Moving abroad does not end an Indian tax filing obligation.
Once a taxpayer's residential status changes from resident to non-resident under the Income-Tax Act, only specified Indian income remains taxable in India. But the nature of that income, certain high-value transactions and even future tax planning can still trigger an ITR filing requirement, or make filing worthwhile even when it is not mandatory.
Here are the situations in which non-resident Indians (NRIs) should consider filing an Indian income tax return (ITR).
When filing an ITR is mandatory
An NRI must file an ITR if total taxable income earned in India exceeds the basic exemption limit. This includes rent from Indian property, interest on NRO deposits, dividends, capital gains from the sale of Indian shares, mutual funds or property, and income from a business or profession carried on in India.
The requirement applies even when the entire tax due has already been paid through TDS. Failure to file by the due date attracts a late filing fee of ₹1,000 where total income does not exceed v5 lakh and ₹5,000 where income exceeds ₹5 lakh.
Interest on NRE and FCNR deposits is exempt from the exemption threshold. NRIs also do not have to declare foreign income or assets in their Indian ITR.
Filing is also mandatory even when there is no income to report if an NRI has deposited more than ₹50 lakh in an Indian savings account or ₹1 crore in a current account during a financial year.
When filing is not mandatory—but can put money back in your pocket
For NRIs, a return can become financially important even when taxable income is below the exemption limit.
The first reason is to claim a refund of excess TDS. NRIs are often subject to higher TDS rates that do not account for their total income, tax slab or available exemptions, said Ajay R. Vaswani, founder, Aras and Co., Chartered Accountants.
“For example an NRI may have only NRO interest income in India, and the total income may be below the taxable limit, but the bank may still deduct TDS at maximum marginal rate. Similarly, in property sale transactions, 12.5% TDS is deducted on the total sale consideration, and not capital gains, which may lead to a higher tax deposited than calculated on actual gains,” he said.
Rental income is another common source of excess tax deduction. Tenants have to deduct 31.2% (including cess) TDS on rent paid to an NRI.
Consider an NRI earning ₹25,000 a month in rent from an Indian property, or ₹3 lakh a year, with no other taxable income in India. The tenant deducts TDS at 31.2%, depositing ₹93,600 with the government. Yet, because the NRI's total taxable income is below the ₹4 lakh exemption limit under the new tax regime, the actual tax liability is nil.
The only way to claim the entire TDS back is by filing an income tax return.
Sanyam Goel, director, India For NRI and Accorp Partners Inc, said NRIs sometimes do not provide their Indian PAN, in which case the highest TDS rate applicable to that income head is applied. For instance, TDS on long-term gains from equity is 12.5%, but rises to 20% if the NRI has not provided their PAN.
The second reason to file is to preserve capital losses.
Losses from the sale of shares, mutual funds, property or other capital assets can be set off against eligible capital gains. If there are no gains in the year the loss is booked, it can be carried forward for up to eight assessment years—but only if the ITR is filed within the prescribed due date.
“An NRI may incur a capital loss on sale of equity mutual funds or listed shares in one year. In the next few years, the same NRI may earn taxable capital gains from MFs, shares, PMS or property. If the loss was properly reported in the ITR and the return was filed within the due date, the loss may be available for set-off against eligible future capital gains,” said Vaswani.
If the return is not filed by the due date, the loss lapses and cannot be set off against future gains.
Why voluntary filing can still make sense
There are also situations where filing is neither mandatory nor immediately financially beneficial, but can make future tax and financial transactions easier.
One such case is an NRI planning to sell an Indian property.
An NRI can apply for a lower or nil TDS certificate where the prescribed TDS is significantly higher than the actual tax liability. Past ITRs showing lower tax outgo in India can considerably improve the chances of obtaining a lower TDS certificate, said Vaswani.
“In practice, tax authorities often seek previous years' ITRs, tax payment history and income computations while processing such applications. If the NRI has not filed ITRs for several years, even because income was below the taxable limit, the lower TDS application may become more difficult and time-consuming. On the other hand, regular ITR filing helps show that the taxpayer has maintained compliance and has a clear tax trail in India,” he said.
Filing can also help with foreign tax credit claims.
Many NRIs claim credit in their country of residence for taxes paid in India under the applicable Double Taxation Avoidance Agreement (DTAA). Goel said that while an Indian ITR is not mandatory for claiming such credit, it provides a comprehensive record of income earned, tax deducted and tax ultimately paid in India, making reconciliation easier during overseas tax filing.
An ITR can also serve as a financial record for practical purposes.
“Financial institutes ask for past ITRs when NRIs apply for a loan or credit card in India,” said Goel. “Besides, past ITR records can also help at the time of repatriation of funds as they serve as an evidence of legitimacy of source of funds,” he added.
For NRIs who maintain close ties with India through frequent travel or business connections—or plan to relocate eventually—filing every year can also create a record of residential status.
Vaswani said tax residency can directly affect the taxation of salary, investments, foreign bank interest, ESOPs, pensions, rental income and capital gains for globally mobile Indians.
“A consistently filed ITR creates a year-wise record of the residential status claimed by the taxpayer, making it easier to demonstrate why only Indian income was offered to tax, explain the non-taxability of foreign income during NRI years, support RNOR claims after returning to India and respond to any future queries from the tax department,” he explained.
For many NRIs, therefore, the decision to file an Indian ITR should not be driven solely by whether tax has already been deducted.
The last date for filing an ITR in India is 31 July. The disclosure is made for the financial year, not the calendar year. This means income, gains and transactions realized between 1 April 2025 and 31 March 2026 are to be disclosed this year.