ITR for NRI

For Non-Resident Indians (NRIs), the most suitable Income Tax Return (ITR) forms depend on the type of income earned in India. NRIs are required to file an ITR in India if their total income exceeds the basic exemption limit (₹2.5 lakhs for NRIs).

Here’s an overview of the applicable ITR forms for NRIs:

1. ITR 2 (Most common for NRIs)

• Applicable to: NRIs with income from sources other than business or profession in India.

• Income Sources:

  • Income from salary (if it is earned in India or received in India).

  • Income from more than one house property.

  • Capital gains from sale of assets (such as property, stocks, mutual funds) located in India.

  • Other sources of income (e.g., interest earned on savings, fixed deposits, etc. in Indian banks).

  • Income from foreign assets or sources (needs disclosure even if not taxable in India, depending on tax treaties).

• Not applicable to: NRIs who have business income in India.

2. ITR 3 (If NRI has business income)

• Applicable to: NRIs who have income from business or profession in India.

• Income Sources:

  • Income from a business or profession carried out in India.

  • Along with any other income such as salary, house property, or capital gains from India.

• Required if: The NRI is engaged in any trade or business in India.

3. ITR 4 (Sugam):

• Applicable to: NRIs who are eligible for presumptive taxation for small businesses or professions under sections 44AD, 44ADA, and 44AE.

• Income Sources:

  • Business income under the presumptive scheme.

  • Income from salary, pension, or one house property in India.

  • Other income sources like interest (but no capital gains or foreign income).

• Not commonly used by NRIs due to presumptive taxation restrictions.

Key Points for NRIs Filing ITR:

• Basic exemption limit: For NRIs, the exemption limit is ₹2.5 lakhs, irrespective of age.

• Deductions: NRIs can claim certain deductions, such as those under Section 80C (Life Insurance Premium, ELSS, etc.), 80D (Medical Insurance), and others.

• Taxable Income: NRIs are taxed only on income earned or accrued in India. Their foreign income is not taxable in India unless received in India.

• Foreign Assets Disclosure: NRIs with assets abroad may need to disclose them under the Foreign Assets Schedule (FA Schedule) in ITR 2 or 3, if applicable.

• Double Tax Avoidance Agreement (DTAA): NRIs can benefit from DTAA between India and the country of their residence to avoid double taxation on the same income.

Thus, most NRIs typically use ITR 2 for filing their income tax returns in India unless they have business income, in which case ITR 3 or ITR 4 might be more suitable.