A common question on the mind of every Non-Resident Indian (NRI) is:
“Am I required to file an Income Tax Return (ITR) in India?”
To answer this, we must understand three key aspects:
- When ITR filing is mandatory for NRIs
- What are the consequences of not filing
- Why filing an ITR is beneficial, even if no tax is payable
Global Taxation Principles & NRIs
Taxation worldwide generally follows the residency principle:
- Residents are taxed on their global income
- Non-residents are taxed only on income earned or received in the source country
Therefore, NRIs are liable to pay tax in India only on income sourced from India, such as:
- Interest on NRO accounts
- Rental income from property
- Capital gains from Indian assets
- Dividends from Indian companies
When is ITR Filing Mandatory for NRIs?
As per Indian tax laws, filing of an ITR is mandatory for NRIs if:
- Total Indian income exceeds ₹2.5 lakh in a financial year
- Aggregate deposits in bank accounts exceed ₹50 lakh during the year
- Total TDS or TCS exceeds ₹25,000 in a financial year (₹50,000 for senior citizens)
TDS Obligations on Payments to NRIs
Under the Indian Income Tax Act, any person making a payment to a non-resident is required to deduct tax at source (TDS) and deposit it with the government—irrespective of whether the recipient’s income is taxable.
This means that:
- Banks deduct TDS on NRO account interest, even if the interest earned is below the basic exemption limit
NRIs are often subject to higher TDS rates
Why You Should File Your ITR in India
✅ To Claim TDS Refunds
Excess TDS is quite common for NRIs. The only way to claim a refund of this deduction is by filing a return of income.
✅ To Avoid Penalties and Notices
Even if there is no additional tax liability, non-filing can attract scrutiny. Notices from the tax department can lead to litigation, unnecessary stress, and added costs. Also note that in cases where incorrect or no TDS is deducted, both the payer and the NRI may be penalized
✅ To Carry Forward Losses
Filing an ITR allows NRIs to carry forward losses (e.g., from stock trading or mutual funds) for up to 8 years to offset against future gains—potentially saving significant tax in the future.
✅ For Global Tax Compliance
As tax residents of another country, NRIs may be required to report their global income. A filed ITR in India provides documented evidence of Indian income and taxes paid—useful when:
- Claiming foreign tax credits
- Avoiding double taxation
- Justifying the source of remittances or investments abroad
In Conclusion
Even when not mandatory, filing your Indian tax return is a wise financial and legal decision.
- You can recover excess TDS
- Stay compliant with Indian and international tax laws
- Protect yourself from future tax complications
- Preserve tax benefits for future use
Don’t lose your hard-earned money to unnecessary TDS deductions. File your ITR in India, stay compliant, and safeguard your financial interests.
