The Income Tax Return (ITR) filing season is one of the busiest periods for taxpayers as well as tax professionals in India. Although the filing process officially begins on 1 April, the effective filing window is considerably shorter. This is because important tax records such as the Annual Information Statement (AIS), Taxpayer Information Summary (TIS), and Form 26AS are generally updated only by the middle of June, leaving a limited timeframe for accurate return preparation and filing before the due date.
For Non-Resident Indians (NRIs), filing an Income Tax Return involves much more than merely reporting taxable income. It requires careful evaluation of residential status, disclosure of exempt income, verification of TDS credits, reporting of overseas tax information, and compliance with various procedural requirements prescribed under the Income-tax Act.
Whether you are residing in the USA, UK, Canada, Australia, UAE, Singapore, Saudi Arabia, Qatar, Oman, or any other country, understanding your Indian tax obligations is essential for ensuring timely compliance and avoiding unnecessary notices or future complications.
This article highlights ten important points that every NRI should keep in mind while filing the Income Tax Return for Financial Year 2025–26 (Assessment Year 2026–27).
1. Income up to ₹12,00,000 Is Not Automatically Tax-Free for NRIs
One of the most common misconceptions among NRIs is that income up to ₹12,00,000 is exempt from tax in India.
The rebate benefit under the Income-tax Act, whereby eligible individuals may not be required to pay tax on income up to ₹12,00,000 (subject to applicable conditions), is available only to resident individuals. This benefit does not extend to Non-Resident Indians (NRIs). Accordingly, NRIs are taxed according to the normal income tax slab rates applicable to them.
NRIs should also remember that capital gains are generally taxed at special rates. Therefore, even where the amount of capital gain is below the basic exemption limit, it should still be reported correctly in the Income Tax Return, and tax must be computed in accordance with the applicable provisions.
2. Timely Filing Is Essential to Carry Forward Eligible Losses
If you have incurred eligible losses during the financial year or have losses brought forward from earlier years, filing your Income Tax Return within the prescribed due date becomes extremely important.
Eligible losses may include:
- Capital losses arising from shares or securities.
- Mutual fund losses.
- Losses from house property.
- Other losses that are permitted to be carried forward under the Income-tax Act.
Failure to file the Income Tax Return within the due date may result in the loss of the right to carry forward such losses for adjustment against future taxable income.
3. Consider Filing Your ITR Even if Your Income Is Below the Basic Exemption Limit
Many NRIs assume that an Income Tax Return is not required where their Indian income is below the basic exemption limit.
However, filing an ITR is often advisable where significant financial transactions have taken place in India.
Such transactions may include:
- Maintaining bank accounts in India.
- Carrying out regular financial transactions.
- Purchasing immovable property.
- Selling property situated in India.
- Receiving gifts.
- Receiving inheritance.
- Receiving sale proceeds from rural agricultural land.
Regular filing creates a proper tax record with the Income Tax Department, establishes the source of funds, and supports your declared residential status as an NRI.
4. Deduction of TDS Does Not Eliminate the Requirement to File an ITR
A common misconception among NRIs is that once Tax Deducted at Source (TDS) has been deducted, no further tax compliance is necessary.
This is incorrect.
If TDS has been deducted on income such as:
- Sale of property.
- Interest earned on NRO accounts.
- Rental income.
- Capital gains.
- Any other taxable income earned in India.
you should still file your Income Tax Return.
Filing the return enables you to:
- Report the correct taxable income.
- Compute your actual tax liability.
- Claim a refund where excess TDS has been deducted.
Verify That TDS Is Reflected in Form 26AS
Many NRIs encounter situations where the TDS deducted on the sale of property does not appear in Form 26AS.
One common reason is that although the buyer has deposited the TDS challan with the Government, the corresponding TDS return has not been filed.
It is important to understand that merely depositing the TDS amount is not sufficient. The buyer must also file the prescribed TDS return before the tax credit becomes available in Form 26AS.
If your TDS is not reflecting, you should immediately contact the buyer and request them to file the pending TDS return so that the credit becomes available for claiming in your Income Tax Return.
5. Maintain an Active NRO Bank Account and Update Your Banking Status
NRIs should ensure that they maintain an active Non-Resident Ordinary (NRO) bank account in India, as income tax refunds are generally credited only to a valid and pre-validated Indian bank account.
Equally important is ensuring that your banking status reflects your current residential status. Once an individual becomes an NRI, resident savings accounts should be converted into NRO accounts or closed, as applicable.
Similarly, investments held in India should also be updated to reflect the correct residential status. Keeping your banking and investment records updated helps ensure compliance with FEMA regulations and facilitates smooth tax processing.
6. Keep Your Income Tax Portal Profile Updated
Before filing your Income Tax Return, review your profile on the Income Tax Portal and ensure that all personal and financial details are accurate and up to date.
The following information should be verified:
- Mobile number
- Email ID
- Residential address
- Residential status
- Bank account details
- Other profile information
An updated profile enables seamless communication with the Income Tax Department and helps prevent delays in processing returns, issuing refunds, or responding to notices.
7. Accurately Report Your Country of Residence, Tax Identification Number, and Stay in India
NRIs are required to furnish certain additional information while filing their Income Tax Return.
This includes:
- Country of residence
- Tax Identification Number (such as SSN, SIN, TIN, UTR, NI, or the equivalent identification number applicable in the country of residence)
- Number of days stayed in India during the relevant financial year
Since the determination of residential status depends largely on the number of days spent in India, it is advisable to keep your travel history readily available before initiating the return filing process.
8. Report Exempt Income Appropriately in the Income Tax Return
Certain categories of income may be exempt from tax in India, subject to the applicable provisions of the Income-tax Act. Even though these receipts are not taxable, reporting them appropriately in the Income Tax Return is considered a good compliance practice.
Examples of exempt income may include:
- Interest earned on NRE accounts
- Interest earned on FCNR deposits
- Inherited money
- Gifts
- Sale proceeds of rural agricultural land
Proper disclosure provides transparency, helps explain the source of funds, and enables the Income Tax Department to better understand the nature of exempt receipts reported by the taxpayer.
9. Consider Using a Digital Signature Certificate (DSC) for Verification and Portal-Related Issues
Many NRIs encounter practical challenges while completing the online verification of their Income Tax Return, particularly where access to Indian mobile numbers or Aadhaar-based authentication is limited.
Common issues include:
- Inactive Indian mobile number
- Non-availability of Aadhaar OTP
- Login-related difficulties
- Problems while adding or validating bank accounts
- Issues updating profile information
In such circumstances, a Digital Signature Certificate (DSC) can be a practical alternative for verifying the Income Tax Return and completing various activities on the Income Tax Portal.
10. Regular ITR Filing Is Advisable If You Plan to Return to India or Invest in India
Regular filing of Income Tax Returns is advisable for NRIs who intend to maintain financial continuity in India, even where filing may not be mandatory in a particular year.
This becomes particularly relevant if you are:
- Planning to return to India in the future
- Purchasing property in India
- Making investments in India
- Undertaking significant financial transactions in India
Maintaining a consistent filing history helps establish proper tax records with the Income Tax Department and supports future financial and tax-related transactions.
Missed the Due Date? Consider Filing a Belated Return
If you are unable to file your Income Tax Return by the prescribed due date, you should not ignore your tax compliance responsibilities altogether.
For Financial Year 2025–26, a belated return may be filed up to 31 December 2026, subject to the applicable provisions of the Income-tax Act.
Although delayed filing may result in:
- Late filing fees
- Interest liability
- Other applicable consequences
it is often preferable to file a belated return rather than not filing the return at all.
An Income Tax Return is not merely a mechanism for paying taxes or claiming refunds. It also serves as an important record of your financial transactions, tax compliance, and income reporting. Timely or belated filing, as applicable, can help avoid future notices, maintain continuity in tax records, and support various financial transactions.
Conclusion
Filing an Income Tax Return in India is an important compliance requirement for NRIs with taxable income or reportable financial transactions in India. Apart from reporting taxable income accurately, NRIs should ensure proper disclosure of exempt income, verification of TDS credits, maintenance of updated residential and banking information, and compliance with the prescribed reporting requirements.
Understanding these important aspects can help minimise errors, avoid unnecessary notices, facilitate timely refunds, and ensure smooth tax compliance. Whether your income arises from property, investments, bank interest, capital gains, or other Indian sources, careful planning and timely filing can help you meet your tax obligations efficiently.
Ushma & Associates – Chartered Accountants
📞 Contact: +91-9910075924
Disclaimer
This article is for general informational purposes only and does not constitute professional advice. Income Tax Laws are subject to changes, and interpretations may vary.
Readers are advised to consult a qualified professional before making any decisions