Last reviewed: 25 September 2026. Update: the 31 July 2026 (ITR-1/2) and 31 August 2026 (non-audit ITR-3/4) due dates have both passed — belated returns remain open until 31 December 2026 (fee under Section 234F and interest under Section 234A apply); audit cases file by 31 October 2026. Revised returns can be filed until 31 March 2027, with a fee for revisions made after 31 December 2026. Many NRIs assume they only file an Indian return when physically in India. In reality, filing depends on residential status, Indian income, TDS and refund position. This guide covers how residential status is decided, what income is taxable, which ITR form to use, how NRO interest and capital gains are taxed, TDS under Section 195, and how DTAA relief and refunds work for AY 2026-27.
At a glance
Step 1 - fix your residential status
Everything follows from residential status, which depends on days spent in India. You are generally non-resident if you were in India for less than 182 days in the year, subject to a secondary 60-day plus 365-day test in some situations. For an Indian citizen or person of Indian origin who visits India, the 60-day limb becomes 182 days (120 days where income other than from foreign sources exceeds Rs 15 lakh). Indian citizens with Indian income above Rs 15 lakh who are not liable to tax in any other country can be treated as deemed residents. Get this wrong and the whole return is wrong.
Step 2 - identify what is taxable in India
Only income that is received, accrues or arises in India is taxed for an NRI: Indian salary, rent from Indian property, capital gains on Indian shares, mutual funds and property, interest on NRO accounts and Indian dividends. NRE and FCNR deposit interest is generally exempt. Foreign salary and foreign investments are outside the Indian net for a non-resident.
Step 3 - TDS, NRO interest and Section 195
Payments to NRIs attract TDS, often under Section 195. NRO interest is typically deducted at around 30% plus surcharge and cess. Because TDS is frequently higher than the actual liability, filing a return to claim the refund is usually worthwhile. Where you expect the tax to be lower, you can apply for a lower or nil deduction certificate.
Capital gains rates for NRIs (AY 2026-27)
| Asset and holding period | Rate (plus surcharge and cess) |
|---|---|
| Listed equity shares and equity mutual funds held more than 12 months | 12.5% on gains above Rs 1.25 lakh (Section 112A) |
| Listed equity shares and equity mutual funds held 12 months or less | 20% (Section 111A) |
| Property, unlisted shares and other capital assets held long-term (generally more than 24 months) | 12.5% without indexation (Section 112) |
| Other short-term capital gains | Slab rates |
| Debt-oriented mutual funds bought on or after 1 April 2023 | Slab rates, whatever the holding period (Section 50AA) |
Step 4 - claim DTAA relief correctly
If the same income is taxed in India and your country of residence, the applicable DTAA can reduce the Indian tax. For AY 2026-27, to claim treaty rates under section 90, keep a valid Tax Residency Certificate and file Form 10F online (section 90(4)/(5)). From tax year 2026-27 the same relief sits in section 159 of the Income-tax Act, 2025: the TRC is required under section 159(8)(a), and Form 41, which replaces Form 10F and is prescribed by Rule 75 of the Income-tax Rules, 2026, under section 159(8)(b). See our Form 41 guide for the details. Form 67 (foreign tax credit) is relevant only if you are a resident claiming credit for tax paid abroad; a non-resident claiming treaty relief in India does not file it.
Watch-outs specific to NRIs
- The Section 87A rebate is not available to non-residents.
- The basic exemption cannot be set off against special-rate capital gains for NRIs.
- Reconcile every entry with Form 26AS and AIS - mismatches are the top cause of NRI notices.
Frequently asked questions
Who is treated as an NRI for income tax?
Residential status depends on days in India, not on your passport. Broadly, you are non-resident if you stay in India for less than 182 days in the year (with a 60-day plus 365-day secondary test in some cases). For an Indian citizen or person of Indian origin who visits India, the 60-day limb becomes 182 days (120 days where income other than from foreign sources exceeds Rs 15 lakh). Indian citizens with Indian income above Rs 15 lakh who are not taxed in any other country can be deemed residents.
Does an NRI have to file an ITR in India?
An NRI must file if they have taxable income in India above the basic exemption, or want to claim a refund of excess TDS, carry forward losses, or meet other conditions. Filing is often worthwhile even where TDS is deducted, because the actual tax may be lower.
Which ITR form does an NRI use?
Most NRIs use ITR-2 (no business income) or ITR-3 (with business or professional income). ITR-1 is not available to non-residents.
What income is taxable for an NRI in India?
Income that is received or accrues in India - Indian salary, rent from Indian property, capital gains on Indian assets, interest on NRO accounts and Indian dividends. NRE and FCNR interest is generally exempt.
How is NRO interest taxed?
Interest on an NRO account is taxable and typically suffers TDS at around 30% plus surcharge and cess. You report the gross interest and claim the TDS credit; a refund arises if your actual tax is lower.
What is TDS under Section 195?
Section 195 requires tax to be deducted on most payments to non-residents. Rates depend on the nature of income, and the NRI can apply for a lower or nil deduction certificate where the actual tax is less.
Can an NRI claim DTAA relief?
Yes. Where the same income is taxable in India and the country of residence, the Double Taxation Avoidance Agreement can reduce the Indian tax. For AY 2026-27, keep a Tax Residency Certificate and file Form 10F online to claim treaty rates under section 90. From tax year 2026-27 the relief sits in section 159 of the Income-tax Act, 2025: the TRC is required under section 159(8)(a), and Form 41 (which replaces Form 10F, under Rule 75 of the Income-tax Rules, 2026) under section 159(8)(b). Form 67 (foreign tax credit) is relevant only if you are a resident claiming credit for tax paid abroad.
Can NRIs claim the Section 87A rebate?
No. The Section 87A rebate is not available to non-residents, so the tax should be computed without it.
Are NRIs eligible for the basic exemption limit?
Yes, but the basic exemption cannot be adjusted against certain special-rate incomes (like short-term 111A or long-term 112A gains) for NRIs, which can change the maths.
How do NRIs get their refund?
File ITR-2 with an Indian bank account (usually NRO) for the refund. Reconcile all income and TDS against Form 26AS and AIS before filing to avoid mismatches and notices.
Do NRIs pay advance tax?
Yes, if the net tax after TDS exceeds Rs 10,000 in the year, advance tax is payable in instalments to avoid interest under Sections 234B and 234C.
What documents should an NRI keep ready?
Passport (days of stay), PAN, NRO/NRE bank statements, TDS certificates (Form 16A), capital gains statements, property documents, and TRC/Form 10F if claiming DTAA relief.
We fix residential status, reconcile AIS, compute capital gains and claim DTAA relief and refunds end to end.
Income Tax FilingNRI Lower TDS CertificateCA for NRIsTalk to CA Somesh Chandak & Associates - we handle NRI returns, TDS and DTAA relief.
WhatsAppLinkedInSchedule a callDisclaimer: This article is for general guidance only and is not a substitute for advice on your residential status, DTAA and the latest law. Please consult before filing.