Who is an NRI for income tax purposes? Know the conditions under which ITR filing is required in India

For Non-Resident Individuals (NRIs), living abroad does not automatically exempt them from filing an ITR in India.

If they earn income from Indian sources, their tax filing obligation depends on their residential status under the Income Tax Act and the type of income they earn.

Who is considered an NRI?

For income tax purposes, an NRI is an individual who does not qualify as a resident of India under Section 6 of the Income Tax Act, 1961.

An individual qualifies as a resident if they meet either of the following conditions:

• Stayed in India for 182 days or more during the financial year, and
• Stayed in India for 60 days or more during that year and 365 days or more during the four preceding financial years.

However, special residency rules apply to certain individuals. For Indian citizens and Persons of Indian Origin (PIOs) visiting India, the 60-day condition is generally replaced with 182 days. The same relaxation also applies to Indian citizens leaving India for employment abroad or as crew members of an Indian ship.

Further, if an Indian citizen or PIO visiting India has total income exceeding ₹15 lakh during the financial year (excluding income from foreign sources), the 60-day threshold is replaced with 120 days instead of 182 days.

Additionally, under the deemed residency provisions introduced by the Finance Act, 2020, an Indian citizen with total income exceeding ₹15 lakh (excluding foreign-sourced income) is treated as a resident if he is not liable to tax in any country.

When does an NRI have to file an ITR in India?

The income tax return filing requirement depends on the type of income earned in India.

Income exceeds the basic exemption limit

An NRI must file an ITR if taxable income earned in India exceeds the basic exemption limit. Under the new tax regime, the threshold is ₹4 lakh, while under the old regime it is ₹2.5 lakh.

Salary earned in India

Salary is taxable in India if the services are performed in India or if the salary is received in an Indian bank account, even if the individual resides abroad.

Rental income from property in India

Income from a house property situated in India is taxable. Taxpayers can claim the deduction of 30% available on the net annual value after adjusting municipal taxes.

Capital gains on Indian assets

Profits from selling Indian shares, mutual funds or immovable property are taxable in India. If tax deducted at source (TDS) exceeds the actual tax liability, filing an ITR is necessary to claim a refund.

Interest and dividend income

Interest earned on NRO accounts and dividends from Indian investments are subject to TDS. Filing an ITR may help claim a refund if excess tax has been deducted.

Business or professional income

NRIs carrying on a business in India or earning professional income are also required to file an ITR.

To carry forward losses

If an NRI incurs eligible capital or business losses in India, filing the return allows those losses to be carried forward and adjusted against future taxable income, subject to the Income Tax Act.

To claim DTAA benefits

NRIs paying tax on the same income in both India and another country may claim relief under the Double Taxation Avoidance Agreement (DTAA). Filing an ITR helps claim tax credit or exemption, depending on the applicable treaty.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.