under Chapter VI-A (80C, 80D, 80E, 80G, etc.) are generally not available to NRIs for investment-linked deductions like 80C. However, deductions for genuinely personal expenditures, such as 80D for health insurance premiums paid in India, may be available. This is an area where professional advice is particularly useful, as NRI eligibility for specific deductions is nuanced.

Old Regime vs New Regime for NRIs

NRIs can choose between the old and new tax regimes, the same choice available to resident Indians. However, the regime choice has less practical impact for many NRIs because most of the deductions that make the old regime attractive for resident Indians (80C for PPF, ELSS, and so on; HRA exemption; home loan interest deduction) are either not available to NRIs or not applicable given the NRI's income structure.

For an NRI whose India income consists primarily of capital gains and NRO interest, the regime choice affects the slab rate applicable to the NRO interest and any other slab-rate income. If the NRI's total Indian slab-rate income is modest (below Rs 7 lakh), the new regime's lower slab rates are typically more favourable because there are few deductions to claim under the old regime.

For NRIs with rental income from multiple properties, or with Indian salary from an Indian employer, the deductions under the old regime (property tax, 30 percent standard deduction on rental income, home loan interest under Section 24(b)) may make the old regime worth computing separately. The rule is always to compute the tax under both regimes and choose the lower one.

If a belated return is filed (after 31 July 2026), the new tax regime is mandatory. This is the same rule as for resident Indians: opting for the old regime requires filing by the due date.

E-Verification for NRIs: Specific Considerations

E-verification of the ITR must be completed within 30 days of filing. The standard verification methods (Aadhaar OTP, net banking, demat account EVC) are all available to NRIs, but access to each depends on whether the NRI has the required linked accounts.

Aadhaar OTP is the fastest method but requires the NRI's Aadhaar mobile number to be a currently active Indian SIM. NRIs who have lost access to their Indian SIM number after moving abroad may not be able to receive the Aadhaar OTP. In this case, net banking verification or demat account-based EVC are the alternatives.

If no electronic verification method is accessible, the NRI can download the ITR-V, sign it in blue ink, and post it to the Centralised Processing Centre in Bengaluru within 30 days of filing. The postal option is slow and carries the risk of the document not reaching within the window; electronic verification is strongly preferred.

NRIs who are not in India at the time of filing and have difficulty with electronic verification should consider filing sufficiently early to have the ITR-V posted and received within the 30-day window, or should resolve their Aadhaar mobile number linkage before filing season.

Common Mistakes NRIs Make When Filing Indian ITR

• Selecting resident status instead of non-resident: This triggers worldwide income declaration requirements and schedules that are not applicable. Always verify the residential status selection before proceeding with the return.

• Not filing because TDS was deducted: TDS at source does not eliminate the filing obligation if total income exceeds the basic exemption limit, and it is the only mechanism to recover excess TDS if income is below the limit. Not filing is almost always financially harmful for NRIs.

• Declaring NRE interest as income: NRE interest is fully exempt from Indian tax and should not be entered anywhere in the return. If NRE interest is declared in Schedule OS, it inflates the income and may increase the computed tax. It may also trigger unnecessary scrutiny.

• Failing to file Form 10F before claiming DTAA benefits: The DTAA claim in the ITR must be supported by Form 10F. Filing the ITR with a DTAA claim but without a corresponding Form 10F on the portal creates a verification gap that may result in the DTAA claim being disallowed.

• Using the wrong DTAA article or claiming benefits not available in the treaty: Not all DTAAs reduce Indian capital gains rates. Claiming a capital gains exemption under a treaty that does not provide one results in a demand from the income tax department.

• Not verifying that TDS in Form 26AS matches Form 16A and the capital gains statement: Discrepancies between these documents are common and must be resolved before filing. Claiming TDS credit that is not in Form 26AS will result in a demand for the difference.

• Forgetting to link a current Indian bank account for the refund: Most NRI ITRs result in refunds. The refund is credited to the bank account registered on the portal. An NRI whose old NRO account has been closed without updating the portal will not receive the refund. Verify the refund bank account before each year's filing.

• Not completing Schedule 112A for equity LTCG: The fund-level detail required in Schedule 112A is mandatory for LTCG under Section 112A. Entering only the aggregate LTCG in Section B1 without Schedule 112A detail is an incomplete return.

A Step-by-Step Filing Sequence for NRIs

• Step 1: Collect documents. Capital gains statement from CAMS and KFintech (for mutual funds); capital gains statement from broker (for equity shares); Form 26AS from the income tax portal; AIS from the portal; NRO bank interest certificates; Form 16A from banks and AMCs for TDS deducted; rental income records; TRC from the tax authority of your country of residence (if claiming DTAA benefits); Form 10F (file this on the portal before proceeding).

• Step 2: Log in to incometax.gov.in. Navigate to e-File > Income Tax Returns > File Income Tax Return. Select Assessment Year 2026-27 and ITR-2 as the form.

• Step 3: Complete the personal information section. Select Non-Resident as residential status. Verify PAN, name, date of birth, and contact details.

• Step 4: Verify pre-filled bank account details. Add or update your NRO or NRE account as the refund bank account. Banks used for NRI accounts must be pre-validated on the portal.

• Step 5: Enter capital gains in Schedule CG. Enter gross LTCG from equity in Section B1; complete Schedule 112A with fund or stock-level detail; enter STCG in Section A1; enter debt fund gains in the applicable slab-rate section.

• Step 6: Enter interest income and dividend income in Schedule OS. Declare NRO interest (full amount before TDS). Declare dividends received. Do not declare NRE interest.

• Step 7: Enter rental income in Schedule HP if applicable. Compute the annual value, deduct property tax and standard deduction, and enter the net income.

• Step 8: Enter DTAA claims in Schedule 90A if applicable. Specify the treaty, the article, and the income for which the benefit is claimed. Ensure Form 10F is already filed.

• Step 9: Verify TDS credits. Check that the TDS pre-filled from AIS matches your Form 26AS and Form 16A. Correct any discrepancies.

• Step 10: Review the computed tax. If the computation shows a refund (which it usually does for NRIs), verify the refund bank account one more time. If the computation shows tax payable, pay using Challan 280 and enter the challan details before submitting.

• Step 11: Submit the return and e-verify immediately. Use Aadhaar OTP, net banking, or demat account EVC. If electronic verification is not possible, send ITR-V by post within 30 days.

Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or financial advice. NRI tax obligations are governed by the Income Tax Act, 1961, FEMA, and applicable DTAAs, all of which are subject to amendment. Residential status determination, DTAA eligibility, deduction availability, and specific schedule requirements depend on individual facts and circumstances. Please consult a qualified chartered accountant with NRI tax experience before filing your Indian income tax return.