NRI Tax Filing in India: What to Report and What to Ignore

• ITR-2: most NRIs with capital gains from stocks/property and NRO income
• ITR-1 (Sahaj): only for NRIs with India-salary income below ₹50 lakh — limited use case
• ITR-3: NRIs with business income in India
• File by July 31 of the assessment year (for FY 2025-26, file by July 31, 2026)

Indian residents (NOT NRIs) who hold foreign financial accounts must complete Schedule FA (Foreign Assets) in their ITR. This is mandatory even if there's zero income from those accounts. NRIs don't file Schedule FA — only residents who maintain foreign accounts need to:

• What to declare: foreign bank accounts (NRE/NRO counts only if the Indian resident held it before becoming an NRI — current NRIs don't file this), foreign equity investments, foreign trusts, foreign business interests.
• Penalty for non-disclosure: ₹10 lakh per year of non-disclosure under the Black Money Act. This is serious — don't skip it.
• Returning NRIs: in your first ITR as a returning resident, complete Schedule FA for all foreign assets you hold. Report IBKR accounts, foreign bank accounts, overseas property.
• Peak balance reporting: for bank accounts, declare the peak balance during the year (not just year-end balance).

TDS is deducted on NRO interest at 30% (or treaty rate if claimed) and on dividends from Indian companies. If you're in a lower tax bracket or the treaty rate is lower than what was deducted, you can claim a refund:

1. File ITR-2 (for NRIs with capital gains and NRO income) by July 31 of the assessment year.
2. In the ITR, declare your NRO interest income and capital gains under respective heads.
3. Enter the TDS deducted (from Form 26AS — available on the income tax portal at incometax.gov.in).
4. Compute your actual tax liability. If TDS deducted > actual tax, the difference is your refund.
5. Enter the refund bank account — must be an Indian bank account (NRO account is fine). Refunds arrive by cheque or NEFT, typically 2–4 months after filing.
6. If refund is delayed: use the 'Refund Status' on the income tax portal. If stuck, raise a grievance on the portal.

DTAA (Double Taxation Avoidance Agreements) can significantly reduce Indian TDS on NRO account interest and certain other incomes. The process to claim treaty rates:

• Obtain a Tax Residency Certificate (TRC) from your country of residence's tax authority — HMRC for UK, IRS for US, ATO for Australia. This confirms you're a tax resident in the treaty country.
• Submit Form 10F (self-declaration of treaty eligibility) along with TRC to your Indian bank. Banks then deduct TDS at the treaty rate instead of 30%.
• Treaty rates for NRO interest: India-UK 15%, India-US 15%, India-Australia 15%, India-UAE 12.5% (India-UAE DTAA differs from common understanding — consult CA).
• Renew annually: TRC and Form 10F need to be submitted each financial year.
• If excess TDS was already deducted: file ITR and claim the refund. You cannot claim TRC retroactively to reduce TDS already deducted.

Choosing the wrong ITR form is a common NRI mistake that can result in a defective return notice. The correct form depends on your income sources, not just your residency status.

• ITR-2: for most NRIs. Use if you have income from salary/pension, house property, capital gains, or foreign assets/income. Does NOT have a business income section.
• ITR-3: if you have income from business or profession (e.g., freelance consulting to Indian clients). More complex but required if any business income is received in India.
• ITR-1 (Sahaj): NOT for NRIs. This simplified form is only for ordinarily resident Indians. NRIs cannot use ITR-1 even if income is simple.
• ITR-2 specific schedules for NRIs: Schedule S (salary from India), Schedule HP (house property), Schedule CG (capital gains), Schedule OS (other sources — NRE interest exemption), Schedule FA (foreign assets), Schedule FSI (foreign income), Schedule TR (tax relief on foreign income).

These are the schedules most NRIs need to complete and commonly get wrong:

• Schedule FA (Foreign Assets): mandatory for any NRI who holds foreign accounts, foreign equity, foreign ESOPs, or has signing authority on foreign accounts. Requires details of each account/investment: name of institution, address, account number, opening balance, peak balance, closing balance, gross interest/income. Failure to disclose = FEMA violation + penalty.
• Schedule FSI (Foreign Source Income): report all foreign-sourced income that is taxable in India (for RNOR/Resident Indians) or Indian-source income that is also taxable abroad. Cross-reference with Schedule TR for DTAA credit claims.
• Schedule TR (Tax Relief): claim DTAA tax credit here. Enter the taxes paid abroad that you're claiming as credit against Indian tax. Attach foreign tax payment proof.
• Capital Gains Schedule: separate sections for short-term (< 24 months for property, < 12 months for equity) and long-term. Equity capital gains from listed securities go in a specific subsection — LTCG above ₹1 lakh taxable at 10%.
• Schedule OS (Other Sources): NRE interest is tax-exempt in India — enter under 'Income not chargeable to tax' section. Bank account interest from NRO accounts goes here as taxable income.

• Standard deadline: July 31 of the assessment year (e.g., July 31, 2026 for FY 2025-26). This is the original due date for non-audit cases.
• Extended deadline: typically extended to December 31 or later. Check income tax department announcements each year.
• Belated return: can be filed up to December 31 of the assessment year. Penalty: ₹5,000 (reduced to ₹1,000 if income below ₹5 lakh).
• Missed the deadline entirely: if you miss the belated return deadline too, you cannot file voluntarily. The department may issue a notice and assess you. Avoid this — file late with penalty rather than not filing.
• Foreign asset disclosure penalty: if you have foreign assets and fail to file Schedule FA, the Black Money Act applies. Penalties are severe: ₹10 lakh per undisclosed asset plus prosecution risk. Never skip Schedule FA if you have any foreign financial accounts.

• Q: Are NRIs required to file ITR in India? A: If your India-sourced income exceeds the basic exemption limit (₹2.5 lakh for below 60, ₹3 lakh for 60–80, ₹5 lakh for above 80), filing is mandatory. Even below these limits, filing is required if you have foreign assets (Schedule FA mandatory regardless of income level).
• Q: Is NRE interest shown in ITR? A: Yes, it must be disclosed, but under the exempt income schedule. NRE interest is exempt under Section 10(4) of the Income Tax Act. Even though it's tax-free, it must be reported in the ITR under 'Income not chargeable to tax.'
• Q: Can NRIs file ITR online from abroad? A: Yes. ITR can be filed completely online via the Income Tax e-filing portal (incometax.gov.in). Aadhaar-linked mobile OTP or net banking DSC is required for e-verification. If you don't have Aadhaar, you can e-verify using EVC via bank account.
• Q: What is the penalty for not filing Schedule FA? A: ₹10 lakh per undisclosed foreign asset under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This is severe. Always disclose all foreign accounts in Schedule FA regardless of the balance.
• Q: Do NRIs need to pay advance tax in India? A: Only if Indian-source tax liability after TDS exceeds ₹10,000. For most NRIs whose Indian income is primarily NRO bank interest (TDS already deducted at 30%), advance tax may not be required. Confirm with a CA.