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Non-Resident Taxation Series | June 2026
Not every non-resident earning income from India needs to file an ITR. The Income Tax Act 2025 provides specific statutory exemptions under Sections 207(8), 209(4), 211(3), and 216 based on income type and TDS adequacy. But when filing is required, getting it right matters. This article covers every scenario, the correct forms, due dates, NRO and NRE account tax treatment, and foreign asset reporting obligations.
Non-Resident Taxation Series – fiscalzenith.com
You are reading Article 10: ITR Filing and Compliance for Non-Residents.
Also in this series: Residential Status – Section 6 | Scope of Income – Section 5 | Deemed Income – Section 9 | Tax Rates – Sections 207 to 217 | TDS on Non-Residents | DTAA – Section 159 | NRI Provisions | Representative Assesse and Agent | PE
Also in this series: Residential Status – Section 6 | Scope of Income – Section 5 | Deemed Income – Section 9 | Tax Rates – Sections 207 to 217 | TDS on Non-Residents | DTAA – Section 159 | NRI Provisions | Representative Assesse and Agent | PE
Table of Contents
- The Basic Question: Do You Need to File?
- When a Non-Resident is Exempt from FilingSections 207(8), 209(4), 211(3), and 216
- When a Non-Resident Must File
- Which ITR Form to Use
- Due Dates Under Section 263(1)
- NRO, NRE, and FCNR Accounts: Tax Treatment
- Foreign Asset Reporting After Becoming Resident
- Self-Assessment Tax Before Filing
- Practical Compliance Checklist
- Frequently Asked Questions
Section 263(1)
General ITR filing obligation. Applies to non-residents when income exceeds the basic exemption limit and no statutory exemption applies.
4 Exemptions
Sections 207(8), 209(4), 211(3), and 216 exempt specific non-resident categories from filing when total income is within the covered types and TDS is adequate.
ITR-2
The standard form for non-residents with salary, capital gains, house property, or foreign income. ITR-1 (Sahaj) is NOT available to non-residents.
31st July
Due date for most non-resident individuals with no business income. 31st October for audit cases. 30th November for transfer pricing cases.
Part IThe Basic Question: Do You Need to File?
The general rule under Section 263(1) of the Income Tax Act, 2025 requires every person whose total income exceeds the basic exemption limit to file a return of income. Non-residents are not exempt from this general rule by default.
However, the Act recognises that for many non-residents, TDS at source effectively settles the entire Indian tax liability. In those cases, requiring a separate ITR filing would be redundant. So the Act provides specific statutory exemptions from filing for certain categories of non-resident income, provided TDS has been adequate.
Part IIWhen a Non-Resident is Exempt from Filing
| Situation | Section | Conditions for Exemption |
|---|---|---|
| Total income consists only of dividends, interest, royalty, or FTS under Sections 207(1) and 207(2) | Section 207(8) | TDS must have been deducted at a rate NOT LESS than the prescribed rates in Sections 207(1) and 207(2) |
| Total income consists only of interest on bonds and dividends on GDRs under Section 209(1) | Section 209(4) | TDS must have been deducted from such income |
| Non-citizen non-resident sportsman, entertainer, or sports association with income only under Section 211(1) | Section 211(3) | TDS must have been deducted from such income |
| NRI whose total income consists only of investment income or LTCGs from foreign exchange assets | Section 216 | Tax must have been deducted at source under Chapter XIX-B |
Filing despite the exemption: Where a non-resident is exempt from filing but excess TDS was deducted (for example, TDS at 20% when the DTAA rate is 10%), filing an ITR is the only way to claim the refund. The exemption from filing does not prevent voluntary filing for a refund.
Part IIIWhen a Non-Resident Must File
Filing is required when:
- The non-resident has India income not covered by the exemption categories above (rental income, business income, capital gains not from foreign exchange assets, etc.)
- Total income exceeds the basic exemption limit and TDS was not adequately deducted
- The non-resident wishes to claim a refund of excess TDS
- The non-resident has a loss to be carried forward (filing by due date is mandatory to preserve carry-forward rights under Section 263)
- The non-resident is a company, firm, or other entity required to file regardless of income level
Part IVWhich ITR Form to Use
| Situation | Form |
|---|---|
| Non-resident individual with salary, one house property, capital gains, or foreign income | ITR-2 |
| Non-resident individual or HUF with business or profession income | ITR-3 |
| Non-resident firm, LLP, AOP, BOI | ITR-5 |
| Foreign company with Indian income | ITR-6 |
ITR-1 (Sahaj) is NOT available to non-residents. ITR-1 is restricted to resident individuals. Even a non-resident with a simple income structure (say, only interest from an NRO account) must use ITR-2. This is a common error that results in defective return notices.
Part VDue Dates Under Section 263(1)
| Category | Due Date |
|---|---|
| Non-resident individual with no business income and no audit requirement | 31st July |
| Non-resident with business or profession income not requiring audit | 31st August |
| Non-resident whose accounts must be audited under the Act or any other law | 31st October |
| Non-resident with transfer pricing or international transactions requiring a report under Section 172 | 30th November |
Part VINRO, NRE, and FCNR Accounts: Tax Treatment
This is one of the most commonly misunderstood areas for NRIs.
NRO (Non-Resident Ordinary) Account
Interest on NRO accounts is fully taxable in India. TDS at 30% (or lower DTAA rate if TRC and Form No. 41 are furnished) is deducted by the bank. The NRI must include this interest in Indian taxable income. Deposits in NRO accounts cannot be freely repatriated beyond USD 1 million per financial year without documentation.
NRE (Non-Resident External) Account
Interest on NRE accounts is fully exempt from Indian income tax under Schedule VII of the Act as long as the account holder is a non-resident or RNOR. No TDS is deducted. When the NRI becomes a full resident (ROR), this exemption ceases and interest becomes taxable.
FCNR(B) (Foreign Currency Non-Resident Bank) Accounts
Interest on FCNR(B) accounts is also exempt from Indian tax for non-residents and RNOR, on the same basis as NRE accounts. No TDS is deducted.
Common error: Some NRIs include NRE or FCNR(B) interest in their ITR as taxable income. This is wrong. Do not include exempt income in your taxable computation. The reverse error, not reporting NRO interest which IS taxable, is equally common and attracts notices.
Part VIIForeign Asset Reporting After Becoming Resident
When an NRI becomes a full resident (ROR), they must report foreign assets held outside India in the ITR. Foreign assets include foreign bank accounts, foreign financial interests (equity, debt), immovable property outside India, any other asset located outside India, and signing authority in any foreign account.
RNOR partial exemption: An RNOR is not required to report foreign assets acquired before becoming resident, unless those assets generate income connected to Indian business or profession. Once status becomes ROR, full foreign asset disclosure is mandatory in the ITR.
Part VIIISelf-Assessment Tax Before Filing
If a non-resident files an ITR and the total tax liability including interest under Section 423 for late filing exceeds TDS already deducted, the balance must be paid as self-assessment tax before or at the time of filing. This is paid using Challan ITNS 280 on the income tax portal (www.incometax.gov.in) selecting “Self-Assessment Tax” (Code 300).
Filing without paying the balance due results in the return being treated as a defective return under Section 263(9), which triggers a notice and potential invalidation of the return if not corrected within the prescribed time.
If you are an NRI earning only NRO account interest and dividends from Indian companies
- TDS is deducted at 30% on NRO interest and 20% on dividends. If your applicable DTAA rate is lower, furnish TRC and Form No. 41 to the bank and registrar before the income is credited. This avoids the over-deduction in the first place.
- If over-deduction already happened, file an ITR to claim the refund. The Section 207(8) exemption permits not filing, but does not stop you from filing for a refund.
If you are an NRI selling Indian real estate
- Capital gains from property are taxable in India. File ITR-2. TDS at 20% (LTCG) or 30% (STCG) is deducted by the buyer.
- If you reinvested in a specified asset under Section 215 (NRI rollover), claim the exemption in the ITR with supporting documents showing reinvestment within 6 months.
If you have just returned to India and are RNOR
- File ITR-2. You do not need to report all foreign assets as RNOR, but be aware that income from a business controlled in India or profession set up in India is taxable even if earned abroad.
- Do not report NRE or FCNR(B) interest as taxable. It remains exempt as long as you are RNOR.
If you have a loss from Indian business or investments to carry forward
- File the ITR by the due date specified in Section 263(1). Missing the due date permanently forfeits the carry-forward right. No belated or updated return can restore it.
Wrapping Up
Compliance for non-residents is simpler than most people assume, especially when income is limited to standard categories with TDS properly deducted. The law has deliberately reduced the filing burden for this group through Sections 207(8), 209(4), 211(3), and 216. Know when you are exempt, file when you are not, and use the ITR proactively when TDS was over-deducted and a refund is due. And remember: ITR-1 is never available to non-residents. Always use ITR-2 or ITR-3 as applicable.
Frequently Asked Questions
NRO bank interest does not fall under Section 207(8) (which covers interest on money borrowed in foreign currency, not NRO deposits in rupees). So the Section 207(8) ITR exemption does not apply. Your income of Rs. 80,000 is below the basic exemption limit (Rs. 3 lakh for those below 60, or Rs. 4 lakh under the new tax regime). So no ITR is required based on the income level either. However, TDS at 30% was deducted, which exceeds your actual tax liability (nil, since income is below exemption). You should file an ITR to claim the full TDS as a refund.
A foreign company files ITR-6. If the PE’s accounts are required to be audited (which is standard for companies), the due date is 31st October. If the PE also has international transactions requiring a transfer pricing report under Section 172, the due date is 30th November. The PE must maintain books of account in India and compute income attributable to its Indian operations. All income earned through the Indian PE is taxable in India at the applicable foreign company rates.
No. The transfer of your overseas salary to India is a remittance of income that was received outside India. For a non-resident, overseas salary is not taxable in India under Section 5(2). The remittance to India does not convert it into Indian taxable income. Do not show this as income in your ITR. The flat purchase may generate taxable income in the future (capital gains when sold, rental income if let out), but the original fund transfer is not a taxable event.
As a full resident (ROR), you must disclose all foreign assets in the relevant schedule of ITR-2. This includes all foreign bank accounts (account number, bank name, country, peak balance, closing balance), foreign equity investments, foreign immovable property, any foreign business interest, and any signing authority in a foreign account. Failure to disclose foreign assets is a serious compliance failure under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which imposes tax at 30% plus 90% penalty on undisclosed foreign assets. File accurately and completely from your first year as ROR.
Disclaimer: For informational and educational purposes only. Based on the Income Tax Act 2025 (30 of 2025), Income Tax Rules 2026, and provisions as amended by the Finance Act 2026, current as of June 2026. Does not constitute legal or tax advice.
