Complete Guide to ITR Filing for NRIs (Non-Resident Indians) in FY 2025-26
Welcome to our blog – Complete Guide to ITR Filing for NRIs (Non-Resident Indians) in FY 2025-26. If you are living abroad but still earning income in India through salary, property rent, bank deposits, shares, or mutual funds, you may need to file an Income Tax Return (ITR). Many NRIs are often confused about whether they should file, what income is taxable, and which deductions they can claim. The rules are slightly different from resident Indians, and knowing them helps you avoid penalties and save tax legally. In this guide, we will explain everything step by step – eligibility for NRI ITR filing, documents required, applicable forms, tax rates, exemptions available, and how to file ITR online from abroad. You will also learn about important due dates, common mistakes to avoid, and useful expert tips to make your tax filing smooth and hassle-free.
Who is Considered an NRI for Tax Purposes?
For tax purposes, you are considered an NRI (Non-Resident Indian) if you do not meet the basic residency rules under the Income Tax Act. In simple terms, if you stay in India for less than 182 days during a financial year, you are treated as an NRI. There’s another test too – if your stay in India is less than 60 days in the current year and less than 365 days in the last 4 years combined, then you also qualify as an NRI. These conditions are checked every year, so your residential status may change depending on your travel and stay in India.
This means that even if you are settled abroad, your tax status depends only on the number of days spent in India. For example, if you work in the USA but earn rent from a flat in Mumbai or receive interest from an Indian bank account, you are considered an NRI and must pay tax in India on that income. The good news is that your foreign income is not taxed in India, only income earned or received in India is taxable. So, before filing ITR, it is very important to first confirm whether you are a resident or NRI as per the law – because all tax rules and benefits will depend on this status.
Is ITR Filing Mandatory for NRIs in FY 2025-26?
✅ Income above exemption limit – If your total income earned in India exceeds ₹2.5 lakh in a financial year.
✅ TDS refund claim – When Tax Deducted at Source (TDS) has been deducted and you want to claim a refund.
✅ Carry forward of losses – If you want to carry forward losses such as capital loss on shares, property, or mutual funds for future tax benefits.
✅ Tax on special income – If you have taxable income like short-term capital gains on shares (STCG under section 111A) or long-term capital gains (LTCG), even if your total income is below ₹2.5 lakh.
✅ Foreign assets disclosure – If you own foreign bank accounts, financial interests, or property abroad, disclosure may be required in certain cases (especially if you qualify as RNOR or resident later).
✅ Multiple income sources – If you earn from salary, rent, dividends, or investments in India, you may need to file depending on income level.
✅ Claiming deductions – If you want to claim deductions under sections like 80C, 80D, or home loan interest, you must file ITR.
✅ Avoiding penalties – Even if income is below limits, filing ensures compliance and avoids notices from the tax department.
Income Earned in India vs. Abroad
As an NRI, your tax depends on where the income is earned:
💡 Income earned abroad – Any salary, business income, or investments from outside India is not taxable in India. You will pay tax only in the country where you live or work.
💡 Income earned or received in India – Income from salary in India, rental property, bank deposits, shares, mutual funds, or capital gains is taxable in India.
Basic Exemption Limit for NRIs
✅ For NRIs, the basic exemption limit is ₹2.5 lakh, irrespective of age.
✅ Unlike resident Indians, NRIs do not get higher exemption limits available to senior citizens (₹3 lakh) or super senior citizens (₹5 lakh).
✅ This means even if an NRI is 60, 70, or 80 years old, the exemption limit remains ₹2.5 lakh only.
✅ Income earned in India above this limit is taxable, whether from salary, rent, investments, or capital gains.
✅ NRIs can still reduce their tax liability by claiming deductions like 80C (investments), 80D (health insurance), home loan interest, etc.
Applicability of New vs. Old Tax Regime
NRIs can choose between the Old Tax Regime and New Tax Regime while filing ITR in India. The choice depends on your income sources and deductions, as it directly affects the tax you pay.
1. Old Tax Regime
Higher tax rates but allows claiming deductions and exemptions.
Common deductions available:
Section 80C – Investments in ELSS, life insurance, PPF, NSC, etc.
Section 80D – Health insurance premium for self, family, and parents.
Section 24(b) – Home loan interest on property in India.
Other deductions like 80E (education loan interest), 80TTA/80TTB (interest on savings account).
Beneficial if you have significant investments or eligible expenses that reduce taxable income.
2. New Tax Regime
Lower tax rates but very few deductions available.
Most common exemptions like 80C, 80D, HRA, or home loan interest are not allowed.
Simple and straightforward for NRIs who do not have many deductions to claim.
Tax slabs are more flexible for certain income ranges, making it easier for those with limited deductions.
How to choose?
If your deductions are high, the Old Tax Regime usually saves more tax.
If you don’t have many eligible deductions, the New Tax Regime may be simpler and result in lower tax due to its lower rates.
Salary and Business Income in India
For NRIs, any salary received in India is fully taxable, even if you earn additional income abroad. This includes your regular salary, bonuses, allowances, or any other payments from an Indian employer. It is important to report all such income while filing your ITR to stay compliant with Indian tax laws.
Similarly, if you have a business or professional income that is controlled or managed in India, it is also fully taxable. Profits from a business, freelance work, or consultancy managed from India must be included in your ITR. In short, any income earned or controlled in India is taxable, while foreign income remains outside the scope of Indian taxation.
Deductions and Exemptions Available to NRIs
NRIs are eligible to claim limited deductions under the Income Tax Act to reduce their taxable income in India. Some of the key deductions include:
Section 80C – Investments like Life Insurance Premium, ELSS, Public Provident Fund (PPF), and principal repayment of a housing loan. The maximum deduction allowed under this section is ₹1.5 lakh.
Section 80D – Health insurance premiums paid for self, spouse, children, and parents.
Section 80E – Interest paid on education loans for higher studies.
Capital Gains Exemptions – Certain exemptions are available if capital gains from the sale of property or assets are reinvested in specified instruments, such as buying another property under Sections 54, 54EC, or 54F.
ITR Forms Applicable for NRIs in FY 2025-26
NRIs need to select the correct Income Tax Return (ITR) form based on the type of income earned or received in India. Filing the right form ensures compliance and helps avoid errors or notices from the Income Tax Department.
ITR-2 – This form is suitable for NRIs who earn income from salary, house property, capital gains, or other sources such as interest from bank accounts or dividends. It is ideal for NRIs who do not have business or professional income in India.
ITR-3 – This form is meant for NRIs who earn business or professional income in India, along with any other sources of income. For example, if an NRI runs a consultancy or freelance business in India, they must use ITR-3.
Due Dates and Penalties for NRI ITR Filing
For NRIs, the due date to file Income Tax Return (ITR) for FY 2025-26 is 31st July 2025, applicable for individuals whose accounts do not require audit. Filing on time ensures compliance and helps avoid unnecessary penalties.
If you file your ITR after the due date, you may face:
Late filing fees of up to ₹5,000 under Section 234F.
Loss of certain benefits, such as the ability to carry forward losses (like capital losses or business losses) to set off against future income.
Get Expert Guidance for NRI ITR Filing
Filing ITR as an NRI can be complicated due to multiple sources of income in India, TDS deductions, and provisions under the Double Taxation Avoidance Agreement (DTAA). Making a mistake or missing out on deductions can lead to penalties or lost tax benefits.
For smooth, hassle-free filing and to maximize your tax savings, get professional guidance from ITRAdda.com. Their experts can help you choose the right ITR form, claim eligible deductions, and ensure timely filing. 📞 Call: +91-86001 98715 | 🌐 Visit: www.itradda.com
