NRIs Filing Indian ITR: How to Report NRE/NRO Interest & Global Income
- Rashmita Choudhary
- Sep 15
- 10 min read
Non-Resident Indians (NRIs) often face complexities when filing income tax returns in India due to cross-border income, TDS provisions, and different reporting requirements. Proper understanding of Indian tax laws, applicable deductions, and exemptions is crucial to avoid penalties and ensure timely compliance. With increasing digitalisation and updated Income Tax Return (ITR) utilities, NRIs now have access to tools and platforms that simplify filing while ensuring accuracy. Let's explain NRI taxation rules, filing requirements, and practical tips for smooth ITR submission.
Table of Contents
Who Qualifies as an NRI for Indian Tax Purposes?
An individual is considered an NRI if they do not meet the residential criteria under the Income Tax Act. Specifically, an individual is non-resident if they spend less than 182 days in India during a financial year, or less than 60 days in India in the year and less than 365 days over the preceding four years. NRIs are taxed differently than residents, especially regarding income earned in India versus abroad.
Taxability of NRE & NRO Interest Income
Interest earned on NRE (Non-Resident External) accounts is fully tax-free in India, while interest on NRO (Non-Resident Ordinary) accounts is taxable at the applicable slab rates. TDS is deducted at 30% on NRO interest unless reduced by a Double Taxation Avoidance Agreement (DTAA) treaty. Correct reporting of these incomes ensures compliance and prevents unnecessary penalties.
Is Global Income Taxable for NRIs in India?
NRIs are generally liable to pay tax only on income earned or accrued in India. Income earned outside India, including salaries, investments, and business profits, is not taxable for NRIs in India. However, it is essential to correctly report Indian-sourced income and maintain proper documentation for audit or verification purposes.
When Must NRIs File an Indian ITR?
NRIs must file ITR if their total taxable income in India exceeds the basic exemption limit (₹2.5 lakh for FY 2024–25) or if they wish to claim a refund of TDS deducted on NRO income. Filing is also mandatory for NRIs involved in capital gains, property transactions, or business activities in India.
Reporting NRE/NRO Interest and Global Income in ITR
NRE interest is exempt from tax and must be reported in the ITR for accurate disclosure. NRO interest and other taxable Indian incomes must be reported under the appropriate ITR schedule. NRIs do not need to report foreign income, but proper documentation is crucial if claiming exemptions or tax treaty benefits.
How to Claim TDS Refunds on NRO Interest
Non-Resident Indians (NRIs) often earn interest on their Non-Resident Ordinary (NRO) accounts in India. Banks typically deduct Tax Deducted at Source (TDS) at the rate of 30% on such interest income. However, in many cases, the TDS deducted may exceed the actual tax liability of the NRI due to exemptions, deductions, or lower tax rates under the Income Tax Act.
To claim a refund of excess TDS, NRIs must file their Income Tax Return (ITR) for the relevant financial year. It is crucial to provide accurate information on all NRO interest earned during the year, along with corresponding TDS certificates issued by banks (Form 16A) and supporting bank statements. The Income Tax Department cross-verifies the TDS claimed with the return filed, reconciles the records, and calculates the excess amount. Once verified, the refund is processed and credited directly to the NRI’s bank account. Filing early ensures quicker processing and avoids delays caused by mismatches or missing documentation.
Utilizing DTAA Benefits for Reduced Tax Deduction
NRIs can benefit from the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence. DTAA is a treaty designed to ensure that income is not taxed twice in two countries. For example, if an NRI earns interest from an NRO account or rental income in India, DTAA provisions may reduce the TDS rate or exempt certain incomes, depending on the treaty with the country of residence.
To claim DTAA benefits, NRIs must submit a valid Tax Residency Certificate (TRC) issued by their resident country, along with the ITR and TDS certificate. The TRC serves as proof of residency and eligibility for lower tax rates. By providing these documents, the tax authorities in India can adjust the TDS and allow the NRI to pay tax at the reduced DTAA rate. Proper documentation ensures compliance and avoids notices or discrepancies later.
Choosing the Correct ITR Form as an NRI
Selecting the correct ITR form is critical for smooth filing and timely processing of returns. For most NRIs:
Filing the correct form ensures that all income types are accurately reported and reduces the chances of receiving notices or errors from the Income Tax Department. Using the wrong form can lead to rejections, delays in refunds, or penalties, so careful selection based on the nature of income is essential.
Other Key Indian Income Sources for NRIs
Besides the interest earned on NRO (Non-Resident Ordinary) accounts, NRIs may have multiple streams of income arising from India, all of which must be accurately reported in their Income Tax Return (ITR). Proper reporting ensures compliance with Indian tax laws, prevents penalties, and allows the taxpayer to benefit from any applicable exemptions or deductions. The primary sources include:
1. Rental Income Income from property rented out in India is fully taxable in the hands of NRIs. The gross rent received must be declared in the ITR. NRIs can claim deductions for municipal taxes actually paid during the financial year. Additionally, a standard deduction of 30% of the net annual value is allowed for maintenance and repairs, irrespective of actual expenditure. Proper accounting of rental income is critical, especially if multiple properties are owned, as failure to report may attract scrutiny or notices from the Income Tax Department.
2. Capital Gains Profits arising from the sale of assets such as property, equity shares, or mutual funds in India are classified as short-term or long-term capital gains depending on the holding period and type of asset. For instance, selling equity shares listed on a recognised stock exchange within 12 months constitutes short-term capital gains, while holding them for more than a year qualifies as long-term. Long-term capital gains above ₹1 lakh on listed securities are taxed at 10% without indexation, while other assets like property follow 20% with indexation. NRIs must correctly report these gains, along with deductions under Sections like 54 or 54F, if applicable.
3. Dividend Income Dividends received from Indian companies are taxable in the hands of NRIs at a flat rate of 20% plus applicable surcharge and cess under Section 115A of the Income Tax Act. However, tax treaties under the Double Taxation Avoidance Agreement (DTAA) may reduce the rate of tax on dividends depending on the country of residence of the NRI. Accurate reporting of dividend income is essential to claim treaty benefits and avoid excess withholding.
4. Pension Income Pension received from Indian employers, including government and private entities, is considered taxable income. NRIs must include this pension income in their ITR. Certain exemptions may apply depending on the source of pension or international tax treaties, but the default rule is that it is fully taxable under the Indian Income Tax Act.
Practical Tips for Smooth NRI ITR Filing
Maintain accurate records of all Indian income, TDS certificates, and bank statements. Reconcile the NRO account TDS with the ITR schedules. Use online platforms or tax professionals specialising in NRI taxation. Double-check form selection, TDS claims, and DTAA applications before submission to avoid errors.
Common Mistakes NRIs Make While Filing ITR
Non-Resident Indians (NRIs) often face unique challenges when filing their Income Tax Returns (ITR) due to the complexity of income sources, tax treaties, and regulatory requirements. One of the most common mistakes NRIs make is reporting foreign income unnecessarily. While NRIs are generally taxed only on income earned or received in India, some taxpayers mistakenly report income earned abroad, leading to unnecessary complications or even incorrect tax calculations.
Another frequent error is misreporting interest earned on Non-Resident Ordinary (NRO) accounts. Interest on NRO accounts is taxable in India, but confusion often arises regarding the applicable TDS and exemptions, resulting in either over-reporting or under-reporting.
Incorrect ITR form selection is another area where mistakes occur. NRIs must carefully choose the correct ITR form based on their income sources and status. Filing the wrong form can trigger notices from the Income Tax Department and require rectifications.
Lastly, many NRIs fail to claim benefits under Double Taxation Avoidance Agreements (DTAA). DTAA provisions can reduce tax liability on income taxed both in India and abroad, but missing this opportunity results in paying more tax than necessary.
These errors not only delay refunds but can also attract penalties, interest, or additional scrutiny, making it crucial for NRIs to stay informed and file accurately.
Digital Tools & Platforms for NRI ITR Filing
Filing Income Tax Returns (ITR) as a Non-Resident Indian (NRI) can be a complex process due to multiple sources of income, foreign tax implications, and TDS (Tax Deducted at Source) reconciliation requirements. Fortunately, digital tools and platforms have transformed this process, making it easier, faster, and more accurate. Modern AI-driven platforms now offer automated workflows that guide NRIs step by step through the tax filing process. These tools simplify calculations, help accurately report income from salary, rent, capital gains, or foreign sources, and ensure compliance with all relevant Indian tax regulations.
One major advantage of these platforms is automated TDS reconciliation. NRIs often face mismatches between the TDS deducted and the credit reflected in their Form 26AS. Advanced platforms automatically verify TDS data, alert users to discrepancies, and provide suggestions to resolve them, minimising errors that could lead to penalties or delayed refunds.
Platforms like TaxBuddy go a step further by offering both self-filing and expert-assisted plans. NRIs can choose to file independently with AI-driven guidance or seek professional assistance to handle complex cases. These platforms also allow users to track refunds in real time, receive instant notifications on notices or discrepancies, and maintain a digital record of their filings for future reference. Overall, AI-powered platforms provide NRIs with an efficient, secure, and hassle-free tax filing experience, reducing stress and ensuring timely compliance.
Conclusion
Filing ITR as an NRI requires careful attention to Indian-sourced income, TDS credits, and applicable exemptions under DTAA. Utilising digital tools and expert guidance ensures accurate filing, minimises errors, and speeds up refund processing. For anyone looking for assistance in NRI tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for NRI ITR filing? Yes, TaxBuddy provides flexible options for NRIs. You can choose a self-filing plan if you are comfortable uploading documents and filing your return online. For those who prefer professional support, expert-assisted plans are available, where a tax expert reviews your income, TDS, and deductions to ensure accurate filing. This ensures compliance with Indian tax laws while saving time.
Q2. Which is the best site to file NRI ITR? TaxBuddy is one of the most reliable platforms for NRIs. It offers AI-driven tax filing, seamless TDS reconciliation, and a user-friendly interface designed specifically for NRIs. Unlike standard portals, TaxBuddy automatically integrates NRO/NRE income and foreign remittances for accurate filing, reducing the risk of errors and delays.
Q3. Where to file an income tax return for NRIs? NRIs can file their ITR online through the Income Tax Department portal using the e-filing system. Alternatively, platforms like TaxBuddy provide a simplified process with guided steps, automated TDS reconciliation, and options for expert assistance.
Q4. Is NRE interest taxable in India? No, interest earned on NRE accounts is fully tax-free in India. This applies to both principal and interest amounts in accounts maintained in Indian banks for NRIs. Proper reporting ensures that your ITR reflects this exemption correctly.
Q5. Is NRO interest taxable? Yes, interest earned on NRO accounts is taxable at the applicable income tax slab rates. Banks usually deduct TDS at 30% (plus cess) for NRO interest. NRIs must report this income in their ITR and can claim credit for TDS deducted to avoid double taxation.
Q6. Can NRIs claim a refund on excess TDS? Yes, NRIs can claim a refund if TDS deducted on NRO income exceeds the actual tax liability. By filing an accurate ITR with details of NRO interest, TDS, and other income, the Income Tax Department processes the refund, which can be credited to your Indian bank account.
Q7. Are NRIs required to report foreign income? No, foreign income is not taxable in India for NRIs, except in specific situations where residential status changes. Only Indian-sourced income, such as rental income or NRO/NRE interest, is taxable. Correct reporting avoids penalties or notices.
Q8. What documents are needed to claim DTAA benefits? To claim Double Taxation Avoidance Agreement (DTAA) benefits, NRIs need a Tax Residency Certificate (TRC) issued by the country of residence. Additionally, the relevant treaty forms or self-declaration may be required by the Indian bank or tax authorities to reduce TDS under DTAA provisions.
Q9. Which ITR form is usually suitable for NRIs? The most common form for NRIs is ITR-2, used for individuals with income from salary, NRO/NRE accounts, and capital gains. If an NRI has business or professional income, ITR-3 may be applicable. Choosing the correct form ensures smooth processing and avoids notices.
Q10. What happens if an NRI files the wrong ITR form? Filing an incorrect form can delay processing, block refunds, or trigger notices from the Income Tax Department. If you realise a mistake, you can file a revised return within the prescribed deadline to correct the form and details.
Q11. How can NRIs track their refunds? Refunds can be tracked through the Income Tax Department e-filing portal using your PAN and assessment year. TaxBuddy also provides real-time updates on refund status and alerts, helping NRIs monitor the refund process efficiently without logging into multiple portals.
Q12. Does TaxBuddy support claiming TDS refunds for NRIs? Yes, TaxBuddy reconciles TDS deducted on NRO accounts, NRE accounts, and other Indian income sources. It helps NRIs claim refunds accurately, ensures all deductions are accounted for, and files ITR using AI-driven automation to minimise errors and speed up processing.
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