NRI Income Tax Return Filing in India: Rent, Capital Gains & NRO Interest

📢 NRI Income Tax Return Filing in India: Rent, Capital Gains & NRO Interest

The tax filing process for Non-Resident Indians in India follows essential steps to maintain compliance with Indian tax legislation. The guide provides essential information for the financial year regarding 🏠 rental income, 🏗️ capital gains from property sales, and 🏦 interest from your account earnings.

📍 Residential Status under Indian Tax Law

The Indian Income Tax Act uses physical residence in India to determine tax residency of its citizens.

You are a Resident if you:

Stay in India for 182 days or more during the financial year, or
Spend 365 days over the past 4 years and at least 60 days in the current year.

🧑‍⚖️ Exceptions for citizens and Persons of Indian Origin:

The tax law for Indian citizens and Persons of Indian Origin now uses a period of 182 days rather than a period of 60 days.
A resident must pay Indian taxes if their income exceeds the established threshold while the tax period changes to 120 days.
❌ Non-resident status applies to individuals who fail to fulfill these requirements.

📌 When and Why to File a Return

📝 Non-residents must submit tax returns because their total taxable Indian-sourced income exceeds the government-established financial year threshold of ₹2.5 lakh.
💰 Even when returns are not mandatory, you must file because you can obtain tax refunds for rent, interest, and property sales.
🧾 You need to file your return for tax refund purposes regarding rent and interest and property sales.
🛡️ You should declare your status to prevent future examination by authorities.
📉 You can carry over capital losses to reduce your future tax burden.
📂 The documentation for loans and visa applications and financial documents needed for repatriation purposes.

💼 Taxation on Different Income Types

💸 Interest Income

All interest from specific bank accounts becomes fully taxable at 30% plus surcharge and cess.
🏦 Banks perform tax withholding before distributing interest payments.
✅ Interest from NRE and FCNR accounts remains exempt from Indian taxation.

🏘️ Rental Income

Rental income falls under the category of 'Income from House Property'.

You can deduct:

🏛️ Municipal taxes paid
📉 A standard deduction of 30%
🔻 Tax is deducted by the tenant at 31.2%

📊 Capital Gains

🏡 Property:

Short-term (< 24 months): Taxed at applicable slab rate
Long-term (> 24 months):
- Taxed at 20% with indexation, or
- 12.5% without indexation (from July 2024)

📈 Shares and Mutual Funds:

STCG (≤ 12 months): 15%
LTCG (> 12 months): 10% above ₹1 lakh

📦 Other Assets:

LTCG: 20% with indexation
STCG: Taxed as per slab

💵 Dividends: 20%
🎰 Royalties, technical fees, lottery: 20%–30%

💰 TDS and Refund Claim

Most non-resident TDS payments exceed their actual tax responsibility.
🔁 You need to file a return to receive any potential refund.

📑 Required Documents:

🧾 Form 16A – TDS certificate from bank or tenant
🏦 Bank statements
📜 Rent agreements
🏠 Property sale deeds
🆔 PAN and passport

🔄 Steps to Claim Refund:

✅ Verify that your tax records contain correct income and tax information (use Form 26AS and AIS)
🧾 File the appropriate income tax return form (ITR-2)
💡 Enter correct income and claim deductions
📤 Submit and e-verify your return
💳 Refund will be credited to your pre-validated bank account

🌍 Double Taxation Relief

Non-resident Indians face dual taxation because they must pay taxes in both India and their home country. 🌐 India has Double Taxation Avoidance Agreements (DTAA) with 90+ countries to prevent this.

📘 How to Claim Relief:

📄 Obtain a Tax Residency Certificate (TRC) from the country where you live
📥 Submit Form 10F (if required)
🧾 Include treaty rate information in your ITR
⏳ File Form 67 before submitting your ITR to claim foreign tax credits

🧭 Step-by-Step Guide

📌 Provide PAN, passport, bank account info, rent/property documents, and TDS certificates
🌐 Log in to www.incometax.gov.in
📆 Select AY 2025–26 and ITR-2 form

📋 Report Your Income:

🏠 House Property: Gross rent – municipal taxes – 30% standard deduction
🏗️ Capital Gains: Report sale value, cost, and holding period
💰 Other Sources: Interest, dividends

🎯 Claim Deductions:

Section 80C (ELSS, LIC)
Section 80D (health insurance)
Capital gain exemptions (Section 54, 54EC)

🧾 Compare TDS in Form 26AS and pay shortfall via Challan 280
📲 Submit and e-verify (Aadhaar OTP, net banking, etc.)

🧮 Example

A non-resident earns:

₹8 lakh from rent
₹2 lakh NRO interest
₹15 lakh LTCG from property

📊 Tax Calculation:

Rent: ₹5.6 lakh taxable → tax ≈ ₹24,500 | TDS = ₹2.49 lakh
Interest: Tax = ₹60,000 | TDS = ₹60,000
LTCG: Tax = ₹3 lakh | TDS = ₹15 lakh

Total Tax Liability: ₹3.99 lakh
Total TDS Deducted: ₹18.09 lakh
Refund Eligible: ₹14.1 lakh

📝 A return submission is necessary to claim the refund.

⚠️ Common Mistakes Non-Residents Should Avoid

❌ Wrong residential status
❌ Using incorrect ITR form
❌ Ignoring Form 26AS or AIS mismatches
❌ Not submitting Form 67 for foreign tax credit
❌ Late filing causing penalties or disqualification from loss carry-forward

🗓️ Important Deadlines

📅 Due date: 15 September 2025

⛔ If filed late:

📈 Interest at 1% per month on unpaid tax
💸 Late fee:
- ₹1,000 (if filed by 31 Dec)
- ₹5,000 (after 31 Dec)
🚫 Loss of deductions and carry-forward rights

✅ Conclusion: File Early, File Right

Excess tax and compliance mistakes should not reduce your returns since you are a non-resident. Your correct on-time filing with complete documents will maximize your refunds while bringing you peace of mind.

📞 Need Help with Non-Resident Tax Filing?

Let a professional handle it for you.
📱 Contact: +91 8171582583 – We will assist you with your return filing while obtaining refunds and maintaining tax compliance.

NRI Income Tax Return Filing in India: Rent, Capital Gains & NRO Interest