Do NRIs need to file ITR in India? What most people get wrong

Before understanding whether you need to file an income tax return in India, it is important to understand how Indian tax law defines a Non-Resident Indian. Under the Income Tax Act, your residential status is determined based on the number of days you were physically present in India during the financial year. If you were in India for fewer than 182 days in a financial year, you are generally treated as a Non-Resident for that year. This is a legal classification for tax purposes and is separate from your passport, visa status, or OCI card. 

Your residential status determines which of your incomes are taxable in India. For a resident, global income is taxable in India. For an NRI, only income that is earned or received in India is taxable here. This distinction is important and is where most confusion begins. 

The short answer is, more often than most NRIs realise. Many Indians living abroad assume that once they leave India their tax connection to the country ends. This is not accurate. If you have any of the following, you likely have a tax filing obligation in India. 

You need to file ITR in India as an NRI if you have:

• Rental income from property in India that exceeds the basic exemption limit

• Interest income on your NRO account that exceeds the basic exemption limit

• Capital gains from selling property in India regardless of the amount

• Capital gains from selling shares or mutual funds in India

• Any income from a business or profession in India

• A salary received in India or for services rendered in India

• Pension income received from India

• Any income where TDS has been deducted and you wish to claim a refund

Note that TDS being deducted from your income does not replace the obligation to file a return. Banks deduct TDS at 30% on NRO account interest. If your actual tax liability is lower due to DTAA benefits or basic exemption, you can only claim the refund by filing an ITR. Many NRIs lose this refund simply because they do not file. 

Interest earned on NRE savings and fixed deposit accounts is fully exempt from income tax in India for NRIs. This is one of the genuine benefits available to NRIs and it is worth knowing clearly. However, once you return to India and your residential status changes to Resident, NRE interest becomes taxable. Many returning NRIs are unaware of this and face unexpected tax demands in their first year back in India. 

This is an area where many NRIs who have worked in the US or other countries are caught off guard. If you hold foreign shares, RSUs from your employer, stock options, or any other foreign assets, and if your total foreign assets exceed a certain threshold, you are required to disclose these in Schedule FA of your ITR. This applies even if no income was generated from these assets during the year. 

Non-disclosure of foreign assets is treated very seriously under Indian tax law. The Black Money and Imposition of Tax Act 2015 prescribes significant penalties for failure to disclose foreign assets. If you hold foreign shares or investments and have not been reporting them in your Indian ITR, it is important to address this with a qualified CA as soon as possible. 

India has signed Double Taxation Avoidance Agreements with over 90 countries including the United States, United Kingdom, UAE, Canada, Australia, Singapore, and Germany. These agreements ensure that the same income is not taxed twice, once in India and once in your country of residence. 

For example, if you are an NRI in the US and you earn rental income from a property in India, that income may be subject to tax in both countries. Under the India-US DTAA, you can claim a credit for the tax paid in India against your US tax liability or vice versa depending on the treaty provisions. To claim this benefit correctly you need to file your Indian ITR accurately and obtain the right certificates. Many NRIs pay double tax on the same income simply because no one explained this to them or filed their return correctly. 

Property sales are one of the most significant tax events for NRIs with Indian assets. When an NRI sells property in India, the buyer is required to deduct TDS at 20% on long-term capital gains or 30% on short-term capital gains before paying the sale proceeds. This TDS is deducted regardless of the actual tax liability. 

If your actual tax is lower than the TDS deducted, which is common when indexation benefits are applied to long-term gains. You can claim a refund. But this is only possible if you file an ITR in India for that financial year. We assist NRIs through the complete process of property sale compliance including capital gains computation, TDS certificates, ITR filing, and repatriation of sale proceeds. 

Mistakes we regularly help NRIs resolve:

• Not filing ITR at all assuming no obligation exists

• Filing as a resident when the correct status is NRI or vice versa

• Not claiming DTAA benefits and paying higher tax than required

• Not disclosing foreign assets in Schedule FA

• Missing the deadline to claim TDS refund on NRO interest

• Incorrect capital gains computation on property sales

• Not obtaining Form 15CA and 15CB before repatriating funds from India

The new Income Tax Act 2025, effective from April 1, 2026, introduces some changes that NRIs need to be aware of. For NRIs with Indian income exceeding ₹15 lakh, the threshold for triggering resident status during India visits has been revised. NRIs in tax-free countries like the UAE who earn more than ₹15 lakh from Indian sources but do not pay tax in their country of residence need to assess their deemed resident status carefully. Additionally, NRIs who are returning to India permanently should explore RNOR status, which can provide significant tax benefits for 1 to 3 years after return by keeping foreign income outside the Indian tax net. These are complex areas that require proper assessment of your specific situation. WhatsApp us to discuss how these changes affect you. 

At Obaid Khan & Associates, we handle complete NRI tax compliance remotely. You do not need to visit our office or be in India. We communicate over WhatsApp and email, share documents securely, prepare your return for your review, and file only after your approval. 

Our NRI services include residential status determination, ITR filing for all types of NRI income, DTAA benefit claims, TDS refund applications, capital gains computation for property sales, Schedule FA compliance for foreign assets, and 15CA and 15CB certificates for fund repatriation. We serve NRI clients from the US, UK, UAE, Canada, Australia, Singapore, and New Zealand. 

If you are an NRI and are unsure whether you need to file an ITR in India this year, WhatsApp us with a brief description of your income and assets in India. We will assess your situation and give you a clear picture of your obligations. Our consultations are charged based on the complexity of your case, we believe in transparent pricing and will confirm our fees before we begin any work.

If you are an NRI and are unsure whether you need to file an ITR in India this year, WhatsApp us with a brief description of your income and assets in India. We will assess your situation and give you a clear picture of your obligations. Our consultations are charged based on the complexity of your case, we believe in transparent pricing and will confirm our fees before we begin any work.

CA Obaid Khan, FCA | 47th All India Rank | Ex-Deloitte | Obaid Khan & Associates, Hyderabad | WhatsApp: +91 9160091660 | www.caobaid.com