NRI Income Tax Filing in India — Complete ITR Guide for AY 2026-27 (FY 2025-26)
By CA Mayank Wadhera (CA | CS | CMA | IBBI Registered Valuer) Founder, MKW Advisors | Legal Suvidha | DigiComply
If you are a Non-Resident Indian (NRI) with income arising in India — whether from property, bank interest, capital gains, or dividends — you likely have a tax filing obligation in India for Assessment Year 2026-27. Unfortunately, NRI taxation is one of the most misunderstood areas in Indian income tax law, and errors in filing can result in unnecessary tax payments, penalty notices, and missed refund opportunities.
This guide walks you through every aspect of NRI income tax filing for FY 2025-26 (AY 2026-27) — from determining whether you need to file, to selecting the correct ITR form, choosing the right tax regime, computing your tax, and avoiding the mistakes that trip up thousands of NRIs every year.
"Most NRIs either overpay their taxes by not claiming legitimate TDS refunds, or face unnecessary scrutiny because they filed the wrong form or missed disclosing income that already appears in their AIS. A systematic, well-informed approach to filing can save you both money and stress." — CA Mayank Wadhera, Founder, MKW Advisors
When Does an NRI Need to File ITR in India?
An NRI is required to file an income tax return in India if any of the following conditions are met during FY 2025-26:
1. Gross total income exceeds the basic exemption limit
Under the new tax regime (default from AY 2024-25 onwards), the basic exemption limit is ₹4,00,000. Under the old regime, it is ₹2,50,000. If your total Indian-sourced income exceeds this threshold, filing is mandatory.
2. You want to claim a TDS refund
Banks deduct TDS at 30% (plus surcharge and cess) on NRO fixed deposit interest. If your actual tax liability is lower — or if no tax is due — the only way to get that excess TDS back is by filing an ITR and claiming a refund.
3. You have capital gains from sale of property, shares, or mutual funds
Any capital gain arising in India is taxable for an NRI, regardless of the amount. If TDS has been deducted on the sale, you must file an ITR to either confirm the tax or claim a refund of excess TDS.
4. You have rental income from Indian property
Rental income from property situated in India is taxable for NRIs. Filing an ITR allows you to claim deductions (such as the 30% standard deduction) and reconcile TDS credits.
5. You want to carry forward losses
If you have incurred capital losses and want to carry them forward for set-off against future gains, filing a return before the due date is mandatory. A belated return does not allow loss carry-forward.
Income Heads Taxable for NRIs in India
Only income that is earned, received, or accrues in India is taxable for an NRI:
| Income Type | Taxable? | TDS Rate | Key Notes |
|---|---|---|---|
| NRO savings/FD interest | Yes | 30% (+cess) | Most common; claim refund if tax is lower |
| NRE savings/FD interest | No (exempt u/s 10(4)) | None | Do NOT include in ITR |
| FCNR deposit interest | No (exempt u/s 10(4)) | None | Do NOT include in ITR |
| Rental income | Yes | 30% on rent | 30% standard deduction available |
| Capital gains — property | Yes | 20% (LTCG) / 30% (STCG) | 12.5% LTCG from FY 2024-25 |
| Capital gains — equity/MFs | Yes | Generally no TDS | LTCG above ₹1.25L at 12.5%; STCG at 20% |
| Dividends | Yes | 20% for NRIs | At slab rates; DTAA may reduce |
| Foreign salary | No | None | Salary for services outside India is NOT Indian income |
NRE Interest — The Critical Exemption
Interest earned on NRE savings accounts and NRE fixed deposits is fully exempt under Section 10(4)(ii) as long as you maintain NRI status. This interest should NOT be included as taxable income.
Important: If NRE interest appears in your AIS (Annual Information Statement), verify it is classified as exempt. If shown as taxable, file feedback on the AIS portal to correct it.
ITR Form Selection for NRIs
| ITR Form | When to Use | Common NRI Scenarios |
|---|---|---|
| ITR-2 | Salary, house property, capital gains, other sources (no business income) | NRO interest + rental income + property sale + dividends |
| ITR-3 | Business or professional income in addition to other heads | Freelance income, consulting, business income from India |
| ITR-1 (Sahaj) | NOT applicable to NRIs | Cannot be used — NRI status disqualifies ITR-1 |
"I have seen hundreds of NRI returns filed on ITR-1 by well-meaning family members or uninformed tax preparers. Every single one is technically a defective return. The department may process it initially, but it creates risk during scrutiny." — CA Mayank Wadhera
New Regime vs Old Regime — AY 2026-27
The new tax regime is the default since AY 2024-25. You are automatically placed under the new regime unless you file Form 10-IEA before the due date.
| Parameter | New Regime (Default) | Old Regime |
|---|---|---|
| Basic exemption | ₹4,00,000 | ₹2,50,000 |
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 80C | Not available | Up to ₹1,50,000 |
| HRA exemption | Not available | Available |
| Home loan interest (self-occupied) | Not available | Up to ₹2,00,000 |
| 30% standard deduction on rent | Available | Available |
| Tax rates | Lower slabs | Higher but with deductions |
For most NRIs, the new regime is more beneficial because NRIs typically don't have Indian salary, making HRA and 80C irrelevant. The lower slab rates compensate for lost deductions.
New Regime Tax Slabs — AY 2026-27
| Total Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Plus 4% Health & Education Cess on total tax, and surcharge if income exceeds ₹50 lakh.
Section 87A Rebate — NOT Available for NRIs
This is one of the most widespread misconceptions. Section 87A provides a rebate of up to ₹25,000 for resident individuals with income up to ₹7,00,000 under the new regime — effectively making their tax zero.
NRIs are NOT eligible. An NRI with ₹6,00,000 income will pay:
- Tax on ₹4L–₹6L at 5% = ₹10,000 + ₹400 cess = ₹10,400
A resident with the same income pays zero. This is a legitimate difference in law.
"Every filing season, we get dozens of calls from NRIs who used online tax calculators that applied Section 87A. Always confirm the tool accounts for NRI status — or work with a qualified CA." — CA Mayank Wadhera
Documents Needed for NRI ITR Filing
| Document | Purpose |
|---|---|
| Form 26AS | TDS credit statement |
| AIS (Annual Information Statement) | All financial transactions linked to PAN |
| TIS (Taxpayer Information Summary) | Computed income values |
| Form 16A | TDS certificates from banks, tenants, buyers |
| NRO bank statements | Interest income details |
| Sale/purchase deeds | Capital gains computation |
| Brokerage/DEMAT statements | Share/MF capital gains |
| Rental agreements | Rental income computation |
| Home loan interest certificate | Section 24 deduction |
| Passport | NRI status confirmation |
| TRC (Tax Residency Certificate) | If claiming DTAA benefits |
AIS/26AS/TIS Reconciliation — Why It Matters
The AIS is now the department's primary tool for identifying discrepancies. Reconciliation is critical for NRIs because:
- Banks may report NRE interest in AIS — even though exempt, it can be flagged as unreported
- Property transactions show sale price, TDS, and stamp duty value — any mismatch triggers notices
- All MF redemptions, dividends, and share transactions are captured
- Multiple TDS credits from different deductors must be verified
At MKW Advisors, every NRI filing begins with thorough AIS/26AS/TIS reconciliation. This step alone has helped clients avoid hundreds of unnecessary notices.
Practical Tax Computation Examples
Example 1: NRO Interest + Rental Income
Mr. Sharma (US-based NRI), FY 2025-26:
| Income | Amount |
|---|---|
| NRO FD interest | ₹3,50,000 |
| Rental income (gross ₹6L, after 30% SD) | ₹4,20,000 |
| NRE FD interest | ₹4,00,000 (exempt) |
| Computation | Amount |
|---|---|
| Taxable Income | ₹7,70,000 |
| Tax (₹4L-₹7.7L at 5%) | ₹18,500 |
| Cess (4%) | ₹740 |
| Total Tax | ₹19,240 |
| TDS deducted (30%+ on NRO + rent) | ₹2,96,400 |
| Refund Due | ₹2,77,160 |
Without filing, Mr. Sharma loses a refund of nearly ₹2.77 lakh.
Example 2: Property Sale Capital Gains
Ms. Patel (UK NRI) sells a flat for ₹1.2 crore, LTCG ₹65 lakh + NRO interest ₹1.2 lakh:
| Computation | Amount |
|---|---|
| LTCG tax (12.5% of ₹65L) | ₹8,12,500 |
| Surcharge (10%, income > ₹50L) | ₹81,250 |
| Cess (4%) | ₹35,750 |
| Total Tax | ₹9,29,500 |
| TDS deducted by buyer | ₹15,00,000 |
| Refund Due | ₹5,70,500 |
Example 3: NRO Interest Below Exemption
Mr. Khan (Dubai NRI) has only ₹2,50,000 NRO interest. TDS of ₹78,000 deducted. Income below ₹4L exemption. Tax = zero. Full refund of ₹78,000 on filing ITR.
"Even ₹78,000 recovered every year adds up significantly over a decade. File your return." — CA Mayank Wadhera
Due Date and Late Filing Consequences
| Category | Due Date |
|---|---|
| NRI (no audit) | 31 July 2026 |
| NRI with audit | 31 October 2026 |
Consequences of Late Filing
| Impact | Details |
|---|---|
| Loss carry-forward denied | Capital/business losses cannot be carried forward |
| Interest u/s 234A | 1% per month on outstanding tax |
| Late fee u/s 234F | ₹5,000 (₹1,000 if income < ₹5L) |
| Old regime option lost | Cannot file Form 10-IEA after due date |
10 Common Mistakes NRIs Make
- Filing ITR-1 — NRIs cannot use Sahaj; results in defective return
- Not disclosing all income — AIS captures everything; omissions trigger notices
- Including NRE interest as taxable — Inflates income, unnecessary tax
- Claiming Section 87A rebate — Not available for NRIs; leads to demand notice
- Wrong residential status — Selecting "Resident" makes global income taxable
- Missing TDS credits — Leaving money with the government
- Not comparing regimes — Running both can save significant tax
- Ignoring DTAA benefits — Results in double taxation
- Not filing at all — "TDS already deducted" loses you the refund
- Filing late — Loses carry-forward and regime choice
Frequently Asked Questions
Is it mandatory for NRI to file ITR in India?
Yes, if gross total Indian income exceeds ₹4,00,000 (new regime) or ₹2,50,000 (old regime). Also necessary to claim TDS refunds, even if income is below the exemption.
Which ITR form should NRI use for AY 2026-27?
ITR-2 for most NRIs. ITR-3 if business income exists. Never ITR-1 — NRIs are explicitly excluded.
Is Section 87A rebate available to NRIs?
No. Section 87A is for resident individuals only. NRIs with income up to ₹7 lakh under new regime still pay tax.
Is NRE account interest taxable?
No. Exempt under Section 10(4)(ii) as long as NRI status is maintained. Do not include in taxable income.
What is the due date for NRI ITR filing AY 2026-27?
31 July 2026 for non-audit cases. Late filing results in penalties, interest, and loss of carry-forward benefits.
Can NRI file ITR online from abroad?
Yes. The entire process is online via incometax.gov.in. E-verify via Aadhaar OTP, net banking, DSC, or by posting signed ITR-V to CPC Bengaluru.
Is foreign salary taxable for NRI in India?
No. Salary for services rendered outside India is not taxable in India for non-residents.
How to compute capital gains on NRI property sale?
Sale consideration minus cost of acquisition. For LTCG (24+ months), choose between 20% with indexation or 12.5% flat rate (pre-July 2024 purchases). Buyer deducts TDS at 20% of sale price.
Can NRI claim DTAA benefits in ITR?
Yes. Obtain a Tax Residency Certificate (TRC) from your country of residence. File Form 67 if claiming Foreign Tax Credit. DTAA can reduce TDS rates on interest, dividends, and capital gains.
What are consequences of not filing ITR as NRI?
TDS refunds stay with the government (often ₹2-5 lakh for property sales). Department may issue notices based on AIS data showing unreported income. Capital losses cannot be carried forward.
Why NRIs Trust MKW Advisors
At MKW Advisors, we specialize exclusively in NRI taxation. Led by CA Mayank Wadhera (CA | CS | CMA | IBBI Registered Valuer), our team handles end-to-end filing:
- Complete AIS/26AS/TIS reconciliation
- Dual regime comparison (new vs old)
- Correct ITR form selection and filing
- DTAA benefit analysis
- TDS refund tracking and follow-up
- Capital gains computation with indexation
- Post-filing notice support
NRI ITR filing starts at just ₹2,000. Available through the Legal Suvidha platform with real-time tracking via DigiComply.
Start Your NRI Tax Filing
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Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws are subject to change. For personalized advice, consult a qualified Chartered Accountant. Last updated: March 2026.
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