Do NRIs Need To File Income Tax Returns In India?

1. Do NRIs Need To File Income Tax Returns In India? Understanding The Rules, Case Studies, And Updated Deadlines For many Non-Resident Indians (NRIs), submitting income tax returns in India might seem optional or even pointless – particularly when their income falls below the basic exemption threshold. Nevertheless, the Income Tax Act has clear rules that require return filing, and not adhering to these can result in lost refunds, penalties, or interest charges. In this blog, we explore the rules, exemptions, deadlines, filing methods, and practical examples that NRIs need to be aware of. Who should file an ITR in India? A checklist for NRI investors The following individuals are required to file an Income Tax Return (ITR) in India.  Anyone whose income surpasses the non-taxable threshold of Rs. 250,000 (However, this basic exemption does not apply to NRIs when their income is taxed at special rates, like Long-Term or Short-Term Capital Gains on equity or equity mutual funds) Expenditures exceeding ₹2,00,000 on foreign travel, electricity bills over ₹1,00,000, or deposits exceeding ₹1 crore in a current account or ₹50 lakh in savings accounts Business turnover that exceeds ₹1 crore or gross professional receipts that surpass ₹50 lakh TDS/TCS of ₹25,000 or more (₹50,000 for resident senior citizens) Any ordinary resident who possesses or has a beneficial interest in an asset or account located outside India Anyone who has incurred a loss that they wish to set off and/or carry forward to subsequent years Anyone seeking to claim a refund of TDS deducted on interest income, even if it falls below the basic exemption limit All companies and firms, regardless of their income levels       

2.  Anyone who has engaged in specific transactions during the year that have been reported to the income tax department via the Annual Information Statement (AIS) Anyone who has conducted any significant transactions, even if they resulted in income that is exempt from income tax in India  Real-Life Examples Every NRI Should Learn From Example 1: Mr. A, a non-resident living in Saudi Arabia Mr. A holds an NRO Fixed Deposit of ₹1,50,000, which generates ₹10,000 in interest annually and Tax is deducted (TDS) of ₹3,120 is deducted. As his total income is under ₹2,50,000, he is not obligated to file an ITR. However, if wants to claim the refund of tax deducted, he must submit his return by the due date. Many NRIs, like Mr. A, often miss filing returns due to lack of awareness, resulting in lost refunds and the burden of high TDS rates. Example 2: Mr. B, a non resident living in the USA Mr. B realized a short-term capital gain (STCG) of ₹2,00,000 from selling equity. While this amount is below the exemption threshold, NRIs are not eligible for the basic exemption on income that is charged at specified rate (STCG from equity is taxed at 20%). Mr. B is required to file an ITR, even if his income is below ₹2,50,000, and he is also required to pay tax of Rs. 41,600 (@20.8% including surcharge on STCG of 200,000) because the special tax rate provisions take precedence over the basic exemption for non-residents. Income tax filing for NRIs: Physical, electronic & verification options  Physical: Only individuals residing in the country who are over 80 years old and using ITR-1 or ITR-4 forms are permitted to submit manual returns. Electronic: All individuals under 80 years of age are required to file their returns electronically. All NRIs are also required to file their income tax returns electronically. Income tax portal: You can download the JSON file for AIS Utility from the income tax portal. This file can then be imported into the AIS utility or income tax software, allowing for a pre-filled income tax return to be generated based on the JSON file. The taxpayer will need to review and adjust the figures as necessary before filing the tax return. Verification: After filing, ITRs must be verified using a Digital Signature Certificate (DSC), Aadhaar OTP, or Electronic Verification Code (EVC) via Bank account, Demat account, or Net banking. Alternatively, the acknowledgement (ITR-V) can be printed, signed manually, and sent to the CPC – Bengaluru within 30 days of filing the return.    Due date of filing income tax return For most NRIs, the standard deadline for filing income tax returns in India is July 31 of the relevant assessment year. However, for the financial year 2024-25 (assessment year 2025-26), the due date has been extended to September 15, 2025, owing to delays in updating tax forms and system infrastructure. For individuals or Hindu Undivided Families (HUFs) with income from business or profession where accounts are subject to audit, the filing deadline is October 31, 2025. If the taxpayer is also required to furnish a transfer pricing report, the deadline extends further to November 30, 2025. Note: To carry forward any loss or to revise a return, the return must be filed within the prescribed due date. Filing beyond the deadline may lead to penalties and loss of certain benefits.

3. What if you miss the deadline? Although income tax returns are ideally required to be filed by the due date, the law permits NRIs to file a belated return or a revised return up to by December 31. For the financial year 2024-25 (AY 2025-26), delayed return can be filed by December 31, 2025. If the original return is not filed by the due date, it can still be submitted as a belated return by December 31. However, this attracts late filing fees and interest, and certain benefits – such as the ability to carry forward business or capital losses – will be forfeited. If the original return was filed on time but contains errors, a revised return may be submitted by December 31. While interest at 1% per month may apply, no late filing fee is charged for revised returns. Late filing fees for belated returns:   1,000 – if total income is below Rs. 5,00,000 5,000 – if total income exceeds Rs. 5,00,000 Note: Both belated and revised returns are subject to interest under Section 234A at 1% per month from the due date until the actual date of filing. Timely filing is crucial to avoid penalties and preserve tax benefits. Why ExpertNRI recommends filing – Even when not mandatory Drawing from extensive experience with NRIs in over 80 countries, ExpertNRI highly advises filing income tax returns in several important situations:       to obtain TDS refunds, to adhere to foreign asset reporting obligations, to carry forward business or capital losses, to keep a clean and consistent financial record in India, to report significant transactions shown in the Annual Information Statement (AIS), and to prevent possible scrutiny or income tax notices based on the Specified Financial Transactions (SFT) or AIS transactions (e.g. new NRE FD). Many NRIs fail to recognize the importance of timely and precise tax filing, particularly when their income seems to fall below the threshold. With ExpertNRI, you can receive clear, practical, and tailored guidance, ensuring compliance and peace of mind throughout your NRI financial journey. Ultimately, while NRIs may not always be legally required to file income tax returns in India, doing so is often the smarter, more strategic choice – especially when viewed through the lens of long-term financial planning. Regular and timely ITR filing ensures compliance, minimizes future tax complications, and builds a credible financial history in India. This not only helps avoid penalties or missed refunds but also strengthens your position when making high-value investments, repatriating funds, or applying for financial products like loans or credit in India. For those exploring NRI investment opportunities in India, consistent tax compliance becomes a vital pillar of a secure, transparent, and opportunity-ready financial journey. Resource: Do NRIs Need To File Income Tax Returns In India?