NRI Tax Filing Guide India 2025-26: ITR, DTAA, FEMA & What NRIs Must Know

Who is an NRI? Determining residency status

Tax residency status in India is determined by the number of days spent in India under Section 6 of the Income Tax Act:

When must an NRI file ITR in India?

An NRI is required to file an Indian ITR if:

• Total India-source income exceeds ₹2.5 lakh (basic exemption limit) in the financial year
• There are capital gains from sale of Indian assets (any amount — even if within exemption)
• TDS was deducted and the NRI wants to claim a refund
• NRI has Indian rental income, dividends, interest from NRO accounts
• NRI sold immovable property in India
• NRI is a director in an Indian company
• NRI has foreign assets that need to be reported in Schedule FA

DTAA — How double taxation relief works

India has signed DTAA agreements with 90+ countries. DTAA prevents the same income from being taxed twice. Key mechanisms:

• Exemption method: income taxed only in one country (usually the country of source or residence)
• Tax credit method: tax paid in one country is credited against tax due in the other
• Most India DTAAs use the credit method for NRIs
• To claim DTAA benefit: NRI must obtain Tax Residency Certificate (TRC) from their country of residence and file Form 10F with the Indian tax authority
• DTAA rates for TDS are often lower than domestic TDS rates — NRIs should furnish TRC to payers

NRI bank accounts — NRE vs NRO

Understanding account types is critical for FEMA compliance:

• NRE (Non-Resident External): Holds foreign currency earnings converted to INR. Interest is completely exempt from Indian tax. Funds freely repatriable — no limits. Joint account possible with another NRI only.
• NRO (Non-Resident Ordinary): Holds India-source income (rent, dividends, pension). Interest is taxable at 30% (TDS deducted). Repatriation capped at USD 1 million per financial year after paying taxes. Joint account allowed with resident Indian.
• FCNR-B: Foreign currency deposit in India. No INR conversion risk. Interest may be exempt under DTAA.
• Key rule: Once you become NRI, all rupee accounts must be converted to NRO. Resident accounts cannot be maintained by NRIs.

NRI property sale — tax and repatriation

NRI property transactions have special rules:

• Buyer of NRI's property must deduct TDS at 20% (LTCG) or 30% (STCG) — much higher than resident's 1%
• NRI should apply for Lower Deduction Certificate (Form 13) from the Assessing Officer before sale to reduce TDS to actual capital gains tax
• After paying capital gains tax, NRI can repatriate sale proceeds through NRO account (up to USD 1M/year with CA-certified Form 15CA/CB)
• Section 54 LTCG exemption available to NRIs too — reinvest capital gains in another Indian residential property
• Properties ancestrally inherited have different FMV and holding period calculation rules