NRI Tax Filing Guide — Do You Need to File ITR in India?

Living abroad and earning in a foreign currency does not necessarily sever your ties to the Indian tax system. Millions of Non-Resident Indians (NRIs) hold property, bank accounts, and investments back home. With the tax department rapidly digitizing and the Union Budget 2026 introducing stricter tracking measures, NRIs must be proactive about their compliance to avoid heavy penalties and frozen assets.

The 183-Day Rule (Determining NRI Status)

Your tax liability depends entirely on your residential status during the financial year (April 1 to March 31).

Generally, you qualify as an NRI if you spend fewer than 182 days in India during the year. However, there is a major catch introduced in recent years: if your India-sourced income exceeds ₹15 lakh, the residency threshold can drop to 120 days. Spend 121 days in India with high local income, and you may be treated as resident for tax purposes.

When Must NRIs File an ITR in India?

You are legally required to file an Income Tax Return in India if your total Indian income (before applying deductions) exceeds the basic exemption limit (₹3 lakh).

Even if your income is below this limit, you should file an ITR if you want to claim a refund. NRIs face higher TDS rates on Indian transactions, and filing a return is the only legal way to reclaim that excess tax.

What is Taxable in India?

As an NRI, you only pay tax on income that is earned, accrued, or received within India. This includes:

• Rental income from property located in India.
• Capital gains from selling Indian real estate, stocks, or funds.
• Dividends received from Indian companies.
• Interest earned on NRO accounts and fixed deposits.

What is NOT Taxable in India?

India does not tax your global income as an NRI. Your foreign salary, foreign business profits, and the interest earned on designated NRE and FCNR accounts in India are generally tax-free in India.

The 20% TDS Trap on Property Sales

When an NRI sells property in India, the buyer is legally required to deduct a high TDS (often 20%+ including surcharge/cess) on the entire sale value — not just the profit.

Example: If you sell a house for ₹1 Crore, the buyer may withhold ~₹20 Lakh in tax. You can reduce this by applying for a Lower TDS Certificate before the sale, or file an ITR later to compute actual capital gains and claim the refund.

DTAA and Claiming Relief

If your Indian income is taxed in India and also taxed in your country of residence, you can avoid double taxation using DTAA (Double Taxation Avoidance Agreement). Typically you will need a Tax Residency Certificate (TRC) from your host country and proper documentation while filing.

Summary: Track your residency days carefully, plan lower TDS certificates for asset sales, and file your ITR to reclaim excess taxes.