NRI Income Tax Return Filing Guide for AY 2026-27: Residential Status, DTAA, Deductions & ITR Forms

If you are a NRI & having any income generating in India & don’t know about the tax consequences then this article is for you.

Non-Resident Indians (NRIs) are liable to pay income tax in India on income that accrues or arises in India, or is received in India & its mandatory to file the ITR if it exceeds the basic exemption limit or taxpayer wants refund of TDS deducted on such income

For this understanding the residential status is more important

Determining Residential Status (Section 6, IT Act 1961)

Residential status is determined for each financial year separately based on physical presence in India as below

Note: An NRI is taxed only on India-sourced income i.e., Income accrued or received in India. (Foreign income will not be taxable even if business controlled from India)

Which ITR Form should be used?

NRIs cannot file ITR-1 (Sahaj) or ITR-4 (Sugam) these forms are restricted to residents. The applicable forms are:

• ITR 2: Salary/pension, house property, capital gains, foreign assets/income, more than one house property
• ITR 3: All sources including business/profession, partnership firm income, foreign assets

Most of the NRIs with salary, capital gain or property income files ITR 2 & whose are earning any Business income or any partnership income files ITR 3

Key Schedules in ITR-2/ITR-3 Relevant for NRIs

1. Schedule FSI: Foreign Source Income

Details of income from outside India (relevant for RNOR taxpayers and for claiming DTAA relief). Non-disclosure can trigger scrutiny.

2. Schedule TR: Tax Relief

Used to claim relief under Section 90/90A (DTAA) or Section 91 (unilateral relief) having separate rows for each country.

NRE, NRO, and FCNR Accounts Tax Treatment

Double Tax Avoidance Agreement (DTAA): How to Claim Relief

India has DTAAs with 90+ countries. An NRI may opt for the more beneficial provisions either the Income Tax Act or the DTAA.

To avail the benefits of DTAA assessee should possess:

• Tax Residency Certificate (TRC) from the country of residence mandatory
• Form 10F self-declaration (can be filed on the income tax portal)
• No Permanent Establishment declaration (for business income)

DTAA helps to reduce the TDS on interest by reducing the rates typically to 10 to 15% instead of 30%

Can NRI claim deductions?

Yes, if an NRI assessee want to claim any deduction under chapter VI-A then he can take it by opting old regime.

The major deductions are available to NRI are:

• 24b: interest against Let out property
• 80C/80CCC/80CCD (1): LIC, ELSS, home loan principal, tuition fees, PPF (if applicable)
• 80D: Medical insurance premium
• 80E: Interest on education loan

Pre-Filing Checklist for NRIs

Filing Due Dates: AY 2026-27

Common Mistakes to Avoid

• Filing ITR-1 instead of ITR-2 as NRIs are ineligible for Sahaj
• Ignoring NRO account interest as it is taxable and often under-reported
• Not reconciling AIS/TIS before filing as mismatches invite scrutiny notice
• Skipping Schedule FSI/TR when DTAA relief is claimed
• Mixing up residential status as NRI status ends the moment stay exceeds the threshold hence one has to check residential status each financial year.