Special Tax Regime for NRIs: Know More to save taxes & avoid filing ITR in India:

Special Tax Regime for NRIs: Know More to save taxes & avoid filing ITR in India Non-Resident Indians (NRIs) are having a chance to save taxes and avoid filing returns under a special tax rule called Chapter XII-A of the Income Tax Act, 1961. This rule provides lower tax rates on income earned from certain foreign exchange (FOREX) assets in India.

Special Tax Regime for NRIs

NRIs can pay only 12.5% tax on the long-term capital gains (LTCG) from specified FOREX assets and 20% on investment income such as interest and dividends, under Chapter XII-A. It includes:

• Shares of Indian companies
• Debentures or deposits with Indian public companies are also included.
• Securities of the Central Government.

This regime will apply only to income from these assets. Any other income is taxed at normal rates.

No Deductions or Extra Benefits

NRIs who choose this regime:

• They will not get deductions under Chapter VI-A (like Section 80C, 80D, etc.)
• They will not get the indexation benefit on LTCG
• Not able to deduct expenses or allowances from investment income
• Benefits from forex rate changes are not available to them while calculating LTCG

No Need to File ITR

An NRI is not required to file an Income Tax Return (ITR) in India if:

• They earn their only income from investment income or LTCG from specified FOREX assets
• Tax has already been deducted at source (TDS)

Option to Opt Out

NRIs are given flexibility to choose to not follow this special regime for any financial year. To do this, they are required to mention it in their ITR and inform the tax officer.

Benefits Continue After Returning to India

If an NRI become resident in the future, the benefits under Chapter XII-A will continue for the income earned from these FOREX assets, until they are converted into cash or sold.

NRI Tax Status

For getting these benefits and considered as an NRI, a person must either:

• Live outside India for 182 days or more than that in the financial year
• Live outside India for 60 days in the year and 365 days or more than that in the past 4 years

NRIs can invest their money in real estate and financial instruments in India, except for farmland, plantation property, or farmhouses.

Which ITR Form to Use

• ITR-2: These forms can be used by NRIs with income from salary, property rent, capital gains, or other sources (not business/profession)
• ITR-3: NRIs with income from business or profession in India can use this form
• ITR-1 (Sahaj): These are not available for NRIs, even if the income qualifies under the eligible types

Last Date to File ITR

The last date of filing ITR for FY 2024-25 is July 31, 2025, for individuals not under tax audit, including most NRIs. All the deadlines follow Indian Standard Time (IST), it doesn't matter where the person lives.