Non-Resident Individual Income Tax Return Filings for AY 2025-2026: A Complete Guide

Introduction: Understanding Your Tax Obligations as an NRI in India

Living abroad doesn’t automatically absolve you from tax responsibilities in India, especially if you continue to earn income from Indian sources. Filing an income tax return in India is a crucial compliance requirement for Non-Resident Individuals (NRIs) under specific conditions. This guide focuses specifically on the non-resident individual income tax return process for the Assessment Year (AY) 2025-2026, which corresponds to the Financial Year (FY) 2024-2025 (April 1, 2024, to March 31, 2025). Navigating the non-resident individual income tax return India regulations can seem complex, involving distinct rules regarding residential status, taxable income, applicable forms, and potential relief under Double Taxation Avoidance Agreements (DTAA). Understanding these nuances is vital, as accurate and timely filing helps you avoid penalties, interest, and potential legal complications with the Income Tax Department. This comprehensive guide aims to simplify the process, outlining everything you need to know about income tax return filing for non-residents for AY 2025-26.

Who Qualifies as a Non-Resident Individual (NRI) for Tax Purposes?

Determining your residential status is the foundational step in understanding your tax obligations in India. The Income Tax Act, 1961, lays down specific criteria, primarily based on your physical presence in India during the relevant financial year, to classify individuals for tax purposes. This status dictates the scope of income that will be taxed in India and is critical for correct tax filing.

Defining Residential Status under the Income Tax Act

Your residential status for AY 2025-26 depends on your stay in India during FY 2024-25 (April 1, 2024 – March 31, 2025). According to Section 6 of the Income Tax Act, you will be considered a Non-Resident Indian (NRI) if you do not meet either of the following basic conditions for residency:

You were in India for 182 days or more during the Financial Year (FY 2024-25).
You were in India for 60 days or more during the Financial Year (FY 2024-25) AND 365 days or more during the 4 preceding financial years (FY 2020-21 to FY 2023-24).

Note: The 60-day limit is extended to 182 days for Indian citizens leaving India for employment or as crew members of an Indian ship, and for Indian citizens or Persons of Indian Origin (PIO) visiting India. However, specific exceptions apply if total Indian income (excluding foreign sources) exceeds ₹15 lakh, potentially reducing the 182-day period to 120 days under certain conditions, leading to ‘Resident but Not Ordinarily Resident’ (RNOR) status.

Broadly, the statuses are:

Resident: Meets at least one of the basic conditions. Taxed on global income.
Non-Resident (NRI): Fails to meet both basic conditions. Taxed only on income earned or accrued in India.
Resident but Not Ordinarily Resident (RNOR): Meets basic conditions but satisfies additional criteria related to non-residency in previous years. Taxed on Indian income and specific foreign income linked to India.

It is crucial to meticulously calculate your days of stay in India for FY 2024-25. For official definitions and tools, refer to the Income Tax India Website.

Why Determining Correct Status is Crucial

The significance of correctly identifying your residential status cannot be overstated. It fundamentally impacts your tax liability in India. A Resident is taxed on their worldwide income, whereas an NRI is taxed only on income that is received, accrues, or arises, or is deemed to accrue or arise in India. An RNOR falls in between, taxed on Indian income and foreign income derived from a business controlled in or a profession set up in India. Misclassifying your status can lead to incorrect tax computation, underpayment of taxes, non-disclosure of required income (like global income for residents), and consequent penalties or scrutiny from the tax authorities. Therefore, accurately assessing your status as per the provisions of the Income Tax Act is the first and most critical step in the non-resident individual income tax return filing process.

Income Taxable in India for Non-Residents

Once you confirm your status as an NRI for AY 2025-26, the next step is to identify which income sources are taxable in India. Unlike residents who are taxed on global income, NRIs have a limited scope of taxation, focusing primarily on income with a connection to India.

Income Accrued or Arisen in India

This category includes income earned directly within the geographical boundaries of India. It represents income where the source is clearly located in India. Common examples include:

Salary Income: If you rendered services while physically present in India, the salary received for that period is taxable in India, regardless of where the salary was paid. Even if the salary is credited to an overseas bank account, the portion attributable to services performed in India is taxable.
Rental Income: Income generated from letting out a house property (residential or commercial) situated in India is taxable for NRIs.
Capital Gains: Profits arising from the sale or transfer of capital assets (like real estate, shares of Indian companies, Indian mutual funds, debentures) located in India are subject to capital gains tax in India. The tax rate depends on the type of asset and the holding period (short-term vs. long-term).
Interest Income: Interest earned on deposits held in Non-Resident Ordinary (NRO) savings accounts or fixed deposits with Indian banks is taxable in India after relevant TDS deductions.
Business/Profession Income: Income generated from a business controlled from India or a profession set up within India is taxable.

Income Deemed to Accrue or Arise in India

Certain types of income, even if generated or received outside India, are considered “deemed” to accrue or arise in India under Section 9 of the Income Tax Act and are therefore taxable for NRIs. These situations often involve an indirect connection to India:

Income through a Business Connection in India: Profits reasonably attributable to operations carried out through a business connection in India.
Income through any Property, Asset or Source of Income in India: Like income derived directly or indirectly through an asset located in India.
Income through the Transfer of a Capital Asset Situated in India: Reinforces the taxation of capital gains on Indian assets.
Salary Earned for Services Rendered in India: As mentioned earlier, this is often deemed to accrue where services are performed.
Salary Payable by the Government to an Indian Citizen for Service Outside India: This is taxable irrespective of the place of service.
Dividend paid by an Indian Company: Dividends received from Indian companies are generally taxable in the hands of the shareholder, including NRIs, subject to applicable tax rates and DTAA provisions.
Interest, Royalty, or Fees for Technical Services (FTS): Income received from the Government or an Indian resident (or even a non-resident in certain circumstances if used for business in India) under these heads is typically deemed to accrue in India, subject to DTAA benefits.

Income NOT Taxable in India for NRIs

The defining principle for NRI taxation is the source rule. Consequently, any income that is earned outside India from a source located outside India is generally not taxable for an NRI in India. For instance, salary earned for services rendered entirely outside India to a foreign employer, rental income from a property located abroad, or capital gains from selling assets situated outside India would not be taxed in India for an NRI. A significant exemption often relevant to NRIs is the interest earned on Non-Resident External (NRE) accounts. Under Section 10(4)(ii) of the Income Tax Act, interest credited to NRE savings or fixed deposit accounts maintained in India is exempt from Indian income tax, provided the individual qualifies as a ‘person resident outside India’ under the Foreign Exchange Management Act (FEMA).

Key Aspects of Non-Resident Individual Income Tax Return Filing for AY 2025-2026

Filing the non-resident individual income tax return involves understanding several key components specific to NRIs, from choosing the right form to leveraging tax treaties and meeting deadlines. Being aware of these aspects ensures compliance and potentially minimizes tax liability.

Applicable ITR Forms for NRIs

Selecting the correct Income Tax Return (ITR) form is crucial. For NRIs, the applicable forms primarily depend on their sources of income in India for AY 2025-26:

ITR-2: This form is generally used by individuals and Hindu Undivided Families (HUFs) who do not have income from profits and gains of business or profession. It is suitable for NRIs whose income includes:
- Salary or Pension income
- Income from House Property (one or multiple properties)
- Income from Capital Gains (short-term and long-term)
- Income from Other Sources (including interest income from NRO accounts, dividends from Indian companies, etc.)
- Agricultural income exceeding ₹5,000.
ITR-3: This form is applicable for individuals and HUFs who do have income under the head “Profits or gains of business or profession”. If an NRI has income from a proprietary business or profession carried out in India, they must use ITR-3, even if they also have income from sources covered under ITR-2.

Choosing the wrong form can lead to the return being considered defective or invalid. NRIs must carefully assess their Indian income sources before selecting the appropriate ITR form.

Understanding AY 2025-2026 Income Tax Guidelines for NRIs

Navigating the AY 2025-2026 income tax guidelines requires attention to several areas:

Tax Slabs and Rates: For AY 2025-26 (FY 2024-25), NRIs are generally subject to the same income tax slabs and rates as resident individuals below 60 years under the old tax regime. The applicability of the new tax regime (Section 115BAC) for NRIs should be checked based on the final rules notified for AY 2025-26, as specific conditions might apply. Certain incomes, like specific long-term capital gains (LTCG) and short-term capital gains (STCG), are taxed at special rates (e.g., LTCG on listed equity shares under Sec 112A at 10%, other LTCG often at 20% with indexation for NRIs, STCG on listed equity under Sec 111A at 15%). Note: Tax laws are subject to change. Always refer to the official guidelines applicable for AY 2025-26.
TDS Applicability: Tax Deduction at Source (TDS) is a significant aspect for NRIs. Payers making certain payments to NRIs are obligated to deduct tax under Section 195 at prescribed rates (often higher rates apply to NRIs, subject to DTAA relief). Common instances include:
- Sale of Immovable Property: TDS applicable on the sale consideration.
- Rent Payments: TDS deducted by the tenant.
- Interest on NRO Deposits: Banks deduct TDS.
- Dividends, Professional Fees, etc.
NRIs must ensure they claim credit for this TDS deducted against their final tax liability when filing their ITR.
Form 26AS and AIS/TIS: These are crucial documents available on the Income Tax portal. Form 26AS is an annual tax statement summarizing TDS deducted/collected, advance tax paid, etc. The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) provide a comprehensive view of financial transactions reported by various entities. NRIs must reconcile their income details with these statements before filing to ensure accuracy and avoid discrepancies.

Double Taxation Avoidance Agreements (DTAA)

India has comprehensive DTAAs with numerous countries worldwide. The primary purpose of a DTAA is to prevent the same income from being taxed in both the country of residence and the country of source (India, in this case). NRIs residing in countries with which India has a DTAA can potentially claim relief from double taxation. This relief can take the form of:

Exemption: Income taxed in one country may be exempt in the other.
Credit: Tax paid in one country may be allowed as a credit against the tax payable on the same income in the other country.
Reduced Rates: DTAAs often prescribe lower TDS rates on certain incomes like interest, dividends, royalties, and fees for technical services compared to the rates under the Indian Income Tax Act.

To claim DTAA benefits in India, an NRI must provide:

A Tax Residency Certificate (TRC) obtained from the tax authorities of their country of residence.
Form 10F: A self-declaration filed electronically on the Indian Income Tax portal providing specific information required under Section 90/90A.

Actionable: NRIs should check the specific provisions of the DTAA between India and their country of residence. You can find details on the Income Tax Department’s DTAA section online (https://www.incometax.gov.in/ -> International Taxation -> Tax Treaties).

Filing Deadlines for AY 2025-2026

Meeting the filing deadline is critical to avoid penalties and interest. For individual taxpayers (including NRIs) whose accounts are not required to be audited, the due date for filing the income tax return for AY 2025-26 (FY 2024-25) is typically July 31, 2025. Further details on due dates can be found in our resource on Tax Filing Deadlines in India: A 2025 Calendar Overview.

However, if an NRI’s income includes profits from a business or profession requiring a tax audit, the deadline is usually later (often October 31st). It’s essential to monitor official announcements from the Central Board of Direct Taxes (CBDT) or the Income Tax Department, as deadlines can sometimes be extended. Filing after the due date attracts late filing fees under Section 234F and interest under Sections 234A, B, and C on any unpaid tax liability.

Step-by-Step Non-Resident Income Tax Filing Procedure India

Filing your non-resident individual income tax return involves a systematic process. Following these steps ensures you cover all necessary requirements for the non-resident income tax filing procedure India.

Prerequisite: PAN Card

A Permanent Account Number (PAN) is mandatory for any individual, including NRIs, who earns taxable income in India or undertakes specified financial transactions. If you have taxable income in India but do not have a PAN, you must apply for one before you can file your ITR. PAN serves as a unique identifier for tax purposes and is required for almost all financial transactions and tax-related communication in India. Ensure your PAN details are active and correctly linked where necessary (e.g., bank accounts).

Gather Necessary Documents: Income Tax Return Requirements for Non-Residents

Before starting the filing process, gather all relevant documents. Having these readily available streamlines the process and ensures accuracy. Key income tax return requirements for non-residents include:

Bank Account Statements: Statements for all Indian bank accounts, especially NRO accounts (to report taxable interest) and NRE accounts (details required for reporting even if interest is exempt).
TDS Certificates: Form 16A (for TDS on income other than salary, like NRO interest, rent), Form 27D (for Tax Collected at Source, if applicable), and any other relevant TDS certificates issued by deductors.
Form 26AS / AIS / TIS: Download the latest versions from the Income Tax e-filing portal to verify TDS credits and reported income/transactions.
Capital Gains Statements: Detailed statements from brokers (for shares/mutual funds) or sale deeds/agreements (for property) showing purchase and sale details, costs, and calculation of capital gains. For more on this, check our Understanding Capital Gains Tax in India.
Proof of Income Earned/Accrued in India: Rent receipts or agreements (for rental income), salary slips or Form 16 (if applicable for services rendered in India).
Details of Foreign Bank Accounts: While global income reporting is primarily for Residents/RNORs, the ITR forms require NRIs to report details of foreign bank accounts held. Ensure you have account numbers, bank names, and locations.
DTAA Relief Documentation: If claiming benefits under a DTAA, keep your Tax Residency Certificate (TRC) from your country of residence and ensure Form 10F is filed electronically.

Choosing and Filling the Correct ITR Form

As discussed earlier, select the correct ITR form (ITR-2 or ITR-3) based strictly on your sources of income in India during FY 2024-25. Download the appropriate utility (Excel or Java) or use the online filing option available on the portal. When filling the form:

Ensure personal details (Name, PAN, Address, Contact details, Residential Status – Select ‘Non-Resident’) are accurate.
Report all taxable income earned or accrued in India meticulously under the correct heads (Salary, House Property, Capital Gains, Other Sources, Business/Profession if ITR-3).
Report income exempt from tax (like NRE interest) in the relevant schedules for disclosure purposes.
Provide mandatory details of all Indian bank accounts and foreign bank accounts held.
Fill in the schedules for TDS, TCS, Advance Tax paid, and Self-Assessment Tax paid.
If claiming DTAA relief, fill the specific schedule (Schedule FSI and Schedule TR) providing details of the DTAA article, country, TRC, and income for which relief is claimed. Ensure Form 10F is filed.

Filing the Return Online

The most common and convenient method for filing is electronically through the official Income Tax e-filing portal: https://www.incometax.gov.in/. The basic steps are:

Register/Login: If you are a first-time user, register using your PAN. Otherwise, log in using your PAN (User ID) and password.
Navigate to e-File: Go to the ‘e-File’ menu -> ‘Income Tax Returns’ -> ‘File Income Tax Return’.
Select Assessment Year: Choose AY 2025-26.
Select Mode of Filing: Choose ‘Online’ (preferred for ITR-1 & 4, available for 2 & 3) or ‘Offline’ (download utility, fill, generate JSON, upload).
Select Status: Choose ‘Individual’ and confirm your residential status as ‘Non-Resident’.
Choose ITR Form: Select ITR-2 or ITR-3 based on your income profile.
Fill the Details: Complete all applicable sections and schedules of the ITR form, validating information as you proceed. The online form often pre-fills some data from your profile and AIS. Verify this data carefully.
Calculate Tax Liability: The form/utility will compute your tax liability or refund based on the entered data.

Tax Payment (if applicable)

After calculating your total tax liability and deducting TDS, TCS, and any advance tax paid, if there is still tax due (Self-Assessment Tax), you must pay it before submitting your return. Payment can be made online through the e-Pay Tax service on the Income Tax portal using net banking or credit/debit cards via authorized payment gateways. Generate the challan (CRN) for the payment and ensure the details (BSR code, date, challan number, amount) are entered correctly in the ITR form before final submission.

Verification of ITR

Filing the ITR is not complete until it is verified. This is a crucial final step in the non-resident income tax filing procedure India. Verification confirms the authenticity of the return filed. NRIs have several options for e-verification:

Using EVC (Electronic Verification Code) generated through:
- Net Banking: Log in to your net banking account linked with PAN and access the e-verify option.
- Bank Account: Pre-validate your Indian bank account on the portal and generate EVC.
- Demat Account: Pre-validate your Demat account on the portal and generate EVC.
Using Digital Signature Certificate (DSC): If you have a valid DSC registered on the e-filing portal, you can use it to digitally sign and verify the return instantly. This is often used by those filing ITR-3.
Sending Signed ITR-V Physically: If e-verification options are not feasible, you can download the ITR-V (Acknowledgement) generated after submitting the return, print it, sign it in blue ink, and send it via ordinary post or speed post only (not courier) to:

Centralised Processing Centre (CPC),
Income Tax Department,
Bengaluru – 560500, Karnataka, India.

The ITR-V must reach CPC within 30 days of uploading the return. E-verification is generally faster and recommended. Failure to verify within the stipulated time will render the return invalid.

Common Mistakes to Avoid During NRI Tax Filing

Filing taxes as an NRI can be prone to errors due to the specific rules involved. Avoiding these common pitfalls can save you time, money, and potential hassles with the tax department. To learn more about preventing these errors, refer to Common Mistakes in Income Tax Returns and How to Avoid Them:

Incorrect Determination of Residential Status: As emphasized earlier, misjudging your stay duration or applying the rules incorrectly can lead to filing under the wrong status, significantly impacting your tax liability and reporting requirements. Always calculate days meticulously for the relevant FY.
Not Reporting All Taxable Income Sources in India: NRIs sometimes overlook reporting certain incomes like interest earned on NRO accounts, small capital gains from Indian investments (shares, mutual funds), or deemed income. All income taxable in India must be declared, irrespective of the amount.
Errors in Claiming DTAA Relief: Claiming DTAA benefits without a valid TRC from the country of residence or without electronically filing Form 10F can lead to the denial of relief and application of higher tax rates/TDS as per the Indian Income Tax Act. Ensure all documentation and procedural requirements are met.
Choosing the Wrong ITR Form: Filing ITR-2 when you have business income (requiring ITR-3) or vice-versa will result in a defective return. Carefully match your income sources to the descriptions of the ITR forms.
Failing to Report Foreign Assets/Bank Accounts: While the primary impact of foreign asset reporting (Schedule FA) is on Residents and RNORs (who have to report global assets), ITR forms require even NRIs to report details of foreign bank accounts held during the year. Ensure this mandatory disclosure is made.
Missing the Filing or Verification Deadline: Filing the return after the due date (typically July 31st for non-audit cases) attracts late filing fees (Section 234F). More critically, failing to verify the filed return within 30 days (via e-verification or sending ITR-V) makes the return invalid, as if it was never filed.

Conclusion: Ensuring Compliance with Your Non-Resident Individual Income Tax Return

Successfully navigating the non-resident individual income tax return filing for AY 2025-2026 hinges on a clear understanding of your obligations. The key takeaways involve accurately determining your residential status for FY 2024-25, meticulously identifying all income taxable in India (earned, accrued, or deemed to accrue), correctly applying the non-resident income tax filing procedure India, utilizing DTAA benefits appropriately with proper documentation (TRC and Form 10F), and strictly adhering to the filing and verification deadlines. Accurate filing not only ensures compliance with Indian tax laws but also prevents potential penalties, interest, and scrutiny. Given the specific nuances involved, careful planning and execution are essential.

The process of non-resident individual income tax return filing might seem daunting, especially with varying income sources and international implications. If you’re facing challenges with income tax return filing for non-residents or need clarity on specific aspects like DTAA, capital gains computation, or choosing the right ITR form, professional assistance can be invaluable. TaxRobo offers expert services tailored for NRIs, ensuring your return is filed accurately, efficiently, and in full compliance with the latest regulations. Contact us today for personalized support and peace of mind (TaxRobo Income Tax Service).

Frequently Asked Questions (FAQs)

Q1: Do NRIs need to file an ITR in India if their total Indian income is below the basic exemption limit?

Answer: Filing an ITR is mandatory for an NRI if their total gross income (before claiming deductions under Chapter VI-A like 80C, 80D etc.) from Indian sources exceeds the basic exemption limit applicable for the financial year (e.g., ₹2.5 lakh or ₹3 lakh depending on the regime and final rules for AY 2025-26). However, even if income is below this limit, it is highly advisable, and sometimes required, to file if:

Tax has been deducted at source (TDS) in India, and you wish to claim a refund.
You need to carry forward losses (e.g., capital loss, house property loss) to set off against future income.
You hold certain foreign assets (though primarily applicable to R/RNOR, check form requirements).
You need proof of income filing for loan applications or visa purposes.

Filing a ‘Nil Return’ or a return declaring income below the threshold maintains a record with the tax department.

Q2: Can NRIs claim deductions like Section 80C (LIC, PPF, ELSS etc.)?

Answer: Yes, NRIs are eligible to claim several deductions under Chapter VI-A against their gross total income taxable in India, similar to resident individuals. Popular deductions include:

Section 80C: Investments in specified instruments like Life Insurance premiums (for self/spouse/children), Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), NSC, repayment of housing loan principal, etc., up to a limit of ₹1.5 lakh. (Note: NRIs cannot open new PPF accounts but can contribute to existing ones).
Section 80D: Premiums paid for health insurance for self, spouse, dependent children, and parents (residing in India), subject to specified limits.
Section 80TTA: Deduction on interest earned on NRO savings bank accounts up to ₹10,000. (Not applicable to NRE accounts as interest is already exempt).
Section 80G: Donations to eligible Indian charities/funds.

NRIs should ensure they make eligible investments/payments from appropriate sources and maintain proof.

Q3: What are the consequences of not filing the non-resident individual income tax return on time?

Answer: Failure to file the non-resident individual income tax return by the due date (e.g., July 31, 2025, for non-audit cases for AY 2025-26) can lead to several adverse consequences:

Late Filing Fee: A penalty under Section 234F is levied, which can be up to ₹5,000 (reduced to ₹1,000 if total income is below ₹5 lakh).
Interest Liability: Interest under Section 234A is charged on the unpaid tax amount for the period of delay. Interest under Sections 234B (delay in payment of advance tax) and 234C (deferment of advance tax installments) may also apply.
Loss of Ability to Carry Forward Losses: Certain losses (like capital losses, business losses excluding depreciation) cannot be carried forward to subsequent years if the return is filed after the original due date.
Delayed Refunds: If you are due a refund, it will be delayed, and interest on the refund might be reduced.
Potential Scrutiny: Increases the chances of your case being selected for scrutiny by the Income Tax Department.

Q4: How is income from NRE accounts treated for tax purposes?

Answer: Interest earned on funds held in Non-Resident External (NRE) accounts, whether savings accounts or fixed deposits (FDs), is tax-exempt in India. This exemption is granted under Section 10(4)(ii) of the Income Tax Act, 1961. This makes NRE accounts an attractive option for NRIs to park their foreign earnings remitted to India. However, it’s important to distinguish this from Non-Resident Ordinary (NRO) accounts. Interest earned on NRO accounts (funded by Indian income or domestic funds) is fully taxable in India at applicable slab rates, and banks are required to deduct TDS on this NRO interest.

Q5: Is linking Aadhaar with PAN mandatory for NRIs?

Answer: According to current provisions (as of early 2024), Aadhaar-PAN linking is mandatory for individuals who are eligible to obtain an Aadhaar number. The requirement primarily targets residents of India. NRIs, as per the definition under the Aadhaar Act, are generally not required to obtain Aadhaar. Therefore, an NRI who does not have an Aadhaar number is typically exempt from the mandatory PAN-Aadhaar linking requirement. However, if an NRI does possess an Aadhaar number (perhaps obtained when they were a resident), then linking it with PAN is usually required or at least advisable to avoid potential PAN inactivity issues. NRIs should check the latest circulars and guidelines on the Income Tax India Website regarding this, as rules can evolve. If exempt, they might need to update their status/jurisdiction on the Income Tax portal.

Non-Resident Individual Income Tax Return Filings for AY 2025-2026