Introduction
As a Non-Resident Indian (NRI), navigating India's tax system can be complex due to residency rules, international income, and compliance requirements. For Assessment Year (AY) 2025-26, understanding how to file your Income Tax Return (ITR) is vital to avoid penalties and leverage benefits like Double Taxation Avoidance Agreements (DTAA). This guide provides a step-by-step approach to NRI tax filing, focusing on unique aspects like foreign income reporting and asset disclosure.
Whether you're working abroad or investing in India, staying compliant ensures peace of mind. Let's break down the essentials for ITR filing by the extended deadline of September 15, 2025.
Determining NRI Status
Your tax obligations hinge on residency under the Income Tax Act:- NRI Definition: If you spend less than 182 days in India during FY 2024-25 or less than 60 days with 365 days in the prior four years (exceptions for PIOs/OCIs).
- Deemed Residency: If Indian income exceeds ₹15 lakh and you're not liable for tax in any other country, you're deemed resident—impacting global income taxation.
Tip: Use FEMA for banking but Income Tax Act for taxation. Confirm status via passport stamps or employer certificates.
Taxable Income for NRIs
NRIs are taxed only on India-sourced income:- Rental Income: From Indian properties, taxable after 30% standard deduction.
- Capital Gains: From selling assets like stocks or property; LTCG on equities at 12.5%.
- Interest Income: From NRO accounts (taxable) vs. NRE/FCNR (tax-free).
- Salary/Pension: Taxable if received in India or for services rendered here.
Foreign income (e.g., overseas salary) is exempt unless you're deemed resident.
DTAA Benefits and Tax Relief
India's DTAAs with over 90 countries prevent double taxation:- Claim Relief: Via Form 10F and Tax Residency Certificate (TRC) from your resident country.
- Withholding Tax: TDS on rentals (31.2%) or dividends (20%); claim credit in home country.
Example: A US-based NRI with Indian rental income can claim US tax credit for Indian TDS under India-US DTAA.
Choosing the Right ITR Form
- ITR-2: For income from salary/pension, house property, capital gains, or other sources (no business income).
- ITR-3: If you have business/professional income from India.
Report foreign assets/income in Schedule FA and foreign bank accounts in Schedule FSI.
Step-by-Step Filing Guide
- Register on e-Filing Portal: Use PAN; NRIs can use Aadhaar or email for OTP.
- Gather Documents: Form 16A (TDS), rental agreements, bank statements, TRC.
- Select Tax Regime: New (default, simpler) or old (deductions like 80C, limited for NRIs).
- Fill ITR Form: Report India-sourced income; claim DTAA relief.
- Disclose Assets: Mandatory for foreign assets above ₹50 lakh.
- File by September 15, 2025: e-Verify via net banking or DSC.
Pro Tip: Use prefilled forms for accuracy; consult a CA for complex cases.
Common Challenges and Solutions
- TDS Mismatch: Reconcile with Form 26AS; file rectification if needed.
- FATCA Compliance: Report US accounts to avoid penalties.
- Repatriation Issues: Use NRE accounts for tax-free transfers.
- Deemed Residency Trap: Monitor Indian visits and income to avoid global taxation.
Conclusion
Filing ITR as an NRI for AY 2025-26 requires attention to residency, income sources, and international treaties. By following this guide, you can comply efficiently and minimize tax burdens. For more tailored advice, visit Commerce Tutors (https://www.commercetutors.com).This concludes our series on ITR for AY 2025-26—empowering you for smarter tax decisions!