Income Tax Filing for NRIs in India

Income tax filing time has started, and again, as an NRI, you worry about whether you are on the right path to file or ignore the ITR filing. Income Tax Filing for NRIs is not a complex topic, as the IT Department has cleared most things. Let us check and answer questions like:

When is ITR filing mandatory for NRI?

If an NRI does not have income in India, does he need to file an ITR in India?

If an NRI has filled IT returns in past years, is it mandatory to file it every year?

What key points NRI needs to check while filing ITR in India?

When is ITR filing mandatory for NRI in India?

Non-Resident Indians (NRIs) (& residents) are generally required to file an Income Tax Return (ITR) if their income in India exceeds specific thresholds—₹2.5 lakhs under the old tax regime and ₹3 lakhs under the new tax regime. Non-compliance may result in penalties, including potential imprisonment.

However, if an NRI has no income sourced from India, Income Tax Filing for NRIs is not mandatory.

We need to understand,

Which income is Taxable or Non-Taxable for NRIs in India?

Taxable Income in India

Income Earned and Accrued in India: Any income earned and accrued in India is taxable, regardless of whether it is received within the country or abroad.

For example:

• Dividends from Indian Companies: Any dividend declared by an Indian company.
• Rental Income from Property in India: Earnings from leasing out residential or commercial property situated in India.
• Capital Gains from Indian Investments: Profits arising from the sale of investments located in India.
• Income Earned Abroad but Received in India: Income earned outside India but received in an Indian bank account is also taxable. Examples include: Dividends from Foreign Companies: Dividends declared by a company outside India.
• Rental Income from Overseas Property: Earnings from renting out property situated outside India.
• Capital Gains from Foreign Investments: Profits from the sale of investments located abroad.

If these income combined exceeds the thresholds—₹2.5 lakhs under the old tax regime and ₹3 lakhs under the new tax regime, ITR filing is mandatory.

Tax authorities are free to interpret non-filing as an attempt to evade taxes. The penalties under Section 276CC of the Income Tax Act include imprisonment ranging from six months to seven years, along with monetary fines.

Non-Taxable Income in India

Income earned, accrued, and received entirely outside India is not subject to Indian taxation. This includes:

• Dividends from Foreign Companies: Dividends deposited in a foreign bank account.
• Rental Income from Overseas Property: Rental income kept in a foreign bank account.
• Capital Gains from Foreign Investments: Gains from the sale of foreign investments deposited outside India.

Can an NRI file ITR voluntarily? Are there any benefits of Income Tax Filing?

Yes, an NRI can file ITR even though his income does not exceed the threshold and he does not have any income in India.

Voluntary filing can be beneficial in cases such as claiming tax refunds for excess TDS, carrying forward capital losses, and providing documentation for visa or loan applications.

Other conditions – When Income Tax Filing for NRIs is required?

Certain financial activities may also necessitate filing an ITR, even if income is below the threshold. These include high-value deposits, significant TDS/TCS deductions (Above Rs 25000 in a year), property-related transactions, and substantial travel expenses using Indian accounts.

Why does filing ITR by NRIs matter? 

NRI taxation and financial planning are correlated. One should aim to stay compliant with new tax regulations while optimizing investments. Here are reasons it helps:

1. Income Threshold Awareness: If you have income in India exceeding ₹2.5-3 lakhs, filing ITR is mandatory. Staying within compliance ensures you avoid penalties and take advantage of tax efficiencies.
2. Refunds & Offsetting Losses: If you’ve been subjected to TDS on Indian assets, voluntary ITR filing allows you to claim refunds. Additionally, any capital losses from Indian investments can be carried forward, a strategy useful for long-term wealth management.
3. High-Value Transactions: Certain financial activities like large deposits, TDS deductions above ₹25,000, or significant travel expenses from Indian accounts may still require filing—even if you don’t meet the standard income threshold.
4. Account Compliance: Since you meticulously analyze financial regulations, this ensures that proper account management aligns with your compliance goals.

So, as per the discussion above, make a decision to file or not.

In case of doubt, it is best to consult a tax expert.